Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.
Indicate whether the statement is true or false
Ques. 2Refer to the Article Summary. The increase in GDP discussed in the article summary was due in part to increases in commercial and residential construction.
Increases in commercial and residential construction will cause a(n) ________ the aggregate expenditure curve.
A) movement down along B) downward shift of
C) upward shift of D) movement up along
Ques. 3To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency, the Federal Reserve could
A) raise government spending. B) sell Treasury securities.
C) raise bank taxes. D) lower the required reserve ratio.
Ques. 4Which of the following statements about inflation targeting is true?
A) Inflation targeting would not reduce the flexibility of monetary policy to address other policy goals.
B) Inflation targeting by the central banks in other countries has not typically lowered inflation.
C) Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation, improving their planning and the efficiency of the economy.
D) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession.
Ques. 5When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing, ________ occurred.
A) an automatic destabilizer B) a housing bubble
C) a supply shock D) stagflation
Ques. 6Refer to Figure 28-7. Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds.
If the assumptions of the rational expectations school hold true, and the Fed's announcement is credible, the rate of unemployment will be ________ in the short run.
A) less than 5.5 percent B) 5.5 percent
C) between 5.5 and 7.5 percent D) 7.5 percent
Ques. 7Refer to Table 29-2. Given the following exchange rates in the above table, what are the exchange rates stated as U.S. dollars per Mexican peso and U.S. dollars per British pound respectively?
A) 0.10 dollars per peso and 2.00 dollars per pound
B) 0.10 dollars per peso and 5.00 dollars per pound
C) 1.00 dollars per peso and 20.00 dollars per pound
D) 0.01 dollars per peso and 0.50 dollars per pound
E) 0.01 dollars per peso and 0.20 dollars per pound
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