MACRO DEBATES

Long-run growth ______the demand for goods and services.

According to the Fisher equation, the real interest rate equals the nominal interest rate minus the:

According to the Philips curve, the inflation rate depends on all of the following expect:

Which of the following would be represented by a negative value of the random supply shock, Ut?

According to the monetary policy rule, when inflation is at its target level and output is at the natural level, then the real interest rate equals the:

The monetary policy rule specified in the dynamic model of aggregate demand and aggregate supply indicates that the central bank adjusts interest rates in response to fluctuations in:

According to the Taylor rule, when real GDP is below its natural level, the nominal funds rate should be_____, and when inflation exceeds 2 percent, the nominal federal funds rate should be______.

At long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, which variables will equal the central bank's target rate of inflation ?

The dynamic aggregate supply curve will shift if any of the following changes expect the:

According to the monetary policy rule (assuming Θπ>0) when inflation increases, the central bank increases the nominal interest rate by ______ the increase in the rate of inflation, which _____ the real interest rate.

When the central bank lowers its target inflation rate, it ______the nominal and real interest rate, which shifts the dynamic aggregate demand curve to the _____.

In the dynamic model of aggregate demand and aggregate supply, changes in the natural level of output change:

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a one-period positive supply shock causes output to:

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a five-period positive demand shock causes output_____until returning to the natural level in the long run.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, in the periods after a permanent reduction in the central bank's inflation target, the DAS shifts downward because:

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a permanent reduction in the central bank's inflation target causes the nominal interest rate to:

In the dynamic model of aggregate demand and aggregate supply, if the central bank chooses a large value of Θπ, the responsiveness of nominal interest rates to inflation, and a small value of ΘΥ, the responsiveness of nominal interest rates to output, then the DAD curve will be relatively ______, and supply shocks will have relatively ______ impacts on inflation than output.

Equation: Monetary Policy Rule it=πt + ϝ + θπ (πt - π*t) + θY (Yt- Y*t). Given the monetary policy rule of the dynamic model of aggregate demand and aggregate supply, which value of Θπ, the responsiveness of nominal interest rates to inflation, would lead to inflation spiralling out of control following a demand shock?

The investment spending component of GDP includes all of the following except:

In equilibrium, other things being equal, all of the following changes will increase the real rental price of capital except:

Other things being equal, the neoclassical model of investment predicts that net investment will increase when the:

According to the neoclassical model of investment, when the real interest rate increases, business fixed investment ______ because the ______ of capital increases.

According to the efficient markets hypothesis, changes in stock prices are:

According to the efficient markets hypothesis, stock price changes reflect ______, but according to Keynes, stock price changes often reflect ______.

Loans made to subprime borrowers in the early 2000s had the immediate impact of ______ housing demand and ______ housing prices.

A toy manufacturer accumulates inventories because of the uncertainty of the demand for their product at Christmas and the desire not to lose any potential sales. This is an example of the ______ motive for holding inventories.

Holding other factors constant, a fall in the interest rate will ______ inventory investment.

According to the neoclassical model of investment, the immediate impact of a rise in the real interest rate will be to:

Government debt equals the:

Holding other factors constant, the ratio of government debt to GDP can decrease as a result of any of the following changes except:

If government debt is not changing, then:

A deficit adjusted for inflation should include only government spending used to make _____ interest payments.

Assume that a government has a balanced budget when the economy is at full employment. If the economy then enters a recession, with no change in tax or spending laws, then the budget of the government is most likely to:

Inflation-indexed government bonds have all of the following benefits except:

According to the traditional viewpoint of government debt, a tax cut without a cut in government spending:

According to the traditional view of government debt, if taxes are cut without cutting government spending, then the international effect initially will be a capital ______ and a trade ______.

Government tax policy can affect aggregate supply as well as aggregate demand, because changes in taxes change the:

Ricardian equivalence refers to the same impact of financing government:

A debt-financed tax cut will ______ current consumption in the traditional view and ______ current consumption in the view of Ricardian equivalence.

Given a reduction in income tax withheld, but no change in income tax owed, households that act according to Ricardian equivalence would ______ the extra takehome pay, while those facing binding borrowing constraints would ______ the extratake home pay.

A strict balanced-budget rule would:

Funds flow directly between savers and investors in financial _____ and flow indirectly between savers and investors through financial _____.

Purchasers of bonds issued by companies are _____ of the company, while purchasers of shares of stock issued by a company are _____ of the company.

Risk that affects many businesses at the same time is called _____ risk, while risk associated with individual businesses is called _____ risk.

A situation in which one party to an economic transaction has more knowledge about the transaction than the other is called:

Which of the following is an example of moral hazard?

Governments can reduce the problem of moral hazard by:

An asset-price bubble bursts if there is:

Subprime borrowers are borrowers:

The mortgage defaults during the 2008–2009 financial crisis severely reduced the capital positions of:

A credit crunch reduces aggregate demand by:

During the 2008–2009 period, the conventional monetary policy response was to _____ the target federal funds rate, while the conventional fiscal policy response was to _____ taxes and to _____ government spending.

An illiquid bank can become insolvent when it:

The government purchasing ownership stakes in a faltering financial institution in order to prop up the financial system is an example of:

Proponents of restricting the size of financial institutions believe this policy will _____, while opponents believe this policy will _____.

Sovereign debt refers to debt issued:

Economists who view the economy as naturally stable often argue that:

The time between when government spending increases and when aggregate demand starts to increase is an example of an:

According to the Lucas critique, when economists evaluate alternative policies they must take into consideration:

If policymakers are free to analyze events as they occur and choose whatever policy seems appropriate at the time, then this is:

Conducting monetary policy so that the FF rate = 0.05, where the FF rate is the nominal federal funds interest rate, is an example of:

An argument in favor of allowing discretionary macroeconomic policy is that:

Assume that there is a short-run tradeoff between inflation and unemployment, that the central bank desires both low inflation and low unemployment, and that the central bank uses discretion in conducting monetary policy. Initially, households and firms expect high inflation. Following an announcement by the central bank of a low-inflation policy, households and firms will ______ the central bank's announcement and ______ their expectations of inflation.

Monetary policy rules that target nominal variables would target any of the following except the:

Economic research finds that greater central-bank independence is ______ correlated with lower and more stable inflation as well as ______ correlated with the average growth and variability of real GDP.

Economic science has provided convincing evidence in favor of the: