Econ 304 Final Exam with Complete
Solutions 2024
In lecture we showed that real wages were rising in the US during the beginning of the internet, in the
mid 1990s, since the growth rate in nominal wages was greater than the growth rate in the general price
level. - - true
If you buy a US Treas...
Econ 304 Final Exam with Complete Solutions 2024 In lecture we showed that real wages were rising in the US during the beginning of the internet, in the mid 1990s, since the growth rate in nominal wages was greater than the growth rate in the general price level. - - true If you buy a US Treasury bond, you hope interest rates on that bond fall so that you can realize a capital gain by selling the bond for a higher price than you bought it for. This would be a good strategy if you knew that the Fed was going to conduct quanti tative easing before they announced it. - - true When the Fed conducts quantitative easing they buy US Government Securities which increases the demand of US Government Securities and thus, lowers interest rates on these US Government Securities. - - true Suppose the interest rate on a one year government security in January of 2019 is 2.58%. Also, suppose the CPI price index is 252.55 in January of 2019 and 258.82 in January of 2020. Calculate the ex -post real rate of interest. True or false: The ex -post r eal rate of interest is negative (less than zero). - - false The reason the bond demand curve slopes downward is due to the fact that as prices fall, interest rates rise and thus, all else constant, bonds become more attractive relative to substitutes and thus, people buy more of them. - - true One reason the Fed wants inflation to rise is due to the fact that higher inflation results in higher real interest rates (the Fisher effect) and thus, higher inflation will give more bullets to the Fed to fight a recession. - - false Shortly before the breakdown of the Bretton Woods system, the US $ become undervalued and thus, member countries were desperate to convert their gold into US $. As a response, President Nixon abandoned the Bretton Woods system in 1971. Since then, the US $ remains the world's reserve currency. - - false Currently, the inflation rate is slightly higher than the Fed would like it to be. Part of the reason is due to the recent rounds of quantitative easing. - - false According to the Fed's new policy regime, they really don't care what the unemployment rate is since the Phillips curve is currently flat indicating there is no relationship between inflation and unemployment. - - false In a deflationary environment, real interest rates are positive even if nominal interest rates are zero (0%). - - true During the beginning of the Great Recession, right after the Fed hit the zero bound, the Fed could have done better with their forward guidance - that is, the Fed should have put a date on their forward guidance rather than using vague terms like "for some time" and "for an extended period" - - true We argued that the Fed has less power now, relative to the onset of the Great Recession since longer term interest rates are lower now that they were in the beginning of the Great Recession - - true The income effect for labor supply implies that the labor supply curve is positively sloped - the higher the wage, the higher the labor supply. - - false If MPN rises above the real wage then the firm should hire more workers. - - true A positive shock to the production function, such as in the New Economy, resulted in the production function shifting up and the long run aggregate supply curve shifting to the right. - - true The Fed better be careful with the amount of quantitative easing they are currently conducting since last time they conducted quantitative easing (during the Great Recession), the excessive money growth resulted in high inflation - - false the relationship between money growth and inflation has disappeared, we are not worried about inflation right now Given the Fed's new regime, they basically admitted that for the time being at least, NAIRU does not exist. - - true NAIRU is defined as the highest the unemployment rate can go without inflation accelerating. - - false NAIRU is the lowest unemployment can go without inflation accelerating Given the pandemic shock, the unemployment rate in the US rose to its highest level in over 70 years! - - true Currently, the inflation rate is slightly higher than the Fed would like it to be. Part of the reason is due to the recent rounds of quantitative easing - - false the inflation rate is extremely low at the moment The Phillips curve has flattened over recent decades. This flattening of the Phillips explains, in part, the Fed's notion that NAIRU is currently non -existent since a flat Phillips curve implies no relationship between unemployment and inflation. - - true Lower interest rates are typically good for the stock market since lower interest rates, all else constant, raise the present value of futures earnings. - - true
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller BESTGRADES9. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.79. You're not tied to anything after your purchase.
