Equilibrium and Stabilization

What will be the effect of an expansionary fiscal policy on the unemployment rate and inflation rate?

1. 1. Unemployment and inflation rates will both increase

   2. Unemployment and inflation rates  will both decrease

   3. Unemployment rate will increase while inflation rate will decrease

   4. Unemployment rate will decrease while inflation rate will increase

What will be the effect of a contractionary fiscal policy on the unemployment rate and inflation rate?

1. 1. Unemployment and inflation rates will both increase

   2. Unemployment and inflation rates  will both decrease

   3. Unemployment rate will increase while inflation rate will decrease

   4. Unemployment rate will decrease while inflation rate will increase

What is the effect of improved production technology on unemployment and inflation?

1. 1. Unemployment and inflation rates will both increase

   2. Unemployment and inflation rates will both decrease

   3. Unemployment rate will increase while inflation rate will decrease

   4. Unemployment rate will decrease while inflation rate will increase

What is the short-run effect of higher oil prices on unemployment and inflation?

1. 1. Unemployment and inflation rates will both increase

   2. Unemployment and inflation rates  will both decrease

   3. Unemployment rate will increase while inflation rate will decrease

   4. Unemployment rate will decrease while inflation rate will increase

What is the effect of interest rate hikes on unemployment and inflation?

1. 1. Unemployment and inflation rates will both increase

   2. Unemployment and inflation rates  will both decrease

   3. Unemployment rate will increase while inflation rate will decrease

   4. Unemployment rate will decrease while inflation rate will increase

An expansionary fiscal policy may address the recessionary effects of a decline in aggregate demand by:

1. 1. Increasing tax rates to stimulate aggregate demand

   2. Decreasing tax rates to stimulate aggregate supply

   3. Increasing government purchases to stimulate aggregate demand

   4. Increasing money supply  to stimulate aggregate supply

An expansionary monetary policy may address the recessionary effects of a decline in aggregate demand by:

1. 1. Increasing interest rates to stimulate aggregate demand

   2. Increasing interest rates to stimulate aggregate supply

   3. Increasing money supply  to stimulate aggregate demand

   4. Increasing money supply  to stimulate aggregate supply

What is the short-run effect of tax cuts on aggregate demand and inflation?

1. 1. Aggregate demand and inflation rates will both increase

   2. Aggregate demand and inflation rates  will both decrease

   3. Aggregate demand will increase while inflation rate will decrease

   4. Aggregate demand will decrease while inflation rate will increase

What is the short-run effect of tax cuts on real GDP and the unemployment rate?

1. 1. Unemployment rate and real GDP will both increase

   2. Unemployment rate and real GDP  will both decrease

   3. Unemployment rate will increase while real GDP will decrease

   4. Unemployment rate will decrease while real GDP will increase 

Monetary policies are enacted by:

1. 1. Congress

   2. The executive branch (Whitehouse)

   3. Central bank

   4. Both A and B

Fiscal policies are enacted by:

1. 1. Congress

   2. The executive branch (Whitehouse)

   3. Central bank

   4. Both A and B

What are stabilization policies?

What is a monetary policy?

What kind of stabilization policy is normally employed when the economy is in a recession?

1. 1. Expansionary fiscal policy

   2. Expansionary monetary policy

   3. Contractionary fiscal policy

   4. Both A and B

What is fiscal policy?