Questions from Macroeconomics

Q: If the Fed wanted to use all of its policy tools to

If the Fed wanted to use all of its policy tools to decrease the money supply, what would it do?

Q: How does the economy’s behavior in the short run differ from its

How does the economy’s behavior in the short run differ from its behavior in the long run? Draw the model of aggregate demand and aggregate supply. What variables are on the two axes?

Q: If the government wants to contract aggregate demand, it can ________

If the government wants to contract aggregate demand, it can ________ government purchases or ________ taxes. a. increase, increase b. increase, decrease c. decrease, increase d. decrease, decrease

Q: The Federal Reserve expands the money supply by 5 percent.

The Federal Reserve expands the money supply by 5 percent. a. Use the theory of liquidity preference to illustrate in a graph the impact of this policy on the interest rate. b. Use the model of aggreg...

Q: List and describe the three functions of money.

List and describe the three functions of money.

Q: Use the theory of liquidity preference to explain how a decrease in

Use the theory of liquidity preference to explain how a decrease in the money supply affects the aggregate- demand curve.

Q: Suppose that the government reduces spending on highway construction by $10

Suppose that the government reduces spending on highway construction by $10 billion. Which way does the aggregate-demand curve shift? Explain why the shift might be larger or smaller than $10 billion....

Q: If the Federal Reserve increases the rate of money growth and maintains

If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will ________ and the short-run Phillips curve will shift ________. a....

Q: Illustrate the effects of the following developments on both the short-

Illustrate the effects of the following developments on both the short-run and long-run Phillips curves. Give the economic reasoning underlying your answers. a. a rise in the natural rate of unemploym...

Q: Draw the long-run trade-off between inflation and unemployment

Draw the long-run trade-off between inflation and unemployment. Explain how the short-run and long-run trade-offs are related.