Why did the government use expansionary monetary policies in the late 1970s, and what was the principal negative macroeconomic effect of these policies?
What will be an ideal response?
In the late 1970s the U.S. government used expansionary monetary policies in an attempt to reduce the unemployment rate and to increase the growth rate of output. Relying on the Keynesian model to explain the slowdown in economic growth, policymakers concluded that aggregate demand had declined and that expansionary monetary stabilization policies could pull aggregate demand back to the full-employment level of output. However, aggregate demand had not declined. The recession was created by a decline in aggregate supply caused by an increase in the price of oil. Expansionary monetary policies caused aggregate demand to increase along the new aggregate supply curve, which caused inflation to increase further.
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In 2014, which component of GDP had a negative value?
A) investment B) government spending C) net exports D) consumption
A checking deposit functions as
a. a medium of exchange and as a store of value. b. a medium of exchange, but not as a store of value. c. a store of value, but not as a medium of exchange. d. neither a medium of exchange nor as a store of value.
If asset A is significantly more liquid than asset B, then it is _____ costly to convert asset A into cash than it is to convert asset B into cash. Furthermore, it is likely that asset B will be included in the _____ measure of money.
A. more; M1 B. less; M1 C. less; M2 D. more; M2
Assume a country agrees to a free-trade act with another country. In the process, some individuals are displaced from their jobs, thus the free-trade act results in a negative externality
A) False B) True C) Only if those who were displaced are not compensated with another job or income transfer. D) Only if those who were displaced were compensated with another job or income transfer.