Exam 28: Inflation and Monetary Policy

A) change the form of inflation
B) change the type of unemployment
C) change the level of unemployment
D) stop the flow of currency abroad
E) change the rate of inflation

Correct Answer

verified

Show Answer

A) attempted to guarantee stability of the banking system
B) was a reaction to the savings and loan crisis
C) added full employment to the list of objectives for the Fed
D) strengthened deposit insurance programs
E) pledged the Fed to keep the inflation rate low

Correct Answer

verified

Show Answer

A) That it takes time to observe the effects of fiscal policy on the economy
B) That the Fed takes awhile to figure out what it wants to do
C) That the Congress takes awhile to figure out what it wants to do
D) That it takes time to observe the effects of monetary policy on the economy
E) That the public needs time to decide how to respond to monetary policy changes

Correct Answer

verified

Show Answer

A) Money demand would not change,real GDP would not change,the interest rate would decrease,and there would be partial crowding out.
B) Money demand would not change,real GDP would not change,the interest rate would increase,and there would be complete crowding out.
C) Money demand would increase,real GDP would not change,the interest rate would increase,and there would be partial crowding out.
D) Money demand would not change,real GDP would increase,the interest rate would decrease,and there would be complete crowding out.
E) Money demand would increase,real GDP would not change,the interest rate would decrease,and there would be complete crowding out.

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer

A) shows the Fed's employment options
B) is vertical because the Fed refuses to change the unemployment rate in the long run
C) indicates that the Fed cannot affect the unemployment rate in the long run
D) is fixed permanently
E) measures recessionary pressures

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer

A) sees it all the time
B) can ignore it
C) can't do much about it
D) is a natural reaction to unemployment
E) has always recognized that some workers will be voluntarily unemployed

Correct Answer

verified

Show Answer

A) Maintain a money supply target
B) Decrease the money supply
C) Maintain a passive monetary policy
D) Neutralize the impact with an increase in the money supply
E) Increase the interest rate

Correct Answer

verified

Show Answer

A) Encouraging investment
B) Regulating foreign trade
C) Minimizing the interest payments on the national debt
D) Achieving a low and stable rate of inflation
E) Keeping the interest rate low

Correct Answer

verified

Show Answer

A) The choice between higher real wages and higher output
B) The choice between cyclical unemployment and frictional unemployment
C) The choice between a higher capital stock and inflation
D) The choice between higher output per capita and maintaining the natural rate of unemployment
E) The choice between unemployment and inflation

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer

Correct Answer

verified

Show Answer

A) the Fed can choose to fight the rising price level,but this will result in lower unemployment.
B) the Fed can choose to fight the rising unemployment,but this will result in an even lower price level.
C) the Fed can choose to fight the falling unemployment,but this will result in an even higher price level.
D) the Fed can choose to fight the rising unemployment,but this will result in an even higher price level.
E) the Fed can choose to fight the rising unemployment,but this will result in higher taxes.

Correct Answer

verified

Show Answer

A) is the same as a country's production possibilities frontier..
B) is upward sloping.
C) illustrates the Fed's choice between inflation and unemployment in the long run.
D) illustrates the Fed's choice between inflation and unemployment in the short run.
E) illustrates the Fed's choice between inflation and tax revenues in the short run.

Correct Answer

verified

Show Answer

A) Financial markets are inefficient and information takes several months to impact them.
B) Changes in monetary policy only affect future projects such as factories,not current ones.
C) Interest rates takes several months to change after a change in money supply.
D) Interest rates are fixed and it takes several months to change laws to have the targets amended.
E) Because of the Fed's relative inability to convince Congress about the necessity of a particular monetary policy.

Correct Answer

verified

Show Answer