ECN 211 - All Exam Questions - Ballinger

- ASU West

If there is crowding out... Fiscal expansion (Lowers/Raises) interest rates, which (Increases/Reduces) the net increase in aggregate demand - ✔✔Raises & Reduces According to the theory of rational expectations, if households and firms believe the Federal Reserve's contractionary policy to be credible and revise expectations to expect a lower inflation rate - ✔✔Inflation will fall and there would be less unemployment than the traditional sacrifice ratio predicts Which of the following would cause a shift in the short-run aggregate-supply curve, but no change in the long-run aggregate-supply curve? - ✔✔A change in price expectation Question 6. According to the theory of rational expectations, if households and firms believe the Federal Reserve's contractionary policy to be credible and revise expectations to expect a lower inflation rate, then - ✔✔Inflation will fall and there would be less unemployment than the traditional sacrifice ratio predicts 8. Would the federal government cutting taxes to stimulate the economy be classified as fiscal policy? - ✔✔Yes 9. What would a decrease in the price level do to the short-run aggregate supply curve? - ✔✔Shift the short-run supply curve to the right 11. Under the assumptions of the fisher effect and monetary neutrality, if the money supply growth rate falls then - ✔✔The nominal interest rate falls, but the real interest rate does not. 12. The costs of inflation include: - ✔✔Shoeleather costs, Menu costs, Misallocation of resources from relative price variability