[Solved] Leverage Is

If the Bank of Canada chooses to fight high unemployment with expansionary monetary policy and firms and consumers expect this policy to increase inflation, which of the following would you expect to see? A)an upward shift of the short-run Phillips curve B)a downward shift of the short-run Phillips curve C)a decrease in the long-run aggregate supply curve D)the short-run Phillips curve will become flatter E)Both B and C are correct answers.

The short-run Phillips curve shifting down following the 1989 Bank of Canada announcement that they were adopting inflation targets shows that workers and firms A)had adaptive expectations. B)had rational expectations and that they trusted Bank of Canada announcements. C)preferred high unemployment to high inflation. D)consistently ignored inflation when setting nominal wages. E)Both A and B are correct answers.

If the Bank of Canada's announcements about upcoming monetary policy decisions are credible, which of the following would you expect to see? A)Inflation expectations will not accurately reflect actual inflation. B)Expansionary monetary policy will result in lower rates of inflation. C)Firms and workers will be better able to accurately forecast changes in the rate of inflation. D)The Bank of Canada will have less control over the inflation rate. E)The Bank of Canada will be able to dictate the rate of economic growth.

If the Bank of Canada announces that its target for the overnight interest rate is falling from 3 percent to 2.25 percent, how would you expect workers and firms to react? A)As long as the Bank of Canada's announcement is credible, workers and firms will decrease their consumption and investment spending, which will decrease aggregate demand and inflation. B)As long as the Bank of Canada's announcement is credible, workers and firms will increase their consumption and investment spending, which will increase aggregate demand and inflation. C)If the Bank of Canada's announcement is not credible, workers and firms will not expect inflation to rise so they will increase their consumption and investment spending, which will decrease aggregate demand and increase inflation. D)Workers and firms will incorporate the decrease in interest rates into their expectations of inflation, and they will expect inflation to fall as a result of Bank of Canada's policy announcement. E)Workers and firms will reduce their consumption and investment spending in expectation of higher interest rates in the future.

If the economy experiences a(n)________, inflation will rise and real GDP will fall. A)negative supply shock B)positive supply shock C)increase in short-run aggregate supply D)a negative demand shock E)positive demand shock

In the aftermath of the global financial crisis, it is generally accepted that record ________ on Wall Street played a significant role. A)high levels of leverage B)low levels of leverage C)high levels of liabilities D)low levels of liabilities E)government intervention

In the aftermath of the global recession, ________ has/have been discredited as an indicator of monetary policy, and central banks have been led to look elsewhere. A)quantitative measures B)the short-term nominal interest rate C)the money supply D)monetary aggregates E)reserve ratios

The 1989-1993 Bank of Canada adoption of inflationary targets led to substantial reductions in the inflation rate, but it came at the cost of A)increases in disinflation. B)the risk of deflation. C)very high levels of interest. D)very high levels of unemployment. E)the credibility of the Bank of Canada.

The Bank of Canada's inflation targeting policy has led to inflation ________ since 1996. A)remaining relative stable in the 1 to 3 percent band B)fluctuating wildly C)generally increasing D)generally decreasing E)continually decreasing

When reducing the overnight rate was no longer seen as an option to deal with the global recession, some central banks began A)reducing reserve ratios for commercial banks. B)quantatative easing. C)reducing tax rates. D)selling large quantities of government securities. E)destroying currency previously in circulation.