Question : 61) If the Fed lowers the federal funds rate, eventually : 1238238

61) If the Fed lowers the federal funds rate, eventually the

A) AD curve shifts leftward, decreasing real GDP and raising the price level.

B) AS curve shifts leftward, decreasing real GDP and raising the price level.

C) AD curve shifts rightward, increasing real GDP and raising the price level.

D) AD curve shifts leftward, decreasing real GDP and lowering the price level.

E) AS curve shifts rightward, decreasing real GDP and raising the price level.

62) When the economy is in a recession, the Fed can ________ the federal funds rate, which ________ aggregate demand and ________ real GDP.

A) lower; increases; decreases

B) raise; decreases; increases

C) lower; increases; increases

D) raise; increases; decreases

E) lower; decreases; decreases

63) If the Fed increases the quantity of money and lowers the federal funds rate, real GDP ________ and the price level ________.

A) increases; increases

B) increases; decreases

C) decreases; increases

D) decreases; decreases

E) increases; does not change

64) In the short run, lowering the federal funds rate shifts the aggregate demand curve ________ so that real GDP ________ and the price level ________.

A) rightward; increases; rises

B) leftward; decreases; rises

C) rightward; increases; falls

D) leftward; decreases; falls

E) rightward; decreases; rises

65) In a recession, the Fed’s monetary policy aims to ________ the real interest rate, ________ aggregate demand, and ________ aggregate supply.

A) increase; decrease; not change.

B) decrease; increase; not change

C) increase; not change; increase

D) decrease; increase; increase

E) increase; increase; increase

66) To fight a recession, an appropriate monetary policy would be that the Fed conducts an open market operation that ________ government securities, ________ the federal funds rate, and ________ aggregate demand.

A) sells; raises; increases

B) sells; raises; decreases

C) buys; lowers; increases

D) buys; lowers; decreases

E) sells; lowers; increases

67) Using the data in the above table, if potential GDP for this economy is $25 billion, then at the present moment real GDP is

A) less than potential GDP.

B) equal to potential GDP.

C) greater than potential GDP.

D) at the full-employment level of output.

E) not comparable to potential GDP.

68) Using the data in the above table, if potential GDP for this economy is $25 billion, then in order to restore full employment, the federal funds rate can be

A) lowered so that government expenditure on goods and services increases.

B) raised so that consumption expenditure, investment, and net exports increase.

C) lowered so that consumption expenditure, investment, and net exports increase.

D) raised so that net exports increase.

E) lowered so that consumption expenditure and investment increase, though net exports decrease.

69) The economy is at the equilibrium shown as point a in the above figure. To restore the economy to potential GDP, the Fed should

A) buy government securities and thereby increase aggregate demand.

B) sell government securities and thereby increase aggregate demand.

C) sell government securities and thereby decrease aggregate demand.

D) buy government securities and thereby decrease aggregate demand.

E) buy government securities and thereby increase aggregate supply.

70) The economy is at the equilibrium shown at point a in the above figure. If the Fed

A) buys government securities, the economy moves to an equilibrium at point c.

B) buys government securities, the economy moves to an equilibrium at point b.

C) sells government securities, the economy moves to an equilibrium at point c.

D) sells government securities, the economy moves to an equilibrium at point b.

E) None of the above is correct because the economy will remain at point a if the Fed buys or if the Fed sells government securities.