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Terms in this set (57)
normal cost of holding money in the form of cash
equal to whatever interest you would have received at the bank or other investment alternatives
normal market demand curve for money
a down-ward sloping demand curve, where more money is held at lower interest rates
if the Fed sells bond though open market operations, the money ...
supply curve should shift leftward
a monetary stimulus is designed to shift the
Aggregate Demand curve to the right
steps by which restrictive monetary policy is effective
decrease in M1, increase in interest rate, and decrease in investment
Monetary stimulus will fail if ...
banks are reluctant to lend money
Monetary stimulus may be ineffective if ...
the investment demand curve is inelastic
believe monetary policy to be effective for fighting inflation but not for changing real output
Monetarist solution for a recession
steady and predictable growth of the money supply
Assuming the aggregate supply curve is vertical, what is most likely to occur if the Fed pursues expansionary monetary policy?
the equilibrium price level will increase but output will stay the same
Assuming the aggregate supply curve is upward-sloping, which of the following is most likely to occur if the Fed pursues restrictive monetary policy?
the equilibrium price level and output will both decrease
Assume the aggregate supply curve is horizontal and the economy is experiencing recession. Which of the following is most likely to occur if the Fed pursues expansionary monetary policy?
The equilibrium output will increase but the price level will stay the same until full employment is reached.
Given a vertical aggregate supply curve, what's most likely to occur is the Fed pursues restrictive monetary policy?
the equilibrium output will decrease but the price level will stay the same
The Fed can change the equilibrium rate of interest by changing
reserve requirements or discount rate, or through open market operations
An increase in the money supply will
reduce interest rates and increase aggregate demand
if the money supply decreases, what is most likely to occur?
aggregate demand would decrease
Equilibrium interest rate can increase by the Fed ...
selling bonds in the open market, raising discount rates, and increasing reserve rates
a rightward shift in aggregate demand will cause an increase in output and no change in the price level is aggregate supply is ...
a rightward shift in aggregate demand will cause an increase in the price level and no change in output if aggregate supply is ...
an AS curve that's always vertical is most consistent with what economic view ...
According to the hybrid/consensus view of AS, the chance for an aggregate demand increase to cause inflation accelerates as ...
the economy moves toward full capacity
a movement up the Phillips curve will cause
a trade-off between unemployment and inflation
rightward AS shifts will cause
leftward Phillips curve shifts
an increase in the misery index would definitely result from ...
a rightward shift of the Phillips curve
What would cause the AS curve to shift to the right?
decrease in marginal tax rates
a leftward AS shift could be caused by ...
an increase in the marginal tax rate
a rightward AS shift could be caused by ...
increased investment in human capital
what policy is a positive supply-side lever?
human capital investment
a reduction in tariffs and quotas on imported goods shifts the ...
AS curve to the right
for a phillips curve, an increase in AD could cause a ...
upward movement along the curve
a short-run increase in capacity utilization ...
moves the economy to a point closer to its existing production possibilities curve
a long-run expansion capacity
shifts the production possibilities curve rightward
long-run economic growth can occur as the result of
a technological advance
the percentage change in real GDP from one period to another is called..
the growth rate
if the number employed grows faster than the population, then the....
living standard will rise
most common measure of productivity
output per labor-hour
the knowledge and skills possessed by the labor force
what would not increase labor productivity?
an increase in the number of participants in the labor force
what would shift the long-run AS curve to the right?
political and economic stability
negative economic growth in the long-run ....
inward shift of the PPC
long-run economic growth ...
shift outward of the PPC
long-run economic growth implies a
rightward shift of AS
rightward shift of AS indicates
the capacity of the economy has increased
new growth theory
emphasizes the importance of advances and dissemination of knowledge
if the US has a trade deficit
the trade balance is negative
specialization in production and then trading with other countries ...
change the mix of output for each country and increase total world output
what is a gain from free trade?
a higher standard of living for all trading countries
world output of good and services increases with specialization because ...
the world's resources are being used more efficiently
if a country is self-reliant in producing goods for its own consumption needs, then
its consumption possibilities equal its production possibilities
a country has a comparative advantage in a good if ...
it can produce a good at lower opportunity cost relative to another country
when a country has a lower opportunity cost in producing a good than any other country,
consumption possibilities will increase with specialization and trade
redistributes income from import-competing industries to export industries
who has an interest in encouraging free trade?
workers in export industries
protectionism achieves ...
protection of infant industries
when a country imposes tariffs, it is likely to cause
higher prices for the import-competing goods
If the US raises tariffs on foreign goods, it may achieve
greater profitability of import-competing firms
a limit on the quantity of a good that may be imported
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