What impact does a decrease in the price level in the United States have on net exports and why?
A) A decrease in the price level reduces net exports because lower prices increase American spending on imports.
B) A decrease in the price level increases net exports because lower prices increase the value of the dollar.
C) A decrease in the price level reduces net exports because lower prices raise the value of the dollar.
D) A decrease in the price level increases net exports by reducing the relative cost of American goods.
Ques. 2According to the Taylor rule, the Fed should set the target for the federal funds rate equal to the sum of the equilibrium real federal funds rate, the current inflation rate, one-half times the ________, and one-half times the ________.
A) interest rate gap; inflation gap B) inflation gap; output gap
C) interest rate gap; output gap D) unemployment gap; government-spending gap
Ques. 3Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?
A) AD did not shift and SRAS shifted to the left. B) AD shifted to the right by less than SRAS.
C) SRAS shifted to the right by more than LRAS. D) AD shifted to the right by more than SRAS.
Ques. 4Refer to Figure 29-1. Italians cut back on smoking and cut their demand for American cigarettes in half. Assuming all else remains constant, this would be represented as a movement from
A) A to D. B) D to C. C) B to C. D) B to A.
Ques. 5Bank panics have largely disappeared in the United States because
A) banks are now required to hold a larger fraction of deposits as reserves.
B) of low interest rates.
C) bank loans are more closely monitored by the Federal Reserve.
D) of deposit insurance.
Ques. 6From an initial long-run equilibrium, if aggregate demand grows more slowly than long-run and short-run aggregate supply, then Congress and the president would most likely
A) decrease oil prices.
B) decrease taxes.
C) increase the required reserve ratio and decrease government spending.
D) decrease government spending.
E) lower interest rates.
Ques. 7If workers and firms ignore inflation or form their inflation expectations adaptively, expansionary monetary policy will lower unemployment permanently.
Indicate whether the statement is true or false
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