21 - award: '1 0 out of ..... Potential output: r takes...

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Unformatted text preview: award: '1 0 out of ..... Potential output: r takes into account temporaiy shocks to the economy when determining the output level associated with full employment. ed p is output produced with normal resource usage. 2- is maximum output that can be produced in the economy. 2- is output produced with normal labor usage. MultipleClIoice Section: Output and Inflation in the Long Run award 2 0 out I :r'he cgngre'éémfiéi'o'diigat'iiifi'éé'flég'éhnu'fiHEéH that it lowered its estimate of'p'otential output by foreseea'olerutureIIWhat'cha'nge in mic-Inier growth is né'éli'e'a'iitHE'Eeo wants-Ito continue having afi'a'ife'iége'ifiii'a'fi'd'n" rate ol2%7 r Raise money growth by 1 '96 °# 3“ Lower money growth oy 1% :- Leave moneygrowth unchanged :- Lowar money growth toZ'ib MultiDIeCnoice Section: Output and Inflation in the Long Run a '.'.' a rd: 3- I} out of 10 points Suppose a firm has detailed engineering plans for investment projects in a filing cabinet. Afall in the market rate ofinterest at a given inflation rate: ,2- may or may not afiectfirm investment, depending on whetherthe market interest rate is above or belowthe long—run real rate ofinterest. °_ P will raisethe chancesthat some ofthese projects are undertaken since the cost offinancing has declined. b will lowerthe chances that any ofthese projects are undertaken since the market rate of return has fallen. P will have no efi'ect on firm investment since it is the long—run real interest rate, r*, that determines investment spending. MultipleChoice Section: Monetary Policy and the DynamicAggregate Demand Curve award 4 0 out of ............... ..1l?.P.2ir-t5 Real Immsi R2112 (r) lnthe diagram above: the economy lS initially at pointA: the intersection ofthe aggregate expenditure curve and the vertical line represanting the level oloolenlial output atlhe long-run interest rate llthere is a technical ll'll'lflVEllCIl'l that allows more uuloulto be produced for given inputs then the newlongsrun real interest rate Will be at point p A P C (- El oat" D MW WEBpr The more aggressive the central bank is about controlling the inflation rate, the steeperthe cuNe. fl It shows the target nominal short—run interest rate announced bythe monetary authority plotted against the inflation rate. F It must pass through the point associated with the current nominal short—run interest rate target and the current inflation rate. r‘ When the inflation rate is greaterthan the target rate, the central bank shitts the cure to the lelt, even ifthe inflation target is unchanged. HultipleClioice Section: Monetary Policy and the DynamicAggregate Demand Curve award: 6 0 out of ' 19. ' MPRCFigmzl Rfifllulerfll R4139”) BIPRCI MPEG2 MFR Reallmuest “PRC Rate (5") Tmninnai'w (:T} Maison (m) Considerthe diagram above. lfthe central bank becomes less aggressive aboutfighting inflation then: r itwould select curve MPRC1 1-“ itwould move along liIlF'RE.‘4 r itwould change from MPR02 to MPRC1 °_. 1" itwould change from MF'RCZ t0 MF'RCBI lilultipleClioice Section: Monetary Policy and the DynamicAggregate Demand Curve a we rd: 7 0 out of ............... Which otthe followmg lists includes onlytactors shitting the shorterun aggregate supply curve to the lefi? 1* Potential output rises‘ a cut intne inflation target; a production cut by OPEC r“ A recesSionary output gap; a rise In health care costs; a lower inllationtarget r A shortage oflabor; a fall in oil prices; a rise inthe inflation target. °_‘ r A rise in raw materials prices: an expansionary output gap; a newly-appointed central bankerwho financial market participants anticipate will pursue policies that lead to a rise in inflation Multiplechoice Section Aggregate Supply a w a rd: 8- 0 out of ............... Long-Rim Aggregate “ EmmWthflRAS Expected Inflation (I?) Y P Y Relative to the initial long-run equilibrium depicted above, awar in which a significant number ofworkers die would: ,r“ shift SRAS to the right. ,r“ shift LRAS to the right. F shift neither LRAS nor SRAS. \ e_ r Shifi LRAS to the lefi. MultipleCholce Section:Aggregate Supply a '.'.'a rd: 9- 0 out of ............... .flmflammmmmmmmmmmmmmmmmmmWWWmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm Which ofthe following correctly describes long—run equilibrium inthe economy? 3* The short-run and long—run aggregate supply curves intersect at a point consistentwith potential output and expected inflation. r The aggregate demand and short—run aggregate supply curves intersect atthe expected rate ofinflation. r The short-run aggregate supply curve and the aggregate demand curve intersect at potential output and where actual and expected inflation are the same. 3* The aggregate demand curve intersects the long run aggregate supply curve at potential output. MultipleClioice Section: Equilibrium and the Determination ofOutput and Inflation award: 10 flout of .............. TE In the above diagram, ifthe economy starts with a positive inflation gap but no output gap. itwill initially be at point: HultipleClIoice Section: Equilibrium andthe Determination ofUutput and Inflation ...
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21 - award: '1 0 out of ..... Potential output: r takes...

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