If real GDP exceeded potential real GDP and inflation was increasing, which of the following would be an appropriate fiscal policy?
A) an increase in oil prices
B) an increase in taxes
C) an increase in government spending
D) a decrease in the money supply and an increase in the interest rate
Ques. 2Inflation is generally the result of total spending growing faster than total production.
Indicate whether the statement is true or false
Ques. 3When confronted with rational expectations regarding changes in monetary policy, the short-run Phillips curve may be vertical.
Indicate whether the statement is true or false
Ques. 4The real power within the Federal Reserve lies with the
A) Council of Economic Advisors. B) Council of Monetary Advisors.
C) Board of Governors. D) Federal Reserve District banks.
Ques. 5Refer to Figure 29-1. Currency speculators believe that the value of the euro will decrease relative to the dollar. Assuming all else remains constant, how would this be represented?
A) Supply would increase, demand would increase and the economy moves from D to A to B.
B) Supply would decrease, demand would increase and the economy moves from A to D to C.
C) Supply would increase, demand would decrease and the economy moves from C to B to A.
D) Supply would decrease, demand would decrease and the economy moves from B to C to D.
Ques. 6Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP, then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal
funds rate.
A) will be the same as B) will be less than
C) will be greater than D) may be greater than or less than
Ques. 7Which of the following would be most likely to induce Congress and the president to conduct expansionary fiscal policy? A significant
A) increase in net exports. B) decrease in investment spending.
C) decrease in oil prices. D) increase in consumption spending.
Ques. 8Refer to Figure 29-1. Europe experiences an economic boom. Assuming all else remains constant, this would be represented as a movement from
A) D to A. B) C to B. C) B to A. D) D to C.
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