Question 1

In the New Keynesian Rational Expectations model with a Taylor rule, if the central bank follows the Taylor principle

Accepted Answer

A) there is one steady state. 
B) there are three steady states. 
C) there are many steady states. 
D) there is no steady state. 
E) there are two steady states. 
A) there is one steady state. 
B) there are three steady states. 
C) there are many steady states. 
D) there is no steady state. 
E) there are two steady states.

Question 2

In 2018, Venezuelan inflation approached

Accepted Answer

A) -20%. 
B) 13%. 
C) 2%. 
D) 80,000%. 
E) 10,000%. 
A) -20%. 
B) 13%. 
C) 2%. 
D) 80,000%. 
E) 10,000%.

Question 3

In the New Keynesian Rational Expectations Model, in the output demand relationship

Accepted Answer

A) the difference between current output and future output increases when the actual real interest rate increases. 
B) the difference between current output and future output increases when anticipated future inflation decreases. 
C) output increases when the nominal interest rate increases. 
D) the difference between current output and future output increases when the natural real interest rate increases. 
E) the difference between current output and future output increases when the nominal interest rate increases. 
A) the difference between current output and future output increases when the actual real interest rate increases. 
B) the difference between current output and future output increases when anticipated future inflation decreases. 
C) output increases when the nominal interest rate increases. 
D) the difference between current output and future output increases when the natural real interest rate increases. 
E) the difference between current output and future output increases when the nominal interest rate increases.

Question 4

In the Basic New Keynesian model, when there is a liquidity trap, if the central bank promises higher inflation in the future, then

Accepted Answer

A) output rises and inflation falls. 
B) output and inflation stay the same. 
C) output rises and inflation rises. 
D) output falls and inflation falls. 
E) output falls and inflation rises. 
A) output rises and inflation falls. 
B) output and inflation stay the same. 
C) output rises and inflation rises. 
D) output falls and inflation falls. 
E) output falls and inflation rises.

Question 5

For the central bank, loss increases as

Accepted Answer

A) the output gap increases. 
B) the Phillips curve gets steeper. 
C) inflation gets closer to the inflation target. 
D) the output gap decreases. 
E) the output demand curve becomes less steep. 
A) the output gap increases. 
B) the Phillips curve gets steeper. 
C) inflation gets closer to the inflation target. 
D) the output gap decreases. 
E) the output demand curve becomes less steep.

Question 6

Taylor's simplified 1993 rule states that

Accepted Answer

A) the zero lower bound is irrelevant. 
B) the nominal interest rate increases one-for-one with the inflation rate. 
C) the nominal interest rate increases less than one-for-one with the inflation rate. 
D) the nominal interest rate increases one-for-one with the natural real rate of interest. 
E) the nominal interest rate should not depend on the natural real rate of interest. 
A) the zero lower bound is irrelevant. 
B) the nominal interest rate increases one-for-one with the inflation rate. 
C) the nominal interest rate increases less than one-for-one with the inflation rate. 
D) the nominal interest rate increases one-for-one with the natural real rate of interest. 
E) the nominal interest rate should not depend on the natural real rate of interest.

Question 7

In the Basic New Keynesian model, if anticipated future inflation increases, the central bank should

Accepted Answer

A) reduce the nominal interest rate less than one-for-one with the decrease in the anticipated future inflation rate. 
B) hold the nominal interest rate constant. 
C) reduce the nominal interest rate one-for-one with the decrease in the anticipated future inflation rate. 
D) increase the nominal interest rate less than one-for-one with the decrease in the anticipated future inflation rate. 
E) increase the nominal interest rate one-for-one with the decrease in the anticipated future inflation rate. 
A) reduce the nominal interest rate less than one-for-one with the decrease in the anticipated future inflation rate. 
B) hold the nominal interest rate constant. 
C) reduce the nominal interest rate one-for-one with the decrease in the anticipated future inflation rate. 
D) increase the nominal interest rate less than one-for-one with the decrease in the anticipated future inflation rate. 
E) increase the nominal interest rate one-for-one with the decrease in the anticipated future inflation rate.

Question 8

In the Basic New Keynesian model, a decrease in the natural rate of interest causes the following effect

Accepted Answer

A) output declines and inflation goes down. 
B) output increases and inflation goes up. 
C) output increases and inflation goes down. 
D) nothing. 
E) output declines and inflation goes up. 
A) output declines and inflation goes down. 
B) output increases and inflation goes up. 
C) output increases and inflation goes down. 
D) nothing. 
E) output declines and inflation goes up.

