Under the adaptive expectations hypothesis, which of the following is the effect of a shift to a more expansionary monetary policy?
a. In the short run, the real rate of output will be unaffected, but in the long run, it will increase.
b. In the short run, the unemployment rate will decrease, but in the long run, it will self correct to the natural rate of unemployment.
c. There will be a permanent increase in the real rate of output, but the inflation rate will also be a little higher.
d. In the short run, the impact on the real rate of output is uncertain, but in the long run, output will increase.
QUESTION 2If the consumer price index in Year 1 was 200 and the CPI for Year 2 was 230, the rate of inflation was:
a. 15 percent.
b. 7.5 percent.
c. 30 percent.
d. 230 percent.
QUESTION 3Fiscal policy is the manipulation of government spending and taxes.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4Under the natural rate hypothesis, expansionary monetary and fiscal policies can at best produce a:
a. permanent change in the long-run Phillips curve.
b. short-run change in the unemployment rate.
c. long-run change in the unemployment rate.
d. permanent change in the unemployment rate.
QUESTION 5Which of the following statements is true?
a. Deflation is an increase in the general level of prices.
b. The consumer price index (CPI) measures changes in the average prices of consumer goods and services.
c. Disinflation is an increase in the rate of inflation.
d. Real income is the actual number of dollars received over a period of time.
e. The real interest rate equals the nominal rate of interest plus the inflation rate.
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