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Inflation, Unemployment, and Stabilization Policies
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Inflation, Unemployment, and Stabilization Policies
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25 Questions

1. If the Federal Reserve buys $50 million in government securities, then the money supply will
2. Suppose you read a Wall Street Journal article that states the Federal Reserve will lower the discount rate for the third time this year. According to this article, the Federal Reserve is trying to
3. A recession is likely to occur if
4. ______________________ fiscal policy tries to solve the problem of recession, whereas ______________________ fiscal policy tries to solve the problem of inflation.
5. Imagine the economy is experiencing high unemployment and a low rate of economic growth. What policy should the Federal Reserve follow?
6. If the Federal Reserve decided to pursue a contractionary policy, which actions would tend to offset each other?
7. What happens to the Phillips curve in the long run?
8. The crowding out effect may be avoided if
9. The main tools of the Federal Reserve are
10. Cost-push inflation refers to
11. According to the preceding diagram, the economy is at equilibrium at Point B. Choose the best fiscal policy that would increase real GDP.
12. Which fiscal policy would be the most contractionary?
13. Built-in stabilizers are a part of
14. Use the following diagram to answer questions 157 and 158. According to the preceding diagram, the economy is at equilibrium at Point A. Choose the best fiscal policy most appropriate to control demand-pull inflation.
15. A major problem or concern with fiscal policy is
16. Suppose the economy is experiencing stable prices but high unemployment. Which monetary and fiscal policies would help reduce unemployment?
17. The crowding out effect refers to which of the following?
18. Use the following graph to answer question 192. According to the preceding graph, what type of inflation would most likely occur?
19. If the U.S. government adopts a fiscal policy that is
20. The Organization of Petroleum Exporting Countries (OPEC) dramatically increased the price of crude oil in 1973. The price of gasoline in the United States and around the world increased. This increase in price was
21. What happens to the money supply if the Federal Reserve pursues a tight money policy?
22. If the Federal Reserve decided to lower the required reserve ratio, then this would
23. The U.S. Congress lowered taxes to aid in the recovery from a recession. This is an example of
24. "Changes made to fiscal policy would involve changes in"
25. Suppose the U.S. economy is at potential GDP. If there is an increase in the money supply

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