Question 9

The Phillips curve was first noticed in data for

Accepted Answer

A) the United Kingdom. 
B) Canada. 
C) the United States. 
D) Zimbabwe. 
E) Russia. 
A) the United Kingdom. 
B) Canada. 
C) the United States. 
D) Zimbabwe. 
E) Russia.

Question 10

In the New Keynesian Rational Expectations model, when the nominal interest rate is constant forever

Accepted Answer

A) in the long run, the inflation rate explodes. 
B) in the long run, the inflation rate equals minus the natural real rate of interest plus the nominal interest rate. 
C) in the long run, the inflation rate equals the natural real rate of interest minus the nominal interest rate. 
D) in the long run, the inflation rate equals minus the natural real rate of interest minus the nominal interest rate. 
E) in the long run, the inflation rate equals the natural real rate of interest plus the nominal interest rate. 
A) in the long run, the inflation rate explodes. 
B) in the long run, the inflation rate equals minus the natural real rate of interest plus the nominal interest rate. 
C) in the long run, the inflation rate equals the natural real rate of interest minus the nominal interest rate. 
D) in the long run, the inflation rate equals minus the natural real rate of interest minus the nominal interest rate. 
E) in the long run, the inflation rate equals the natural real rate of interest plus the nominal interest rate.

Question 11

To make forward guidance work

Accepted Answer

A) the central bank must follow through on its promises. 
B) it is important that the central bank surprise the public. 
C) fiscal policy must support monetary policy. 
D) the central bank must not follow through on its promises. 
E) consumers cannot be forward-looking. 
A) the central bank must follow through on its promises. 
B) it is important that the central bank surprise the public. 
C) fiscal policy must support monetary policy. 
D) the central bank must not follow through on its promises. 
E) consumers cannot be forward-looking.

Question 12

In the New Keynesian Rational Expectations Model, in the Phillips curve relationship

Accepted Answer

A) inflation increases more than one-for-one with anticipated future inflation. 
B) inflation increases one-for-one with anticipated future inflation. 
C) inflation decreases when anticipated future inflation increases. 
D) inflation does not depend on anticipated future inflation. 
E) inflation increases less than one-for-one with anticipated future inflation. 
A) inflation increases more than one-for-one with anticipated future inflation. 
B) inflation increases one-for-one with anticipated future inflation. 
C) inflation decreases when anticipated future inflation increases. 
D) inflation does not depend on anticipated future inflation. 
E) inflation increases less than one-for-one with anticipated future inflation.

Question 13

When firms are subject to Calvo pricing

Accepted Answer

A) they can never change their prices. 
B) they change their prices every other year. 
C) they price their output at the Calvo lower bound. 
D) they can change their prices at will. 
E) when they change their prices is determined at random. 
A) they can never change their prices. 
B) they change their prices every other year. 
C) they price their output at the Calvo lower bound. 
D) they can change their prices at will. 
E) when they change their prices is determined at random.

Question 14

Real interest rates have declined

Accepted Answer

A) only in Europe. 
B) only in the United States. 
C) only in Canada and the United States. 
D) worldwide. 
E) only in Canada. 
A) only in Europe. 
B) only in the United States. 
C) only in Canada and the United States. 
D) worldwide. 
E) only in Canada.

Question 15

The following is a suggested cause of the long-term decline in real interest rates

Accepted Answer

A) secular growth. 
B) low savings in China. 
C) sticky prices. 
D) the global investment glut. 
E) an increase in financial market frictions. 
A) secular growth. 
B) low savings in China. 
C) sticky prices. 
D) the global investment glut. 
E) an increase in financial market frictions.

Question 16

An example of an arrangement that helps to enforce commitment by a central bank is

Accepted Answer

A) New Zealand's Policy Targets Agreement. 
B) the Bank of Canada's interest rate target. 
C) an independent central bank. 
D) deposit insurance. 
E) the lender of last resort. 
A) New Zealand's Policy Targets Agreement. 
B) the Bank of Canada's interest rate target. 
C) an independent central bank. 
D) deposit insurance. 
E) the lender of last resort.

