Exam 24: Monetary Policy Theory

The AD curve is drawn on a graph with the ________ on the horizontal axis and the ________ on the vertical axis.

Non-activists believe that that expectations are ________ formed and that wages and prices are ________ with respect to the expected price level.

If inflation was 1% and the monetary authorities set the nominal interest set at the zero lower bound, the real interest rate would be ________.

"How do we prevent the inflationary fire from igniting again and stop the roller coaster ride in the inflation rate of the last 40 years?" Milton Friedman's famous proposition suggests the simple solution: ________.

If a rise in the expected price level results in an immediate and equal rise in wages and prices, then an expansionary monetary policy will cause ________.

In the new classical model, an expansionary monetary policy will lead to a decline in aggregate output if ________.

The new classical model has the word classical associated with it because, when an increase in the money supply is anticipated, ________.

Which of the following is most likely to lead to inflationary monetary policy?

If aggregate output is below the natural rate level, activists of policies would recommend that the government ________.

A sudden shortage of liquidity during a financial crisis will shift the ________ curve to the ________.

The economist who proposed that, "Inflation is always and everywhere a monetary phenomenon" was ________.

-In the new classical model in the figure above, an anticipated monetary contraction ________.

To promote an economic expansion and an exit from the deflationary environment that the Japanese had been experiencing for the past fifteen years, the "Abenomics" aims at ________.

-The notion that anticipated monetary policy has no effect on the real aggregate output is commonly called the ________.

The legislative lag represents ________.

When nominal interest rates are are zero, the AD curve has a ________ slope because when aggregate output decreases the monetary authorities ________ lower the nominal interest rate. As inflation rises the real interest rate _______which will ________ investment and aggregate output.

The existence of lags prevents the instantaneous adjustment of the economy to policies changing aggregate demand, thereby strengthening the case for ________.

When nominal interest rates are above zero, the AD curve has a ________ slope because when the inflation rate increases the monetary authorities will ________ the real interest rate as inflation rises which will ________ investment and aggregate output.

Theoretically, one can distinguish a demand-pull inflation from a cost-push inflation by comparing ________.

What three forms does non-conventional monetary policy take?