In the event that nominal short-term interest rates cannot be lowered further, the Federal Reserve might rely on ________. A) federal government fiscal policy B) targeting the fed funds rate C) quantitative easing D) targeting the inflation rate ANSWER C
Date: September 10th, 2020
A. W. Phillips’ 1958 paper examined unemployment and wage growth. What role, if any, does wage growth play in the modern Phillips curve? What will be an ideal response? ANSWER The modern Phillips curve relates unemployment to inflation, rather than wages. This allows inclusion of expected inflation and price shocks as causes of inflation, […]
Date: September 10th, 2020
A key property of a Diamond-Dybvig bank is A) it is well-diversified. B) it lends to borrowers. C) it provides benefits very different from the provision of insurance. D) it trades with other banks. ANSWER A
Date: September 10th, 2020
In the equation Y = C + I + G, a. only I is an exogenous variable determined by factors outside the model. b. only G is an exogenous variable determined by factors outside the model. c. C is an endogenous variable determined by factors inside the model. d. I and G are exogenous variables […]
Date: September 10th, 2020
If a fall in investment demand of 100 units causes equilibrium income to fall by 150 units in the simple Keynesian model, then the marginal propensity to save must be a. .25. b. 1.5. c. .5. d. 1/3. e. 2/3. ANSWER D
Date: September 10th, 2020
Explain the difference between the CPI and GDP deflator measures of inflation. Which one is likely to measure inflation higher? Why? What will be an ideal response? ANSWER The GDP deflator measures the change in prices of all goods and services included in GDP while the CPI measures the change in price of a […]
Date: September 10th, 2020
Why do consumers benefit from pay-as-you-go social security? A) It keeps inflation in check as money is redistributed. B) It is a better way than taxes to finance the government. C) It forces people to save more than they would otherwise. D) With sufficiently high population growth, many young contribute to the benefits of the […]
Date: September 10th, 2020
The zero-lower-bound problem eliminates the ability of the central bank to use which of the following in implementing policy? A) open market operations B) discount lending C) the federal funds rate D) the required reserve ratio ANSWER C
Date: September 10th, 2020
Why should imports be excluded from gross domestic product? How is a purchase of an import recorded in the components of GDP? What will be an ideal response? ANSWER Imports are purchases by domestic buyers of goods and services produced abroad and gross domestic product is a measure of domestic production of goods and […]
Date: September 10th, 2020
The household budget constraint may have a kink because A) there is uncertainty. B) households prefer diversity. C) households may substitute consumption for leisure, or the reverse. D) leisure is limited by the number of available hours. ANSWER D
Date: September 10th, 2020
