SOLVED

11) If the central bank did not follow the Taylor principle, an increase in inflation would lead to ________. A) a decrease in the nominal interest rate B) an increase in inflation C) a decrease in aggregate expenditure D) all of the above E) none of the above 12) If expected inflation rises, monetary policy ________. A) is rendered ineffective B) must be tightened, to prevent further increases in inflation and expected inflation C) will prevent any increase in the real interest rate D) is designed to increase the nominal interest rate by more than the increase in expected inflation E) none of the above 13) Autonomous tightening of monetary policy involves ________. A) raising interest rates and shifting the MP curve to the right B) lowering interest rates and shifting the MP curve to the left C) raising interest rates and shifting the MP curve to the left D) lowering interest rates and shifting the MP curve to the right E) none of the above 14) Autonomous easing of monetary policy involves ________. A) raising interest rates and shifting the MP curve to the right B) lowering interest rates and shifting the MP curve to the left C) raising interest rates and shifting the MP curve to the left D) lowering interest rates and shifting the MP curve to the right E) none of the above 15) A movement along the MP curve ________. A) implies an automatic adjustment of the interest rate B) implies an autonomous adjustment to the interest rate C) implies an autonomous adjustment of aggregate demand D) all of the above E) none of the above 16) A shift of the MP curve ________. A) implies an automatic adjustment of the interest rate B) implies a direct policy action of the Federal Reserve C) does not alter the relationship between inflation and the interest rate D) all of the above E) none of the above 17) The MP curve may be used to represent ________. A) movements of the real interest rate as a direct policy action of the Federal Reserve B) movements of the real interest rate that are independent of direct Federal Reserve action C) how the real interest rate is related to the inflation rate D) all of the above E) none of the above 18) The MP curve may be used to represent how ________. A) movements of the inflation rate are determined by the real interest rate B) monetary policy responds to changes in the real interest rate C) movements of the real interest rate are related to the inflation rate D) all of the above E) none of the above 19) A decision to increase the parameter λ in the MP curve is an example of ________. A) autonomous easing B) leftward movement along the curve C) rightward movement along the curve D) endogenous response E) autonomous tightening 20) Before the financial crisis of 2007, inflation was on the rise. According to the MP curve, this would lead to ________. A) an increase in the real interest rate B) an upward shift of the MP curve, if policymakers opted for autonomous tightening C) a decrease in aggregate output D) all of the above E) none of the above