chapter 13.rtf - Exam Name MULTIPLE CHOICE Choose the one...

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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following best summarises the reaction of the Egyptian Central Banks to the global financial crisis of 2009? 1) _______ A) They expanded their investments in foreign currency. B) They lowered the target for the overnight interest rate. C) They shifted the aggregate demand to the left. D) They increased the long term interest rate. Figure 24-2 2) Refer to Figure 24 - 2. At which point are inflation expectations equal to the actual inflation rate? 2) _______ A) D
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B) B C) A D) E E) F 3) According to the short - run Phillips curve, which of the following would result in low rates of unemployment? 3) _______ A) a higher inflation rate B) a lower inflation rate C) weak increases in aggregate demand D) weak increases in aggregate supply 4) If the current unemployment rate is 5%, under which of the following circumstances would you expect the Central bank to use expansionary monetary policy? 4) _______ A) if the natural unemployment rate is above 5% B) if the natural unemployment rate is below 5% C) if the inflation rate is below 5% D) if the inflation rate is above 5%
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5) Lucas and Sargent argue that the short run trade off between unemployment and inflation is caused by 5) _______ A) workers and firms being fooled by unexpected changes in monetary policy. B) workers and firms using central bank policy to predict inflation. C) workers and firms using all the information available to predict inflation. D) workers and firms rapidly adjusting wages and prices in response to changes in expectation. Figure 24-1 6) Refer to Figure 24 - 1. What should the central bank do if it wants to move from point A to point B in the short - run Phillips curve depicted in the figure above? 6) _______ A) increase the money supply B) buy treasury bills C) sell treasury bills
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D) lower the discount rate E) lower taxes 7) Which of the following does Jordan not include in its core inflation rate, a fact that allowed its Central Bank to keep interest rates low in 2010? 7) _______ A) Clothing B) Food and energy products C) Housing costs D) Insurance 8) When unemployment is below its natural rate, the inflation rate will eventually 8) _______ A) decrease. B) increase. C) become equal to the natural rate of unemployment. D) move to its natural rate. Figure 24-4
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9) Refer to Figure 24 - 4. A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock, like that pursued by Volker in 1979, would result in a movement ________. 9) _______ A) from C to D to A B) from C to A C) from A to C D) from A to D to C E) from A to B 10) If firms and workers have rational expectations, including knowledge of the policy being used by the central bank 10) ______ A) expansionary monetary policy is especially effective.
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