Under fiscal stabilization policy in the New Keynesian model, after a negative shock to output, A) the government increases expenditures and the central bank increases the money supply. B) the government increases expenditures and the central bank decreases the money supply. C) the government decreases expenditures and the central bank increases the money supply. D) […]
User cost is equal to ________. A) interest cost plus the expected rate of change in the real price of capital plus depreciation B) interest cost minus the rate of depreciation C) interest cost minus the expected rate of change of the real price of capital plus depreciation D) interest cost plus depreciation ANSWER […]
The primary source of funds for commercial banks is ________. A) securities B) Federal Reserve Banks C) loans D) deposits ANSWER D
When the Federal Reserve ________. A) drains liquidity, the federal funds rate falls B) drains liquidity, real interest rates fall C) provides more liquidity, the federal funds rate falls D) all of the above E) none of the above ANSWER C
Refer to Figure 12.4. As a result of the monetary policy taking effect after the housing bubble had already burst, real GDP will be ________ potential GDP and the rate of inflation will be ________ the rate of inflation when the economy was initially in equilibrium. A) greater than; greater than B) greater than; less […]
In the aggregate production function Y = A , real business cycle theory treats ________ as the key independent variable. A) potential output B) productivity C) the capital stock D) the labor input ANSWER B
A foreign bank receives a deposit of $10,000 from a U.S. citizen. As a result, there is a net capital outflow from the U.S., if ________. A) the bank buys a U.S.-made computer B) the bank buys a bond issued by a U.S. company C) the bank keeps the $10,000 in a vault D) all […]
Which of the four government policies to stimulate saving is essential? That is, which policy can on its own, regardless of the other policies, determine the level of the national saving rate? What will be an ideal response? ANSWER Reduce budget deficits. A higher tax on consumption will increase national saving only if the […]
If the marginal product of capital is greater than the rental cost of capital in terms of goods and services, then ________. A) the firm should continue to produce using that same amount of capital B) the firm should add additional capital C) the firm should reduce the amount of capital is using D) diminishing […]
Suppose oil prices suddenly begin to rise and the Fed announces that the increase in oil prices are not expected to generate excessive inflation. If the Fed is incorrect in its assumption that rising oil prices will not generate excessive inflation and the inflation rate increases before the Fed takes corrective action, then other things […]
