Question

When easy money policy is used persistently by the Fed, it eventually results in:
	reduced unemployment. excessive savings. high inflation. the exhaustion of excess reserves.

In 2016, Greece faced another set of hurdles in its ongoing saga of managing its debt. In order for Greece to maintain its obligations under the IMF and European Central Bank bailout packages, it must continue to cut government spending, particularly pensions that have put a strain on the budget. Greece's leaders, meanwhile, have argued that the required spending cuts will push the economy back into a recession. What will the required budget cuts do to an economy that is still experiencing slow growth?

AS increases with positive impacts on aggregate output and prices. AD decreases with negative impacts on aggregate output and prices. AD increases with positive impacts on aggregate output and prices. AS decreases with negative impacts on aggregate output and prices.

Expansionary monetary policy has more of an impact on the price level when:
	the economy is close to full employment. there are trade restrictions in the economy. there is high cyclical unemployment in the economy. the economy is considerably below full employment.

Suppose a devastating drought leads to higher food prices, causing a negative supply shock to occur. The Fed would use a(n):
	contractionary monetary policy that could result in high inflation. expansionary monetary policy that could result in high inflation. contractionary monetary policy that could result in a recession. expansionary monetary policy that could result in a recession.

Answer 1

Ans. 1. C. High Inflation - This is the correct answer.

2. B. AD Decreases with negative impact on Aggregate Output and prices.

3.D. when the economy is considerably below full employment.

4. C. contractionary monetary policy that could result in a recession.

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