Refer to Figure 13.3. If exchange rates are floating, an expansionary fiscal policy and the typical Fed response to the change in inflation caused by the fiscal policy would best be represented by a movement from ________ in panel (a) and a
corresponding movement from ________ in panel (b). A) point A to point D; point X to point Y
B) point C to point B; point X to point Y
C) point D to point A; point Y to point X
D) point B to point C; point Y to point X
C
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An agreement among countries to adopt a common currency is called a
A) central bank consolidation. B) currency union. C) monetary compact. D) common banking treaty.
In the above figure, starting at E1, if there is a supply shock that is permanent, the
A) aggregate supply would shift to SRAS1 and LRAS1 would shift to LRAS0. B) aggregate supply would shift to SRAS1 and LRAS0 would shift to LRAS1. C) aggregate supply would shift to SRAS2 and LRAS0 would shift to LRAS1. D) aggregate supply would shift to SRAS1 and then return to SRAS0.
The use of domestic open market operations to counteract the effects of a foreign exchange market intervention on the domestic money supply is known as:
a. normalization. b. quantitative easing. c. sterilization. d. volatilization. e. depreciation.
According to Okun's Law, if the unemployment rate is 7 percent and the natural unemployment rate is 5 percent, potential GDP is ________ than real GDP
A) 2 percent greater B) 7 percent less C) 2 percent less D) 4 percent less E) 4 percent greater