Question 1

According to the Fisher equation,the real interest rate is given by

Accepted Answer

A)  zero.
B)  the nominal interest rate plus the rate of inflation.
C)  the nominal interest rate minus the rate of unemployment.
D)  the rate of economic growth.
E)  the nominal interest rate minus the rate of inflation.F) A) and E)
G) A) and D)

Question 2

According to the Phillips curve,if:

Accepted Answer

A)  the inflation rate is falling,the economy is booming.
B)  the inflation rate is rising,the economy is in recession.
C)  the inflation rate is rising,the economy is booming.
D)  the unemployment rate is falling,the economy is booming.
E)  None of the above is correct.F) A) and B)
G) None of the above

Question 3

If the price of oil unexpectedly rises,the Phillips curve shifts down and to the right.

Accepted Answer

A) True 
 B)False

Question 4

With adaptive expectations,the Phillips curve is written as:

Accepted Answer

A)    .
B)    .
C)    .
D)  Dpt = u¯ut.
E)  Either a or b is correct.F) None of the above
G) D) and E)

Question 5

The federal funds rate is:

Accepted Answer

A)  equal to the rate of inflation.
B)  the interest rate at which banks borrow from the Federal Reserve.
C)  the interest rate at which banks borrow from and loan to each other overnight.
D)  an interest rate that is some fixed amount above the prime lending rate.
E)  the return to stock markets over the long term.F) All of the above
G) B) and C)

Question 6

Monetary economists find that it takes anywhere from six to eight weeks for monetary policy to have a substantial impact on economic activity.

Accepted Answer

A) True 
 B)False

Question 7

When economists say "sticky inflation," they mean that inflation does not react directly with the monetary policy.

Accepted Answer

A) True 
 B)False

Question 8

-Consider Figure 12.9,which shows short-run output fluctuations 
From 1990.1 to 2000.4,by quarter.If this is all the information you have,during the period 1997.1-1993.4,from the Phillips curve,you would conclude that:

Accepted Answer

A)  inflation is decelerating,  .
B)  inflation is accelerating,  .
C)  unemployment is falling.
D)  unemployment is rising.
E)  Not enough information is given.F) All of the above
G) B) and D)

Question 9

What are the mechanics of lowering interest rates?

Accepted Answer

If the Fed wants to lower inte...

Question 10

Which of the following scenarios best describes the short-run model?

Accepted Answer

A)   
B)   
C)   
D)   
E)  None of the above is correct.F) B) and C)
G) A) and E)

Question 11

One of the explanations for the high rates of inflation in the 1970s was a productivity slowdown.

Accepted Answer

A) True 
 B)False

Question 12

In the Phillips curve Dpt = u¯ 
T + o¯, 
Measures:

Accepted Answer

A)  a price shock.
B)  how sensitive inflation is to interest rates.
C)  how sensitive inflation is to aggregate demand conditions.
D)  how sensitive inflation is to aggregate supply conditions.
E)  how sensitive inflation is to price shocks.F) None of the above
G) A) and D)

Question 13

Oil prices are closely watched because:

Accepted Answer

A)  they hurt automobile owners.
B)  they affect inflation directly.
C)  of their impact on stock markets.
D)  of their immediate impact on subsidies and taxes.
E)  they affect inflation both directly and indirectly.F) A) and B)
G) B) and E)

Question 14

When economists say "sticky inflation," they mean:

Accepted Answer

A)  inflation does not react directly to changes in monetary policy.
B)  inflation adjusts slowly.
C)  inflation does not react directly to changes in fiscal policy.
D)  taxes do not react to changes in prices.
E)  a and b are correct.F) D) and E)
G) C) and E)

Question 15

A key assumption of the short-run model is:

Accepted Answer

A)  zero inflation.
B)  perfect price flexibility.
C)  that unemployment always equals its natural rate.
D)  that the economy never deviates from its long-run equilibrium.
E)  sticky inflation.F) B) and C)
G) A) and C)

Question 16

If the Fed mistakenly believes that potential output is higher than it actually is,it might conduct inflationary monetary policy.

Accepted Answer

A) True 
 B)False

Question 17

According to the Phillips curve,if current output equals potential output,

Accepted Answer

A)  unemployment is zero.
B)  inflation fluctuates a lot.
C)  inflation is steady.
D)  unemployment is negative.
E)  the economy is booming.F) B) and C)
G) A) and D)

Question 18

-Consider Figure 12.8,which shows the change in inflation 
From 1995.1 to 2000.4,by quarter.You are Federal Reserve chairman Greenspan and today's date is the second quarter of 1997 (1997.2) .Given the information you have,using the Phillips curve,to stabilize the economy,you would __________,risking __________.

Accepted Answer

A)  raise interest rates;recession
B)  raise interest rates;inflation
C)  lower interest rates;inflation
D)  lower interest rates;higher unemployment
E)  Not enough information is given.F) A) and E)
G) C) and D)

Question 19

The link between real and nominal interest rates is called:

Accepted Answer

A)  the MP curve.
B)  the Phillips curve.
C)  Okun's law.
D)  the Fisher equation.
E)  Jones's equality.F) C) and D)
G) A) and B)

Question 20

Which of the following is the Fisher equation?

Accepted Answer

A)   
B)   
C)   
D)   
E)   F) B) and D)
G) A) and B)

Exam 12: Monetary Policy and the Phillips Curve

According to the Phillips curve,if:

Correct AnswerverifiedShow Answer

Which of the following is the Fisher equation?

Correct AnswerverifiedShow Answer

Oil prices are closely watched because:

Correct AnswerverifiedShow Answer

Which of the following scenarios best describes the short-run model?

Correct AnswerverifiedShow Answer

What are the mechanics of lowering interest rates?

Correct AnswerverifiedIf the Fed wants to lower inte...View AnswerShow Answer

If the price of oil unexpectedly rises,the Phillips curve shifts down and to the right.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When economists say "sticky inflation," they mean:

Correct AnswerverifiedShow Answer

According to the Phillips curve,if current output equals potential output,

Correct AnswerverifiedShow Answer

One of the explanations for the high rates of inflation in the 1970s was a productivity slowdown.

Correct AnswerverifiedShow Answer

With adaptive expectations,the Phillips curve is written as:

Correct AnswerverifiedShow Answer

-Consider Figure 12.9,which shows short-run output fluctuations From 1990.1 to 2000.4,by quarter.If this is all the information you have,during the period 1997.1-1993.4,from the Phillips curve,you would conclude that:

Correct AnswerverifiedShow Answer

According to the Fisher equation,the real interest rate is given by

Correct AnswerverifiedShow Answer

Monetary economists find that it takes anywhere from six to eight weeks for monetary policy to have a substantial impact on economic activity.

Correct AnswerverifiedShow Answer

The link between real and nominal interest rates is called:

Correct AnswerverifiedShow Answer

If the Fed mistakenly believes that potential output is higher than it actually is,it might conduct inflationary monetary policy.

Correct AnswerverifiedShow Answer

When economists say "sticky inflation," they mean that inflation does not react directly with the monetary policy.

Correct AnswerverifiedShow Answer

A key assumption of the short-run model is:

Correct AnswerverifiedShow Answer

In the Phillips curve Dpt = u¯ T + o¯, Measures:

Correct AnswerverifiedShow Answer

The federal funds rate is:

Correct AnswerverifiedShow Answer

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If the Fed wants to lower inte...
View Answer

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