Inflation shocks and shocks to potential output are called ________ shocks.
A. aggregate supply
B. aggregate demand
C. monetary policy
D. fiscal policy
Answer: A
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Which of the following is NOT a basic assumption of the "Lucas" model?
A) slow adjustment of wages and prices B) rational expectations C) imperfect information D) market-clearing
The unemployment rate can remain below the natural rate, but only _____
a. in the long run b. with continuous deflation c. with a continuously increasing inflation rate d. with a series of adverse supply shocks e. if the money supply is constant
Monetarists typically favor strong policy measures to fight recession
a. True b. False Indicate whether the statement is true or false
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and net nonreserve international borrowing/investing in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more positive (or less negative). b. The real risk-free interest rate falls and net nonreserve international borrowing/investing becomes more negative (or less positive). c. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more negative (or less positive). d. The real risk-free interest rate and net nonreserve international borrowing/investing remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.