Chap 36

Tax cuts affect only aggregate demand not aggregate supply.

• True

• False

If the central bank has discretion to make policy, it may create economic fluctuations that reflect the electoral calendar. This is called the political business cycle.

• True

• False

Which of the following is a cost of inflation?

• Menu costs

• Shoeleather costs

• increased variability of relative prices

• All of these are correct

Which of the following is a reason to oppose active monetary and fiscal policy?

• There is no lag in policy.

• The ability to forecast the economy is poor.

• Policy ends up stabilizing the economy.

• None are correct.

The short-run relationship between inflation and unemployment is often called

• the Phillips Curve.

• Money Neutrality.

• the Classical Dichotomy.

• the Aggregate Supply and Demand model.

What is the vertical line called on the Aggregate Model?

• short-run aggregate supply
• aggregate demand
• long-run aggregate supply

• Real GDP

The national debt

• exists because of past government budget deficits.

• is the difference between the government's spending and revenue in a given year.

• is the amount households owe on credit cards, mortgages, and other loans.

• is the amount households and firms have borrowed minus the amount they have saved.

One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy.

• True

• False

Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.

• True

• False

Other things the same, if the exchange rate changes from 115 yen per dollar to 125 yen per dollar, the dollar has

• appreciated and buys more Japanese goods

• appreciated and buys fewer Japanese goods

• depreciated and buys more Japanese goods.

• 1. depreciated and buys fewer Japanese goods.