Exam 15: The Distribution of Income and Poverty

Last year,Bentley bought a bond for $1,000 that promises to pay $45 a year.This year,a person who buys a bond for $1,000 receives $39 a year.If Bentley were to sell his (old)bond,its price would be approximately

The Taylor Rule specifies that the federal funds rate target should be equal to

Under a gold standard,if the market price of gold is above the official price of gold (set by the monetary authority)members of the public would likely buy gold _______________ and sell it __________________,causing the market price of gold to ____________________.

The Keynesian transmission mechanism could be blocked by either interest-insensitive investment or by the liquidity trap.

As the opportunity cost of holding money decreases,the quantity demanded of money

What are the two assumptions made in the nonactivist constant-money-growth-rate rule? Describe the alternative rule known as the predetermined-money-growth-rate rule and explain why some nonactivists prefer this rule.

If Real GDP increases at an annual rate of 4 percent and velocity increases at a rate of 1 percent per year,then rules-based monetary policy advocates who wish to maintain a stable price level would set the annual money supply growth rate at

Last year,Danielle bought a bond for $10,000 that promises to pay $350 a year.This year,a person who buys a bond for $10,000 receives $325 a year.If Danielle were to sell her (old)bond,its price would be approximately

Suppose the money market is in the liquidity trap and that the economy is experiencing a recessionary gap.A Keynesian economist would most likely advocate

There is an increase in the money supply and the interest rate does not change.This is what happens if

A decrease in the money supply will shift the aggregate __________ curve to the __________.

Which of the following statements is likely to be made by an economist who believes in activist monetary policy? (1)The more closely monetary policy can be designed to meet the particulars of a given economic environment,the better.(2)Because of long and uncertain time lags,activist monetary policy may be destabilizing rather than stabilizing.(3)There is sufficient flexibility in wages and prices in modern economies to allow the economy to equilibrate in reasonable speed at the natural level of Real GDP.(4)The "same-for-all-seasons" monetary policy is the way to proceed.(5)There is evidence that monetary policy in the mid-1970s caused a recession.

Under a constant growth rate of money rule of 3 percent in an economy in which Real GDP grows at an average rate of 3 percent and velocity is constant,the inflation rate is

The liquidity trap is the

According to the Keynesian transmission mechanism,if the Fed conducts an open market purchase of government securities,it may cause which of the following in the investment goods market?

The quantity supplied of money is assumed (in the textbook)to be

-Refer to Exhibit 15-2.A(n)__________ in the money supply from S₁ to S₂ would have a tendency to __________ the opportunity cost of holding money.

-Refer to Exhibit 15-3.The economy is currently at point 7.If the economy self-regulates,it will end up at point __________,whereas if contractionary monetary policy is effective,it will end up at point __________.

Suppose that the bond market and the money market start out in equilibrium.Explain the process by which the interest rate and the price of bonds will change as a result of the Fed increasing the money supply.

The rules-based monetary policy reads: The annual growth rate in the money supply will be equal to the average annual growth rate in Real GDP minus the growth rate in velocity.If the average growth rate in Real GDP this year is 3 percent and the growth rate in velocity is 2 percent,then the money supply will increase by ______________ percent this year.