SOLVED

1) If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________. A) it would likely conduct an easing of monetary policy by raising the real interest rate for any given inflation rate B) it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate C) it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand D) it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand E) none of the above 2) If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________. A) it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate B) it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate C) it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand D) it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand E) none of the above 3) If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________. A) it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate B) an increase in aggregate demand would ensue generating a positive output gap C) an eventual decrease in short-run AS would drive the long-run equilibrium level of inflation up D) all of the above E) none of the above 4) If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________. A) it would conduct monetary policy consistent with a downward shift of the MP curve B) it would conduct monetary policy that would lead to a rightward shift of the AD curve C) after an easing of monetary policy, an eventual decrease in short-run AS would drive the long-run equilibrium level of inflation up D) all of the above E) none of the above 5) If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________. A) monetary policy would ultimately lead to higher inflation and real interest rates in the long run B) monetary policy would ultimately lead to higher inflation and thus higher potential output C) monetary policy would ultimately lead to higher potential output and real interest rates but no long-run impact on inflation D) all of the above E) none of the above 6) If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________. A) monetary policy would ultimately lead to higher potential output but real interest rates and inflation would be unaffected in the long run B) monetary policy would ultimately lead to higher inflation but real interest rates and potential output would be unaffected in the long run C) monetary policy would ultimately lead to higher interest rates but potential output and inflation would be unaffected in the long run D) monetary policy would ultimately lead to higher interest rates, potential output, and inflation in the long run E) none of the above 7) Which of the following statements is correct? A) Through autonomous monetary policy adjustments the Federal Reserve can ultimately determine the equilibrium real interest rate in the long run B) Through autonomous monetary policy adjustments the Federal Reserve can ultimately determine potential output in the long run C) Through autonomous monetary policy adjustments the Federal Reserve can target any inflation rate in the long run D) all of the above E) none of the above 8) Which of the following statements is correct? A) Through autonomous monetary policy adjustments the Federal Reserve can target any inflation rate in the long run B) Ultimately, autonomous monetary policy adjustments by the Federal Reserve cannot determine the equilibrium real interest rate in the long run C) Ultimately, autonomous monetary policy adjustments by the Federal Reserve cannot determine long run aggregate output D) all of the above E) none of the above 9) “With autonomous changes in the policy interest rate, the Federal Reserve cannot determine the long run equilibrium level of the real interest rate or potential output and will only be able to determine inflation.” This statement is consistent with ________ A) the notion that shifts in the MP curve may lead to shifts in the AD and AS curves but the LRAS remains unchanged B) the notion of long-run independence between nominal and real variables C) the notion of monetary neutrality D) all of the above E) none of the above 10) Cost-push inflation is to ________ as demand-pull inflation is to ________. A) impatience; inaccuracy B) entering; exiting C) activism; nonactivism D) fiscal; monetary E) none of the above