Draw two SP curves intersecting LP; call the upper intersection point A and the lower point B. The Fed promises to reduce inflation while maintaining natural unemployment. If the public believes the Fed, the economy moves from ________
Then if the Fed turns out to be time-inconsistent, breaking its promise and trading off ________ inflation for lower unemployment, the public revises the way it forms inflation expectations so that in the long run the economy stays at ________. A) A to B, lower, B which is superior to A
B) A to B, higher, A which is inferior to B
C) A to B, lower, A which is superior to B
D) B to A, higher, B which is superior to A
E) B to A, lower, B which is inferior to A
B
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The IS curve shows the combinations of ________ and ________ where the goods market is in equilibrium
A) aggregate expenditure; real GDP B) the real interest rate; real GDP C) potential GDP; aggregate expenditure D) the nominal interest rate; the quantity of money
To say that the natural rate of unemployment changes over time is to say that
a. the short-run Phillips curve shifts over time. b. the long-run Phillips curve shifts over time. c. the aggregate demand curve shifts over time. d. the Federal Reserve influences the natural rate of unemployment over time.
Figure 16-3
Figure 16-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money. If the Federal Reserve does not want interest rates to rise, it will
a.
shift the money supply curve to the right by monetizing the deficit.
b.
shift the money supply curve to the left by open market sales of government securities.
c.
maintain the current targets for both M1 and M2 money stocks.
d.
engage in contractionary monetary policy, such as increases in the discount rate.
Oppotunity-cost theory implies that if the public lost most of its interest in spectator sports
A. the cost of hiring professional athletes would rise. B. the cost of hiring professional athletes would fall. C. this would have no effect on the cost of hiring professional athletes. D. athletes would have to charge more for their services in order to