Why is the government budget constraint different between the short run and the long run?
What will be an ideal response?
In the short run, the government budget constraint consists of tax revenues and borrowing. However, a government cannot borrow indefinitely so that, in the long run, its budget constant consists of only tax revenues.
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Lizzie's budget line is shown in the figure above. If the price of a cookie falls, the budget line
A) shifts rightward and its slope does not change. B) shifts leftward and its slope does not change. C) becomes flatter. D) becomes steeper.
If the Fed expects currency holdings to fall, it conducts open market ________ to offset the expected ________ in reserves
A) purchases; increase B) purchases; decrease C) sales; increase D) sales; decrease
According to estimates of the Taylor rule, monetary policy was too easy
A) from 1960 to 1965. B) from 1965 to 1979. C) in the 1980s. D) in the 1990s.
The idea that hysteresis plays a role in macroeconomics implies that
a. monetary policy can have an effect on the natural rate of unemployment. b. workers can overreact to changes in monetary policy. c. stabilization policy is ineffective and counterproductive. d. fiscal policy is ineffective and counterproductive.