Question
When an economy is facing a permanent positive supply shock, there is a movement down and along the short-run aggregate supply curve. output rises temporarily.
When an economy is facing a permanent positive supply shock,
there is a movement down and along the short-run aggregate supply curve. | ||
output rises temporarily. | ||
there is a movement up and along the aggregate demand curve. | ||
inflation rate falls. |
If the Fed's goal is to stabilize the economy, which of the following is the best strategy in face of a positive demand shock?
Increase money supply. | ||
Conduct an open market sale. | ||
Do nothing. | ||
Lower the reserve requirements. |
With the invention of self-driving cars, the U.S. economy experiences a permanent positive supply shock. To stabilize inflation rate, what should the Fed do?
Increase the interest rate on reserves. | ||
Conduct an open market purchase. | ||
Do nothing. |
Facing a temporary supply shock, the Fed
faces a tradeoff betweens stabilizing inflation rate and stabilizing unemployment rate. | ||
should increase money supply. | ||
should decrease money supply. |
Which of the following is false regarding Volcker disinflation in 1980-1986?
The highest unemployment rate during the disinflation was over 15%. | ||
Inflation rate fell to less than 2% in 1986. | ||
Inflation was over 10% at the beginning of 1980. | ||
Volcker's strategy managed to reduce inflation but it caused massive unemployment. |
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