A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium
Continued higher money supply growth raises the inflation rate. Firms and workers will come to expect higher inflation and take it into account when setting wages and prices. The increase in expected inflation shifts the short-run Phillips curve to the right.
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If the fundamental value of the exchange rate is ________ than the official (fixed) exchange rate, the country has an ________ problem, and it will gain reserves
A) less; overvaluation B) greater; overvaluation C) less; undervaluation D) greater; undervaluation
Government revenue generated by the issue of currency is known as ________
A) monetizing the debt B) triage C) seignorage D) hyperinflation
Which of the following statements is (are) correct? Critics of the real business cycle model
a. question whether technology has ever been the cause of a recession. b. do not deny that some technology shocks affect many industries. However, they do not believe that there are enough of these shocks to explain recessions where output falls too as much as 10 percent below potential output. c. argue that aggregate supply changes drive most business cycles. d. All of the above e. None of the above
Economic theory indicates that the amount consumed of a natural resource depends on
a. the price of the resource. b. consumer income. c. the price of substitute resources. d. all of the above.