43) Keynes argued that fiscal policy, not monetary policy, is needed to get an economy out of the liquidity trap.

True

False

45) Which statement refers to a characteristic of the quantity theory of money?

It is a product of the classical school of economics.

It assumes that prices and interest rates are sticky.

It is focused on the short run.

It assumes money is used for both transactions and savings.

46) According to the monetarists

the economy will move to its full employment output level in the long run.

an increase in the money supply will not affect the price level in the long run.

a decrease in the money supply will have no effect on output in the short run.

output can never be above its full employment level.

49) The Taylor rule is the official tool used by the Fed to adjust interest rates.

False

True

50) According to the Taylor rule, if the Federal Reserve tries to target inflation near 2%, the inflation rate is 3%, and output is 1.3% above potential GDP, the target federal funds rate is 6.15%.

False

True

51) A negative supply shock causes output to _____ and the price level to _____.

decrease; decrease

decrease; increase

increase; decrease

increase; increase