Answer6 - 1.The aggregate demand curve shows the...

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1.The aggregate demand curve shows the relationship between inflation and: A) the nominal interest rate. D) the exchange rate. B) the real interest rate. E) short-run equilibrium output. C) the unemployment rate. Answer: E Learning Objective: Aggregate demand curve Level of Learning: Knowledge Type: Word Problem Source: Unique 2.Any value of the money supply chosen by the Federal Reserve implies a specific value for ______. A) potential output D) the budget deficit B) net exports E) the nominal interest rate C) government purchases Answer: E Learning Objective: Fed and interest rates Level of Learning: Knowledge Type: Word Problem Source: Unique 3.All else equal, an increase in the rate of inflation ____ planned spending and ____ short-run equilibrium output. A) increases; increases D) decreases; increases B) increases; decreases E) decreases; decreases C) does not change; does not change Answer: E Learning Objective: Aggregate demand and inflation Level of Learning: Knowledge Type: Word Problem Source: Web 4.Because the Fed determines the money supply, the: A) money demand curve is downward sloping. D) money supply curve is downward sloping. B) money demand curve is upward sloping. E) money supply curve is upward sloping. C) money supply curve is vertical. Answer: C Learning Objective: Money supply Level of Learning: Knowledge Type: Word Problem Source: Unique 5.If the Fed wishes to reduce nominal interest rates, it must engage in an open market ____ of bonds that ____ the money supply. A) sale; increases D) purchase; increases B) sale; decreases E) purchase; decreases C) sale; does not change Answer: D Learning Objective: Fed controls interest rates Level of Learning: Comprehension Type: Word Problem Source: Unique 6.If the Fed wishes to increase nominal interest rates, it must engage in an open market ____ of bonds that ____ the money supply. A) sale; increases D) purchase; increases B) sale; decreases E) purchase; decreases C) sale; does not change Answer: B Learning Objective: Fed controls interest rates Level of Learning: Comprehension Type: Word Problem Source: Web 7.When the Fed engages in an open market purchase, the money supply ____ and the nominal interest rate ______. A) increases; increases B) increases; decreases C) increases; may either increase or decrease depending on money demand D) decreases; increases E) decreases; decreases Answer: B Learning Objective: Fed controls interest rates Level of Learning: Comprehension Type: Word Problem Source: Unique
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8.If the Fed's monetary policy reaction function does not change, then when inflation increases the Fed responds by _____ the real interest rate, which _____ consumption and investment spending, which _____ output.
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This note was uploaded on 04/09/2011 for the course ECON 201 taught by Professor Joyce during the Spring '07 term at Drexel.

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Answer6 - 1.The aggregate demand curve shows the...

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