Keynesian analysis implies that potential output and price stability can be achieved if
a. the federal budget is balanced annually.
b. marginal tax rates are kept low so the incentive to produce will be strong.
c. aggregate demand is equal to the economy's full-employment rate of output.
d. current saving exceeds the level of investment.
C
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If the Federal Reserve lowers its target inflation rate, the monetary policy reaction function ________ and the aggregate demand curve ________.
A. shifts downward to the right; shifts to the left B. shifts downward to the right; shifts to the right C. shifts upward to the left; shifts to the left D. shifts upward to the left; shifts to the right
If Congress passes legislation to increase government purchases to counter the effects of a recession, then this would be an example of a(n)
A. nondiscretionary fiscal policy. B. supply-side fiscal policy. C. contractionary fiscal policy. D. expansionary fiscal policy.
During the turmoil in the market for subprime mortgages in 2007 and 2008, the Fed increased the volume of discount loans. The goal of the Fed was to
A) reduce unemployment. B) stimulate economic growth. C) reduce the rate of inflation. D) reassure financial markets and promote financial stability. E) reduce the current account deficit.
The average duration of unemployment across the labor force is about
A) 25 weeks. B) 15 weeks. C) 8 weeks. D) 4 weeks.