When the Fed supplies "too much" monetary stimulus in the face of a negative aggregate demand shock:Select one:O a. inflation, real growth, and nominal wage growth all increase.Ob. inflation, real growth, and nominal wage growth all decrease.c. inflation and nominal wage growth decrease, but real growth increases.Od. inflation increases, but real growth and nominal wage growth decrease.

When the Federal Reserve responds to a negative aggregate demand shock by supplying "too much"…

Answered: When the Fed supplies "too much"…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: The Short-run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 4PA

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If the central bank responds to a single negative supply shock with monetary validation, we can expect an increase in.. O a. The money supply but a decrease in costs and prices. O b. Costs, the price level and the money supply. O c. The size of the output gap. O d. The price level and unemployment. O e. Costs but a decrease in real national income
The economy starts at the steady state. Whích of the following changes will increase short-run output on impact? Select one: O a. An increase in the parameter governing how aggressively monetary policy responds to inflation. O b. A decrease in the target rate of inflation. O c. A decrease in the parameter governing how aggressively monetary policy responds to inflation. O d. An increase in the target rate of inflation.
With the inflation rate on the vertical axis and output on the horizontal axis, the long run aggregate supply curve O a. Is horizontal because of money illusion O b. Is upward-sloping because a higher inflation rate implies higher profits for the firms O c Is upward-sloping because of money illusion O d. Is vertical because Yp is independent of the inflation rate
The phrase that inflation is a "monetary phenomenon" means... O a. Increases in the price level are always associated with increases in the money supply. O b. Only an increase in the money supply can start a period of inflation. Oc A continuous rise in prices is possible only with C. continuing increases in the money supply. O d. Repeated supply shocks cannot drive up prices if there is no monetary validation. O e The price level cannot rise without an increase in the money supply.
Suppose an economy is affected by a shock that reduces consumer wealth and simultaneously increases the financial friction (risk premium). Considering the short-run model, which of the following would characterize the outcome just after the shock but before any policy intervention by the central bank? Select one: O a. Short-run output will rise, and the real interest rate will fall. O b. Short-run output will rise, and the real interest rate will rise. O c. Short-run output will fall, and the real interest rate will rise. O d. Short-run output will fall, and the real interest rate will fall.
Which of the following represents a short-run e_ect of a monetary contraction? Select one: O a. an increase in the interest rate O b. a reduction in the price level O c. all of the above O d. a reduction in output
es Suppose a firm is currently producing 900 computers per week and charging a price of $1,200 per computer. a. Demonstrate how the firm will respond to a negative demand shock. Assume prices are flexible. Instructions: Use the tool provided, 'S Flexible Prices', to draw the supply curve when prices are flexible. Then use the tool provided, 'D Negative Shock', to illustrate the shift in the aggregate demand curve when there is a negative demand shock. Computer Market Price $1,200 900 Computers per week Demand Tools S Flexible Pric D Negative Sh O
The misperceptions theory concludes that: O A. in the short run, unanticipated monetary changes are neutral but anticipated monetary changes are not neutral, B. in the short run, both anticipated and unanticipated monetary changes are not neutral. Oc. unanticipated monetary changes are not neutral in either the short run or the long run. O D. in the short run, anticipated monetary changes are neutral but unanticipated monetary changes are not neutral.
In the presence of shocks, monetary policy cannot be used to stabilize both the inflation rate and GDP. O a. Consumer confidence O b. Export ion O c. None of the answers is correct O d. Import
Figure 8.3 Price Level Long run Aggregate Supply A B AS₁ AS2 AD1 AD2 Quantity of Output Long run Aggregate Supply = Potential GDP Refer to Figure 8.3 above. If the economy is at point A, which of the following would cause a change from AD1 to AD2? An increase in expected future inflation. ○ An increase in expected future profit. ○ A tax cut or an increase in either transfer payments. O An increase in the interest rate or a decrease in the quantity of money.
Question 15 Money held to take advantage of future financial opportunities is the O Portfolio demand for money. O Transactions demand for money. O Precautionary demand for money. O Speculative demand for money. Question 16 Which of the following shifts, ceteris paribus, will cause lower rates of both unemployment and inflation? An increase in aggregate demand. O A decrease in aggregate supply. O An increase in aggregate supply. O A decrease in aggregate demand.
All of the following arguments are made against inflation targeting EXCEPT Select one: O a. uncertainty about future levels of output and employment can impede economic decision making in the presence of an inflation target. O b. it would provide an anchor for inflationary expectations. O .rigid numerical targets for inflation diminish flexibility, o d. this policy tool could be economically destabilizing.

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