You are the chairperson of the Board of Governors of the Federal Reserve. You believe in a Keynesian model of the economy, and your goal is to keep the economy at the full-employment level of output. How would you respond (tightening or easing policy) in each of the following cases?(a)Government purchases increase(b)Corporate tax rates increase(c)Expected inflation increases(d)There's a beneficial oil price shock (and the LM curve shifts more to the right than the FE line)
What will be an ideal response?
| (a) | Tighten |
| (b) | Ease |
| (c) | Tighten |
| (d) | Tighten |
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The total surplus in a market is represented by:
A) the area between the demand curve and the market price line. B) the area between the supply curve and the market price line. C) the area between the demand and supply curves and the price axis. D) the area between the demand curve and the horizontal axis.
Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?
What will be an ideal response?
In the short-run, any fall in EP /P, regardless of its causes, will cause
A) an upward shift in the aggregate demand function and an expansion of output. B) an upward shift in the aggregate demand function and a reduction in output. C) a downward shift in the aggregate demand function and an expansion of output. D) an downward shift in the aggregate demand function and a reduction in output. E) an upward shift in the aggregate demand function but leaves output intact.
"Net exports" is defined as
A) GDP minus imports. B) exports plus imports. C) GDP minus exports. D) exports minus imports.