Suppose the economy is initially in equilibrium where real GDP equals potential GDP and the inflation rate is at the target rate. Other things equal, a housing boom will cause aggregate expenditures to increase, which will result in
A) an increase in aggregate demand and an increase in the inflation rate.
B) an increase in aggregate supply and an increase in the inflation rate.
C) an increase in aggregate demand and a decrease in the inflation rate.
D) an increase in aggregate supply and a decrease in the inflation rate.
A
You might also like to view...
(Requires Internet Access for the test question) The following question requires you to download data from the internet and to load it into a statistical package such as STATA or EViews
a. Your textbook estimates an AR(1) model (equation 14.7) for the change in the inflation rate using a sample period 1962:I — 2004:IV. Go to the Stock and Watson companion website for the textbook and download the data "Macroeconomic Data Used in Chapters 14 and 16." Enter the data for consumer price index, calculate the inflation rate, the acceleration of the inflation rate, and replicate the result on page 526 of your textbook. Make sure to use heteroskedasticity-robust standard error option for the estimation. b. Next find a website with more recent data, such as the Federal Reserve Economic Data (FRED) site at the Federal Reserve Bank of St. Louis. Locate the data for the CPI, which will be monthly, and convert the data in quarterly averages. Then, using a sample from 1962:I — 2009:IV, re-estimate the above specification and comment on the changes that have occurred. c. Based on the BIC, how many lags should be included in the forecasting equation for the change in the inflation rate? Use the new data set and sample period to answer the question. What will be an ideal response?
A . Explain how public debt can crowd out private investment. b. Even if the crowding out effect does occur, explain the argument that crowding out does not necessarily undermine overall economic growth
Banks are required to keep a minimum amount of funds in reserve because
A. Depositors may decide to withdraw funds at any time. B. The bank may decide to increase aggregate demand at any time. C. The Fed may decide to withdraw funds at any time. D. Borrowers may decide to repay loans ahead of schedule.
Which of the following statements is true of confidence intervals?
A. Confidence intervals in a CLM are also referred to as point estimates. B. Confidence intervals in a CLM provide a range of likely values for the population parameter. C. Confidence intervals in a CLM do not depend on the degrees of freedom of a distribution. D. Confidence intervals in a CLM can be truly estimated when heteroskedasticity is present.