What Should the FED do?? (Monetary Policy for AP Macro))

Question 1

If the Price Level rises (there is inflation), what happens to real wages?

Accepted Answer

real wages fall

Question 2

Suppose the U.S. economy is in a recession. What should the Fed do??

Accepted Answer

lower the interest rate

Question 3

If "output" increases, what is the effect on Unemployment?

Accepted Answer

U will fall

Question 4

True or false: Expansionary monetary policy fixes the unemployment rate but causes inflation.

Accepted Answer

true

Question 5

Which is also a term used to describe the current level of "output"? (read ALL the choices!)

Accepted Answer

rGDP

Question 6

If Investment and Consumption rise, what happens to Aggregate Demand?

Accepted Answer

AD increases

Question 7

Is lowering the interest rate "expansionary" or "contractionary" monetary policy?

Accepted Answer

expansionary

Question 8

If the Federal Reserve lowers the Reserve Requirement, what will happen to the Money Supply?

Accepted Answer

MS will increase

Question 9

If the interest rate falls, what will happen to Investment and Consumption?

Accepted Answer

Both C & I will rise

Question 10

In the long run, if workers bargain for higher wages, what will happen to Aggregate Supply?

Accepted Answer

SRAS will decrease; PL will rise

Question 11

How do you graph a recession?

Accepted Answer

AD and SRAS meet to the left of LRAS

Question 12

If Unemployment falls and there is inflation, will workers bargain for higher wages? (yes/no)

Accepted Answer

yes

Question 13

If Aggregate Demand increases, what is the effect on the Price Level?

Accepted Answer

PL rises; inflation

Question 14

Which is true of a recession?

Accepted Answer

all of the above

Question 15

If Aggregate Demand increases, what is the effect on "output"?

Accepted Answer

output rises

Questions 15