(16) Suppose a law was passed to authorize more spending on roads, but several m
ID: 1218591 • Letter: #
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.
(22) In the short run, contractionary monetary policy causes output to _______________ and prices to _______________. rise; rise rise; fall fall; rise fall; fall
(23) As the graph illustrates, consumers are worried about the future and have begun saving more money. If the Fed does not intervene in this situation, what will happen to the price level in the long run?
Prices will increase. Prices will stay the same. Prices will decrease. There is insufficient information to answer the question.
(24) Which of the following correctly expresses the quantity theory of money? money x the price level = velocity x real output money x velocity = price level x real output velocity x real output = price level x money price level x velocity = real output
(25) In the real business cycle theory, if long-run aggregate supply increases, then long-run aggregate demand increases by an equal amount, so that real output increases and the price level remains unchanged. less than the amount of increase in aggregate supply, so that real output increases and the price level decreases. more than the amount of increase in aggregate supply, so that real output increases and the price level increases. an equal amount, so that both real output and the price level increase.
(26) The quantity equation is MV = PY. Monetarists believe that if M increases, _________________, while new Keynesians believe that if M increases, _________________. only P increases; only Y increases only P increases; both P and Y increase both P and Y increase; only P increases both P and Y increase; only Y increases
Explanation / Answer
Ans 16. Operational Lag
Ans 17. To enhance the multiplier effect by increasing the effectiveness of fiscal policy.
Ans 18. Velocity = GDP / Money Supply = 4 / 1 = 4
Conclusion:- Velocity = 4
Ans 19. raise prices by the same proportional amount.
Ans 20. P1 in short run. But in long run, economy will move on to its long run equilibrium where Price= P2
Ans 21. raise prices by the same proportional amount.
Ans 22. Fall, Fall
Ans 23. Prices will stay the same. (In the long run, economy will move to its long run equilibrium, according to classicals, it is only in short run, where economy deviates from its equilibrium point.)
Ans 24. money x velocity = price level x real output
Ans 26. only P increases; both P and Y increases.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.