10. When the unemployment rate falls below the natural rate, real GDP falls belo

Question

10.
When the unemployment rate falls below the natural rate, real GDP falls below potential output.
A) True
B) False
11.
Under a passive monetary policy, a rightward shift of the money demand curve will cause a leftward shift of the AD curve.
A) True
B) False
12.
Under an active monetary policy designed to stabilize real GDP, a rightward shift of the money demand curve will cause the Fed to raise its interest rate target.
A) True
B) False
13.
To stabilize real GDP, the Fed should respond to a spending shock with a passive monetary policy.
A) True
B) False
14.
When the Fed raises its interest rate target, bond prices tend to fall and stock prices tend to rise.
A) True
B) False
15.
A negative demand shock presents the Fed with a short-run tradeoff: it must choose between higher inflation or higher unemployment.
A) True
B) False
16.
In the long run, the economy's self-correcting mechanism returns the economy back to full employment after a demand shock, but not after a supply shock.
A) True
B) False
17.
In an economy with built in inflation, the AS curve will shift up each year, even when output is at full employment and unemployment is at its natural rate.
A) True
B) False

Explanation / Answer

Confirmed Correct... F T F F F F F T

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