Econ 304 Final Exam 100% Correct!!

One reason the Fed abandoned using money growth as an intermediate target is due to the fact that velocity became unstable due to financial innovations. {Ans: true}Secular stagnation is an argument consistent with a low r*. {Ans: true}The BNP episode from August of 2007 is an example illustrating how the Fed needed to respond to shocks to reserve demand in an attempt to achieve it's federal funds rate target. In this episode, the Fed reacted by conducting open market sales to keep the federal funds rate from rising above target. {Ans: false}Given the Fisher equation, the more control the central bank has over inflation and inflationary expectations, the more control they have over real rates of interest, and thus, more control over the economy, all else constant. This is one reason why so many central banks explicitly target inflation. {Ans: true}Alan Greenspan, the Fed chair that replaced Paul Volcker, had to deal with the high inflation that Volcker left him. {Ans: false}If we were to characterize the new economy with the labor market, we would shift the labor demand curve to the right because of technology and capital rising (A and K) and we would