Monetarists' preference for reduced-form models is based on their belief that
A) reverse causation is a problem.
B) structural models may understate money's effect on economic activity.
C) money supply changes are always endogenous.
D) monetary policy affects only investment spending.
B
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The traditional Keynesian approach to fiscal policy assumes that
A) an equal income distribution ensures a stable economy. B) consumers spend more when their incomes are higher. C) cutting taxes is a more effective way to stimulate the economy than is increasing government spending. D) the effect of unemployment compensation is to destabilize the economy.
If the intersection of the IS curve with the horizontal axis comes at a level of output below the natural level of output, the Fed
A) can easily bring the economy back to the full-employment level of output. B) loses control of the economy. C) must use contractionary model policy to correct economic problem. D) must decrease money supply and ignore interest rates.
Which of the following could not be expected to shift the aggregate demand curve?
a. Net exports fall. b. Consumption spending decreases. c. An increase in government spending. d. A change in real GDP.
Under the expectations hypothesis of the term structure of interest rates, explain the impact of a U.S. Treasury decision to phase out the 30-year bond and to only focus on 3-month, 1-year, 5-year and 10-year bonds?
What will be an ideal response?