Exam 18: Monetary Policy

A) Contractionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product (GDP) . In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred.
B) Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real GDP. In the long run, as resource prices rise, the aggregate demand curve shifts back to the left, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred.
C) Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real GDP. In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred.
D) Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real GDP. In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right as well, causing the economy to expand.
E) Contractionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real GDP. In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, causing the economy to contract.

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A) movement along; shift of
B) shift of; movement along
C) shift of; shift of
D) movement along; movement along
E) shift of; rotation of

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A) active monetary policy.
B) expansionary monetary policy.
C) contractionary monetary policy.
D) adaptive monetary policy.
E) passive monetary policy.

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A)
B)
C)
D)
E)

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Expansionary monetary policy should be s...

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A) a central bank acts to decrease the money supply in an effort to control an economy that is expanding too quickly.
B) Congress and the president increase taxes in an effort to control an economy that is expanding too quickly.
C) Congress and the president decrease taxes in an effort to stimulate the economy.
D) a central bank acts to increase the money supply in an effort to stimulate the economy.
E) a central bank acts to increase government spending in an effort to stimulate the economy.

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A) unemployment; inflation
B) inflation; unemployment
C) real gross domestic product (GDP) ; price level
D) price level; real GDP
E) real GPD; inflation

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A) reduce interest rates.
B) decrease taxes.
C) increase government spending.
D) steer the economy out of every recession.
E) prevent recessions.

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