Question

16)
Suppose a law was passed to authorize more spending on roads, but several months later the first dollar had not been spent. This delay is an example of a(n) recognition lag. political lag. administration lag. operational lag.
(17)
What is the goal of automatic stabilizers? To reduce the volatility in the currency market To flatten the peaks and valleys in the business cycle To enhance the multiplier effect by increasing the effectiveness of fiscal policy To minimize unemployment
(18)
If GDP is $4 trillion and the money supply is $1 trillion, what can be concluded? Velocity = 4 Velocity = 1/4 Prices = 4 Prices = 1/4
(19)
Most economists believe that, in the short run, an increase in the money supply will raise prices by the same proportional amount. increase output. decrease output. decrease velocity.
(20)
This graph depicts a change in the macroeconomy caused by the Federal Reserve lowering the required reserve ratio. After this Fed action, what is the short-run price level? P0 P1 P2 Yf
(21)
Most economists believe that, in the short run, an increase in the money supply will raise prices by the same proportional amount. increase output. decrease output. decrease velocity.

Answer 1

16) It is operational lag because the law is passed so the only step required is to implement the policy and the same is not done yet

17) They help in increasing the effectiveness of fiscal policy because they pacify the economy during expansions and help fiscal expansion during recessions

18) Nominal GDP = V x M. Here M is 1 and nominal GDP is 4. This implies V is 4.

19) increase output.

20) P₁

21) increase output.