The problem with inflation is that as prices rise, consumers can no longer afford to buy as many goods and services.
Indicate whether the statement is true or false
Ques. 2If the Federal Reserve targets the interest rate and the money demand curve shifts to the left, then the Fed
A) can maintain the interest rate target, but at a higher quantity of the money supply.
B) cannot maintain the interest rate target.
C) can maintain the interest rate target with no change in the money supply.
D) can maintain the interest rate target, but at a lower quantity of the money supply.
Ques. 3What is the difference between net exports and the current account balance?
What will be an ideal response?
Ques. 4The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the
A) MPC. B) consumption function.
C) MPS. D) multiplier.
Ques. 5To increase the money supply, the Federal Reserve could
A) decrease income taxes.
B) raise the required reserve ratio.
C) raise the discount rate.
D) lower transfer payments.
E) conduct an open market purchase of Treasury securities.
Ques. 6If the Federal Reserve attempts to continue reducing unemployment by manipulating monetary policy, which of the following would you expect to see?
A) The rate of inflation will fall as the Fed tries to reduce the unemployment rate.
B) The Fed's policies will be deflationary.
C) The Fed's policies will be inflationary.
D) The Fed will reduce the natural rate of unemployment.
Ques. 7Explain why economies with financial account surpluses usually have current account deficits.
What will be an ideal response?
Ques. 8Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?
What will be an ideal response?
Ques. 9If inflation is anticipated, some effects of inflation on the redistribution of income can be avoided.
Indicate whether the statement is true or false
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