If expected inflation rises, monetary policy ________. A) is rendered ineffective B) must be tightened, to prevent further increases in inflation and expected inflation C) will prevent any increase in the real interest rate D) is designed to increase the nominal interest rate by more than the increase in expected inflation E) none of the […]
The current account surplus is not A) the trade balance. B) the excess of national savings over investment. C) private saving less government deficit. D) output less taxes and trade deficit. ANSWER D
Refer to Figure 12.5. If exchange rates are floating, an expansionary monetary policy would best be represented by a movement from ________ in panel (a) and a corresponding movement from ________ in panel (b). A) point A to point B; point X to point Y B) point C to point A; point X to point […]
According to Solow’s exogenous growth theory, what happens to a country at steady state that suffered extensive capital destruction due to a war or climate event? A) It will stay poor forever. B) It will grow back to be richer than before. C) It will get back to its original status. D) Anything can happen. […]
Of all financial intermediaries, which of the following holds the most assets? A) hedge funds B) the federal government C) commercial banks D) corporations ANSWER C
Suppose a poor economy inches towards the steady state in Solow’s exogenous growth model. What happens? A) Consumption per capita decreases. B) Saving per capita decreases. C) The depreciation rate increases. D) The growth rate of output decreases. ANSWER D
The real business cycle model suggests that, with aggregate demand unchanged, increases in output would be associated with ________. A) an increase in inflation B) a decline in inflation C) and unchanged price level D) procyclical inflation ANSWER B
Consider two alternative worlds: (i) the world works according the real business cycle model, and the central bank acts to stabilize the price level; (ii) the world works according to the New Keynesian sticky price model, and the central bank acts to make the output gap zero. Which is correct? A) We would prefer to […]
A higher desired level of capital and investment will result from ________. A) a decrease in productivity B) a fall in expected future output C) a depressed economy D) a booming economy ANSWER D
An increase in the rate of depreciation is associated with ________. A) a decrease in the rate of productivity B) a decrease in gross investment C) a decrease in net investment D) an increase in net investment ANSWER C
