What can you learn from the figure below (Figure 13-1 from the text) which depicts the U.S. GNP and its components for the year 2009?
What will be an ideal response?
The highest component of GNP is consumption and the U.S. has a negative current balance.
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Suppose the real money demand function is Md/P = 2400 + 0.2Y - 10,000 (r + ?e). Assume M = 4000, P = 2.0, ?e = .03, and Y = 5000. The real interest rate that clears the asset market is
A) 3%. B) 6%. C) 11%. D) 14%.
The main determinant of how quickly expected inflation adjusts to changes in monetary policy is
A) the slope of the Phillips curve. B) the slope of the short-run aggregate supply curve. C) the credibility of the central bank. D) the degree of indexation in the economy.
The output per acre on U.S. farms has
a. remained fairly stagnant since 1968 b. increased only slightly since 1968 c. declined dramatically since the late 1970s d. more than doubled since World War II e. shown a marked decline in recent years