If current output is billion and potential output billion, then the economy is in a ________...
- If current output is
billion and potential
output 
billion, then the economy is in a ________ and 
is about ________.
|
a. |
boom; |
d. |
boom; 6.7 percent |
|
b. |
recession; |
e. |
None of these answers are correct. |
|
c. |
recession; |
||
percent
percentAccording to the text, the slope of the Phillips curve in the United States is about ________. Thus, if the change in inflation is 1 percent, the gap would be ________ percent.
|
a. |
1/4; 0.25 |
d. |
2; 0.5 |
|
b. |
1/3; 3 |
e. |
1/4; 4 |
|
c. |
1/2; 2 |
||
If 
, the macroeconomy
is:
|
a. |
in an expansion |
d. |
Not enough information is given. |
|
b. |
in a recession |
e. |
None of these answers are correct. |
|
c. |
at its potential level of output |
||
Homework Answers
1) d) current output > potential output, therefore the economy is in boom, (12-11.25)/11.25 = 6.7%
2) b) change in inflation/slope = gap
3) c) Not enough information is given. At both the lowest and the highest levels of economics activity delta inflation = 0
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If current output is billion and potential
output
billion, then the economy is in a ________...
7. If the current 1-period interest rate is 3%, and the 1-period rate is expected to be 4% in per...
7. If the current 1-period interest rate is 3%, and the 1-period rate is expected to be 4% in period tti and 5% in period t+2, and the term premium for the 3-period rate is 0.5%, the 3-period rate 2 1S 8. If short-run output is 2% (2% above potential) and the slope of the IS curve is -1, how much must the real interest rate increase to return short-run output to 0%? 9. Initially the rate of inflation is...
21. If an economy in recession with a GDP gap of $10 billion has an MPC...
21. If an economy in recession with a GDP gap of $10 billion has an MPC of 0.8, what is the amount of the recessionary gap? a. $10 billion b. $8 billion c. $5 billion (d. $2 billion
b. Assume that the economy starts with no output gap in the graphs above (at A)....
b. Assume that the economy starts with no output gap in the graphs above (at A). Next, assume an increase in the real interest rate occurs. i. (10) Show this both graphs above and label point B in each. (explain on next page). Label all new axes values that result from this. (16) Fully explain what happens in the short run to output, unemployment, and inflation in response to this increase in interest rates. Styles d. Change of inflation (TA)...
If the quantity of money demanded is $100 billion and the quantity of money supplied is...
If the quantity of money demanded is $100 billion and the quantity of money supplied is $200 billion, then the interest rate will: Select one: O a. remain unchanged. O b. be in equilibrium. O c. fall. O d. rise. If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 3%, the opportunity cost of holding cash in a checking account is: Select one: 0 a. 0.02%. O b. 2%. c...
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b....
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b. potential output; unemployment, current output; long-run inflation c. current output; long-run inflation; unemployment, current inflation d. potential output; unemployment; unemployment, current inflation e. current output: unemployment; potential output; current inflation andwhile the short-run model and , and 2. The IS curve describes short-run movements in an economy via which of the following? ↑Interest rate ↑ Investment → ↓ Output ↑Interest rate → ↓Investment →...
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run...
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run egun A) where the IS and LA curves intersect. Where the IS curve. Meurve. and FE lines inters C) where the IS curve intersects the FB fine. D) where the LM curve intersects the Fence he money supply will cause 27 In the Keynesian model in the short A) a decrease in output and an increase in the real B) an increase in the...
(c) If you cared primarily about inflation and not much about output, which option would you...
(c) If you cared primarily about inflation and not much about
output, which option would you recommend? Why?
(d) Explain the general trade-off that policymakers are faced with
according to the Phillips curve.
5. An oil shock: Consider an economy that begins with output at its potential level and a relatively high inflation rate of 6%, reflecting some recent oil price shocks. As the head of the Federal Reserve, your job is to pick a sequence of short-run output levels...
Refer to the figure below. Suppose the economy is in a short-run equilibrium at output Y3...
Refer to the figure below. Suppose the economy is in a short-run
equilibrium at output Y3 and inflation rate
π2. The economy is currently experiencing ______, and
the correct monetary policy response to this situation, to return
the economy to potential GDP, is to ______.
Select one:
a. a recessionary gap; raise taxes
b. an expansionary gap; cut taxes
c. a recessionary gap; increase the money supply
d. an expansionary gap; decrease the money supply
Inflation rate ASI AS2 AD...
43) Suppose potential GDP is $100 billion and the natural unemployment rate is 5 percent. If...
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Suppose the economy is operating below potential output. Inflation is 2% and expected inflation is 3%....
Suppose the economy is operating below potential output. Inflation is 2% and expected inflation is 3%. The unemployment rate is 8% and the natural unemployment rate is 4%. 54. iv. Draw a long-run Phillips curve and a short-run Phillips curve consistent with these conditions w. The government implements expansionary monetary policy. As a result, unemployment decreases to 6% and inflation increases to 2.5%. Expectations however. do not change. Show where the economy is on the graph you drew for (a)...
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21. If an economy in recession with a GDP gap of $10 billion has an MPC of 0.8, what is the amount of the recessionary gap? a. $10 billion b. $8 billion c. $5 billion (d. $2 billion
b. Assume that the economy starts with no output gap in the graphs above (at A). Next, assume an increase in the real interest rate occurs. i. (10) Show this both graphs above and label point B in each. (explain on next page). Label all new axes values that result from this. (16) Fully explain what happens in the short run to output, unemployment, and inflation in response to this increase in interest rates. Styles d. Change of inflation (TA)...
If the quantity of money demanded is $100 billion and the quantity of money supplied is $200 billion, then the interest rate will: Select one: O a. remain unchanged. O b. be in equilibrium. O c. fall. O d. rise. If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 3%, the opportunity cost of holding cash in a checking account is: Select one: 0 a. 0.02%. O b. 2%. c...
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b. potential output; unemployment, current output; long-run inflation c. current output; long-run inflation; unemployment, current inflation d. potential output; unemployment; unemployment, current inflation e. current output: unemployment; potential output; current inflation andwhile the short-run model and , and 2. The IS curve describes short-run movements in an economy via which of the following? ↑Interest rate ↑ Investment → ↓ Output ↑Interest rate → ↓Investment →...
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run egun A) where the IS and LA curves intersect. Where the IS curve. Meurve. and FE lines inters C) where the IS curve intersects the FB fine. D) where the LM curve intersects the Fence he money supply will cause 27 In the Keynesian model in the short A) a decrease in output and an increase in the real B) an increase in the...
(c) If you cared primarily about inflation and not much about
output, which option would you recommend? Why?
(d) Explain the general trade-off that policymakers are faced with
according to the Phillips curve.
5. An oil shock: Consider an economy that begins with output at its potential level and a relatively high inflation rate of 6%, reflecting some recent oil price shocks. As the head of the Federal Reserve, your job is to pick a sequence of short-run output levels...
Refer to the figure below. Suppose the economy is in a short-run
equilibrium at output Y3 and inflation rate
π2. The economy is currently experiencing ______, and
the correct monetary policy response to this situation, to return
the economy to potential GDP, is to ______.
Select one:
a. a recessionary gap; raise taxes
b. an expansionary gap; cut taxes
c. a recessionary gap; increase the money supply
d. an expansionary gap; decrease the money supply
Inflation rate ASI AS2 AD...
Suppose the economy is operating below potential output. Inflation is 2% and expected inflation is 3%. The unemployment rate is 8% and the natural unemployment rate is 4%. 54. iv. Draw a long-run Phillips curve and a short-run Phillips curve consistent with these conditions w. The government implements expansionary monetary policy. As a result, unemployment decreases to 6% and inflation increases to 2.5%. Expectations however. do not change. Show where the economy is on the graph you drew for (a)...
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