1.A good reason for policymakers to pursue a goal of stabilizing economic activity is that ________.

a. in a stable economy, there is little or no structural inflation

b. high unemployment causes human misery and lost output

c. high inflation is always accompanied by high variability of inflation

d. all of the above

e. none of the above

2.According to Okun's law, an increase in which of the following is associated with an increase in unemployment?

a. inflation

b. autonomous expenditure

c. output

d. potential output

e. expected inflation

3.An asset is ________.

a. anything that can be owned and has value

b. a debt for the owner of the asset

c. equal in value to its corresponding liabilities and net worth

d. a net outflow from the revenues of a producing firm

4.An increase in financial frictions results in ________.

a. an increase in output and inflation

b. a decline in the real interest rates faced by households and firms

c. a rise in the interest rate set by monetary policy

d. a decline in the interest rate set by monetary policy

5.Between 2007 and 2009, which of the following occurred in the United States, butnotin the United Kingdom?

a. a negative supply shock

b. a negative demand shock

c. a sharp increase in financial frictions

d. a negative rate of inflation (i.e., deflation)

e. an increase in unemployment