During the 1990s, Japan experienced periods of deflation and very low nominal interest rates, approaching zero percent. Why would lenders of money agree to a nominal interest rate of almost zero?
What will be an ideal response?
Ques. 2What is the difference between aggregate expenditure and consumption spending?
What will be an ideal response?
Ques. 3Refer to Table 26-2. Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if the Federal Reserve does not use monetary policy.
If the Fed wants to keep real GDP at its potential level in 2017, it should
A) increase income taxes. B) buy Treasury securities.
C) increase the required reserve ratio. D) sell Treasury securities.
Ques. 4If foreign holdings of U.S. dollars decrease, holding all else constant,
A) the balance on the U.S. current account will decrease.
B) the U.S. balance of trade will decrease.
C) the balance on the U.S. financial account will decrease.
D) the balance on the U.S. capital account will decrease.
Ques. 5Which of the following is not a reason why the U.S. economy has been more stable since 1950?
A) Unemployment insurance and other government programs curtail the decline in spending that occurs during a recession.
B) Services have become a larger fraction of GDP and goods have become a smaller fraction of GDP.
C) Goods have become a larger fraction of GDP and services have become a smaller fraction of GDP.
D) The government has actively pursued policy to combat recessions and prolong expansions.
Ques. 6If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories.
Indicate whether the statement is true or false
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