Question 17

Rational expectations implies

Accepted Answer

A) that consumers can be systematically fooled. 
B) that the central bank always foresees what the fiscal authority will do. 
C) that the consumers and firms in models do the best they can in forecasting future economic variables. 
D) that in models with aggregate shocks, consumers and firms always correctly forecast inflation. 
E) that models in which we make this assumption are always right. 
A) that consumers can be systematically fooled. 
B) that the central bank always foresees what the fiscal authority will do. 
C) that the consumers and firms in models do the best they can in forecasting future economic variables. 
D) that in models with aggregate shocks, consumers and firms always correctly forecast inflation. 
E) that models in which we make this assumption are always right.

Question 18

In the New Keynesian Rational Expectations model, an increase in the nominal interest rate

Accepted Answer

A) has no effect on output. 
B) causes output to decrease. 
C) causes inflation to rise. 
D) has no effect on inflation. 
E) causes inflation to fall. 
A) has no effect on output. 
B) causes output to decrease. 
C) causes inflation to rise. 
D) has no effect on inflation. 
E) causes inflation to fall.

Question 19

In the United States, the Federal Reserve has

Accepted Answer

A) no goals. 
B) the same arrangement as the Bank of Canada has with the Canadian government. 
C) an inflation target of 2% mandated by Congress. 
D) an inflation target, which has been in place since 1991. 
E) a dual mandate. 
A) no goals. 
B) the same arrangement as the Bank of Canada has with the Canadian government. 
C) an inflation target of 2% mandated by Congress. 
D) an inflation target, which has been in place since 1991. 
E) a dual mandate.

Question 20

The idea of a "savings glut" was put forward by

Accepted Answer

A) Steve Poloz. 
B) Lawrence Summers. 
C) Ben Bernanke. 
D) Lawrence Bernanke. 
E) Milton Friedman. 
A) Steve Poloz. 
B) Lawrence Summers. 
C) Ben Bernanke. 
D) Lawrence Bernanke. 
E) Milton Friedman.

In the New Keynesian Rational Expectations model with a Taylor rule, if the central bank follows the Taylor principle

In 2018, Venezuelan inflation approached

In the New Keynesian Rational Expectations Model, in the output demand relationship

In the Basic New Keynesian model, when there is a liquidity trap, if the central bank promises higher inflation in the future, then

For the central bank, loss increases as

Taylor's simplified 1993 rule states that

In the Basic New Keynesian model, if anticipated future inflation increases, the central bank should

In the Basic New Keynesian model, a decrease in the natural rate of interest causes the following effect

The Phillips curve was first noticed in data for

In the New Keynesian Rational Expectations model, when the nominal interest rate is constant forever

To make forward guidance work

In the New Keynesian Rational Expectations Model, in the Phillips curve relationship

When firms are subject to Calvo pricing

Real interest rates have declined

The following is a suggested cause of the long-term decline in real interest rates

An example of an arrangement that helps to enforce commitment by a central bank is

Rational expectations implies

In the New Keynesian Rational Expectations model, an increase in the nominal interest rate

In the United States, the Federal Reserve has

The idea of a "savings glut" was put forward by

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters

Exam 14: New Keynesian Economics: Sticky Prices

In the New Keynesian Rational Expectations model with a Taylor rule, if the central bank follows the Taylor principle

In 2018, Venezuelan inflation approached

In the New Keynesian Rational Expectations Model, in the output demand relationship

In the Basic New Keynesian model, when there is a liquidity trap, if the central bank promises higher inflation in the future, then

For the central bank, loss increases as

Taylor's simplified 1993 rule states that

In the Basic New Keynesian model, if anticipated future inflation increases, the central bank should

In the Basic New Keynesian model, a decrease in the natural rate of interest causes the following effect

The Phillips curve was first noticed in data for

In the New Keynesian Rational Expectations model, when the nominal interest rate is constant forever

To make forward guidance work

In the New Keynesian Rational Expectations Model, in the Phillips curve relationship

When firms are subject to Calvo pricing

Real interest rates have declined

The following is a suggested cause of the long-term decline in real interest rates

An example of an arrangement that helps to enforce commitment by a central bank is

Rational expectations implies

In the New Keynesian Rational Expectations model, an increase in the nominal interest rate

In the United States, the Federal Reserve has

The idea of a "savings glut" was put forward by

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters