QUESTION 1 The Federal Reserve will lower short-run output by decreasing the mon
ID: 1203791 • Letter: Q
Question
QUESTION 1
The Federal Reserve will lower short-run output by
decreasing the money supply.
lowering the nominal interest rate.
increasing the money supply.
lowering the real interest rate.
1 points
QUESTION 2
If the aggregate demand parameter increases, and the central bank wishes to stabilize output at potential, it should
expand the money supply.
lower the nominal interest rate.
buy government bonds.
raise the nominal interest rate.
1 points
QUESTION 3
Price-setting behaviors become more sensitive to demand conditions. This results in
the IS curve becoming flatter.
a smaller recession occurring to change the inflation rate one percentage point.
a larger recession occuring to change the inflation rate one percentage point.
the IS curve becoming steeper.
1 points
QUESTION 4
Suppose prices adjust immediately because there is no sticky inflation. Then, monetary policy will
have only real effects.
have both real and nominal effects.
have no effect.
have only nominal effects.
1 points
QUESTION 5
To create disinflation, the Federal Reserve must lower the nominal interest rate.
False
True
1 points
QUESTION 6
At the interest rate targeted by the central bank, the money supply is horizontal.
False
True
1 points
QUESTION 7
A tight monetary policy by the European Central Bank will result in an increase in the nominal interest rate.
True
False
1 points
QUESTION 8
Unlike fiscal policy, which often takes months to have substantial effects on the economy, the effect on economic activity of monetary policy is instantaneous.
False
True
a.decreasing the money supply.
b.lowering the nominal interest rate.
c.increasing the money supply.
d.lowering the real interest rate.
Explanation / Answer
1. option A
2. Option D
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