Question 1

All of the following are likely results of a negative demand shock EXCEPT

Accepted Answer

A)  a negative output gap. 
B)  lower inflation. 
C)  the IS curve shifts to the left. 
D)  the Phillips curve shifts to the left. 
A)  a negative output gap. 
B)  lower inflation. 
C)  the IS curve shifts to the left. 
D)  the Phillips curve shifts to the left.

Question 2

If the Fed is able to permanently reduce the inflation rate,households will eventually lower their expectation of the inflation rate.Once that happens,the Phillips curve will shift ________,and the Fed can return output to potential GDP by ________ the real interest rate.

Accepted Answer

A)  up; raising 
B)  up; lowering 
C)  down; raising 
D)  down; lowering 
A)  up; raising 
B)  up; lowering 
C)  down; raising 
D)  down; lowering

Question 3

In a simple model of the economy,if the MPC is 0.8,the multiplier will equal

Accepted Answer

A)  0.2. 
B)  0.8. 
C)  1.25. 
D)  5. 
A)  0.2. 
B)  0.8. 
C)  1.25. 
D)  5.

Question 4

The marginal propensity to consume can best be described as

Accepted Answer

A)  consumption / income. 
B)  the impact of a change in income on GDP. 
C)  the change in income divided by the change in consumption. 
D)  the change in consumption divided by the change in income. 
A)  consumption / income. 
B)  the impact of a change in income on GDP. 
C)  the change in income divided by the change in consumption. 
D)  the change in consumption divided by the change in income.

Question 5

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Accepted Answer

A)  since real rates are what affect borrowing and spending decisions. 
B)  by improving borrower and bank balance sheets. 
C)  by reducing transactions costs. 
D)  only when the policy is substantial. 
A)  since real rates are what affect borrowing and spending decisions. 
B)  by improving borrower and bank balance sheets. 
C)  by reducing transactions costs. 
D)  only when the policy is substantial.

Question 6

What is the inflation gap? What is the output gap?

Accepted Answer

The inflation gap is the diffe

Question 7

The graph of the short-run relationship between the unemployment rate and inflation is called a(n)

Accepted Answer

A)  MP curve. 
B)  LM curve. 
C)  IS curve. 
D)  Phillips curve. 
A)  MP curve. 
B)  LM curve. 
C)  IS curve. 
D)  Phillips curve.

Question 8

Most investors believed that Congress would never allow Fannie Mae and Freddie Mac to fail,which enabled Fannie and Freddie to sell bonds with

Accepted Answer

A)  high interest rates because investors saw the bonds as having very low default risk. 
B)  low interest rates because investors saw the bonds as having very low default risk. 
C)  high interest rates because investors saw the bonds as having zero default risk. 
D)  low interest rates because investors saw the bonds as having very high default risk. 
A)  high interest rates because investors saw the bonds as having very low default risk. 
B)  low interest rates because investors saw the bonds as having very low default risk. 
C)  high interest rates because investors saw the bonds as having zero default risk. 
D)  low interest rates because investors saw the bonds as having very high default risk.

All of the following are likely results of a negative demand shock EXCEPT

If the Fed is able to permanently reduce the inflation rate,households will eventually lower their expectation of the inflation rate.Once that happens,the Phillips curve will shift ,and the Fed can return output to potential GDP by the real interest rate.

In a simple model of the economy,if the MPC is 0.8,the multiplier will equal

The marginal propensity to consume can best be described as

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

What is the inflation gap? What is the output gap?

The graph of the short-run relationship between the unemployment rate and inflation is called a(n)

Most investors believed that Congress would never allow Fannie Mae and Freddie Mac to fail,which enabled Fannie and Freddie to sell bonds with

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Filters

Exam 18: Monetary Theory Ii: the Is-Mp Model

All of the following are likely results of a negative demand shock EXCEPT

If the Fed is able to permanently reduce the inflation rate,households will eventually lower their expectation of the inflation rate.Once that happens,the Phillips curve will shift ________,and the Fed can return output to potential GDP by ________ the real interest rate.

In a simple model of the economy,if the MPC is 0.8,the multiplier will equal

The marginal propensity to consume can best be described as

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

What is the inflation gap? What is the output gap?

The graph of the short-run relationship between the unemployment rate and inflation is called a(n)

Most investors believed that Congress would never allow Fannie Mae and Freddie Mac to fail,which enabled Fannie and Freddie to sell bonds with

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Filters

If the Fed is able to permanently reduce the inflation rate,households will eventually lower their expectation of the inflation rate.Once that happens,the Phillips curve will shift ,and the Fed can return output to potential GDP by the real interest rate.