Exam 15: The Debate over Monetary and Fiscal Policy

As a result of the Fed's unconventional purchase of over $1 trillion of mortgage-backed securities in 2009,interest rates on both mortgage-backed securities and home mortgages increased.

How do lags affect stabilization policy? Your answer should include three specific types of lags.

Define the following terms and explain their importance to the study of macroeconomics: a.velocity b.equation of exchange c.monetarism d.automatic stabilizer

Believers in fixed rules maintain that

If the aggregate supply curve is flat,

The inflation rate in January of 2009 as measured by the CPI was zero.If inflation were to remain at zero for a long period,what would be the effect on velocity?

If the public decides to hold smaller cash balances,this will cause a(n)

In 1996,if nominal GDP was about $8.5 thousand billion.The stock of money was

In 2009,nominal GDP was $14,050 billion and M1 was $1,587 billion.Velocity was

When comparing the Keynesian and monetarist approaches,the only substantive difference is that

The "Taylor rule" for monetary policy provides the Fed with a

Following an anticapitalist coup,Freedonia forces all citizens to turn in and stop using all credit cards.What is the most likely effect of this on velocity?

List the reasons why the actual multiplier,which is estimated to be less than 2 for the U.S.economy,is much less than what the oversimplified formula suggests.

The Federal Reserve reduced the fed funds rate to the 0-0.25 percent range in 2008 in response to the Lehman Brother's catastrophe.

Critics of macroeconomic stabilization policies argue that

The efficiency of the payments' mechanism affects

Some economists believe that policy makers should avoid stabilization policy because

According to the monetarists,the velocity of money is

During the financial crisis of 2007-2009,the proper policy response was

President George W.Bush's tax cut in 2001 was a rare example of