(I know we aren't supposed to ask multiple questions in one, but this is my last question this month, so if you could please please answer all three I would be very greatful, thank you!) 5. The Short Run Aggregate Supply curve only shifts when there are changes in expectations about inflation, E[π]. If π0 is the initial inflation rate, which of the following must be true in initial equilibrium? a. E[π] < π0 b. E[π] = π0 c. Only the SRAS and DAD curves must intersect d. E[π] > π0 6. In the New Keynesian Model, assume that the goal of The Fed is to keep unemployment as low as possible. What is the appropriate response to a negative real shock? a. Increase the money supply, shifting DAD to the left b. Buy bonds, shifting DAD to the right c. Sell bonds, shifting DAD to the left d. Decrease the money supply, shifting DAD to the left e. None of the above 7. Money neutrality implies a. the Fed will not truly affect long run economic growth through monetary policy. b. monetary policy in the long run will lead to higher levels of inflation. c. Keynes was wrong in his assumption of sticky prices. d. economic growth from monetary policy will have permanent, lasting effects.
(I know we aren't supposed to ask multiple questions in one, but this is my last question this month, so if you could please please answer all three I would be very greatful, thank you!)
5. The Short Run
a. E[π] < π0
b. E[π] = π0
c. Only the SRAS and DAD curves must intersect
d. E[π] > π0
6. In the New Keynesian Model, assume that the goal of The Fed is to keep
a. Increase the money supply, shifting DAD to the left
b. Buy bonds, shifting DAD to the right
c. Sell bonds, shifting DAD to the left
d. Decrease the money supply, shifting DAD to the left
e. None of the above
7. Money neutrality implies
a. the Fed will not truly affect long run
b. monetary policy in the long run will lead to higher levels of inflation.
c. Keynes was wrong in his assumption of sticky prices.
d. economic growth from monetary policy will have permanent, lasting effects.
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