Question 1

Wars of attrition arise in which of the following contexts?

Accepted Answer

A) fiscal policy 
B) deficit reduction 
C) hyperinflation 
D) all of above 
E)  A and B 
A) fiscal policy 
B) deficit reduction 
C) hyperinflation 
D) all of above 
E)  A and B D

Question 2

Once people believe the Fed's commitment to keep unemployment at the natural rate,the Fed can reduce unemployment below the natural rate

Accepted Answer

A) in both the short run and the long run. 
B) in both the short run and the long run, but only after changing peoples' expectations. 
C) in the long run, but not the short run. 
D) in the short run, but not in the long run. 
E)  none of the above 
A) in both the short run and the long run. 
B) in both the short run and the long run, but only after changing peoples' expectations. 
C) in the long run, but not the short run. 
D) in the short run, but not in the long run. 
E)  none of the above D

Question 3

All of the macroeconometric models currently in use

Accepted Answer

A) originate in the United States. 
B) incorporate rational expectations into their predictions. 
C) originate with government or international agencies. 
D) originate with commercial firms who sell their forecasts to other firms and governments. 
E)  none of the above 
A) originate in the United States. 
B) incorporate rational expectations into their predictions. 
C) originate with government or international agencies. 
D) originate with commercial firms who sell their forecasts to other firms and governments. 
E)  none of the above E

Question 4

Econometric models of the U.S.economy generally agree

Accepted Answer

A) on the quantitative impact of monetary policy over a horizon of several years. 
B) that an increase in money growth will increase output in the short run. 
C) that an increase in money growth will decrease output in the short run. 
D) that an increase in money growth will decrease output in the long run. 
E)  that "rational expectations" is the best way to generate policy forecasts. 
A) on the quantitative impact of monetary policy over a horizon of several years. 
B) that an increase in money growth will increase output in the short run. 
C) that an increase in money growth will decrease output in the short run. 
D) that an increase in money growth will decrease output in the long run. 
E)  that "rational expectations" is the best way to generate policy forecasts.

Question 5

Which of the following is not an example of the issue of time inconsistency?

Accepted Answer

A) a central bank announced to maintain low inflation and at the same time increased money supply 
B) a government stated that they will not negotiate with hostage takers. When someone is taken hostage, it negotiates 
C) a mom says to her kids no cookie before meals and she never gives cookies before her kids eat their meals 
D) a person on diet eats ice cream for dinner 
A) a central bank announced to maintain low inflation and at the same time increased money supply 
B) a government stated that they will not negotiate with hostage takers. When someone is taken hostage, it negotiates 
C) a mom says to her kids no cookie before meals and she never gives cookies before her kids eat their meals 
D) a person on diet eats ice cream for dinner

Question 6

In the United States,presidential elections occur every four years.If a political business cycle exists in the United States,in which year of a presidential term,all else fixed,would we expect output growth to be lowest?

Accepted Answer

A) the first or second year 
B) the second or third year 
C) the third or fourth year 
D) the fourth year 
A) the first or second year 
B) the second or third year 
C) the third or fourth year 
D) the fourth year

Question 7

Use "wars of attrition" to explain the debate about deficit reduction.

Accepted Answer

When country is facing large budget defi

Question 8

Which of the following was one of the main rules in the 1990 "Budget Enforcement Act"?

Accepted Answer

A) flat tax rate 
B) spending caps 
C) indexation of income tax brackets 
D) consumption tax 
E)  none of the above 
A) flat tax rate 
B) spending caps 
C) indexation of income tax brackets 
D) consumption tax 
E)  none of the above

Question 9

First,what can be done to increase central bank credibility? Second,why is central bank credibility important?

Accepted Answer

Central bank credibility can be achieved

Question 10

Which of the following policies toward kidnappings would you recommend to authorities?

Accepted Answer

A) State policy of NO negotiations. If a kidnapping occurs, authorities should negotiate. 
B) State policy of negotiations. If a kidnapping occurs, authorities should NOT negotiate. 
C) State policy of negotiations. If a kidnapping occurs, authorities should negotiate. 
D) none of the above 
A) State policy of NO negotiations. If a kidnapping occurs, authorities should negotiate. 
B) State policy of negotiations. If a kidnapping occurs, authorities should NOT negotiate. 
C) State policy of negotiations. If a kidnapping occurs, authorities should negotiate. 
D) none of the above

Question 11

Which of the theory is better to think about policy?

Accepted Answer

A) game theory 
B) optimal control theory 
C) expectations theory 
D) none of the above 
A) game theory 
B) optimal control theory 
C) expectations theory 
D) none of the above

Question 12

Which of the following is the most powerful argument for putting restraints on policy makers (as opposed to self-restraint by policy makers themselves)?

Accepted Answer

A) time inconsistency 
B) uncertainty about Okun's coefficient 
C) uncertainty about the natural rate of unemployment 
D) uncertainty about the timing of policy impacts 
E)  disagreements about the proper structure of an econometric model 
A) time inconsistency 
B) uncertainty about Okun's coefficient 
C) uncertainty about the natural rate of unemployment 
D) uncertainty about the timing of policy impacts 
E)  disagreements about the proper structure of an econometric model

Question 13

Given the uncertainty about the effects of macro policy,economists generally propose that

Accepted Answer

A) macro policies should be more active, the lower the level of unemployment or inflation. 
B) changes in money growth should only be used for fine tuning the economy, not for correcting large imbalances (such as high inflation). 
C) money growth should be set at zero by constitutional amendment. 
D) elected officials should have more input in the determination of monetary policy. 
E)  none of the above 
A) macro policies should be more active, the lower the level of unemployment or inflation. 
B) changes in money growth should only be used for fine tuning the economy, not for correcting large imbalances (such as high inflation). 
C) money growth should be set at zero by constitutional amendment. 
D) elected officials should have more input in the determination of monetary policy. 
E)  none of the above

Question 14

Democratic administrations generally are relatively more concerned about which of the following?

Accepted Answer

A) reducing government expenditures 
B) reducing the rate of inflation 
C) reducing the unemployment rate 
D) balancing budget deficits 
E)  balancing trade deficits 
A) reducing government expenditures 
B) reducing the rate of inflation 
C) reducing the unemployment rate 
D) balancing budget deficits 
E)  balancing trade deficits

Question 15

Who is best known for arguing about the fine tuning of monetary policy?

Accepted Answer

A) Friedman 
B) Keynes 
C) Modigliani 
D) Greenspan 
E)  Bernanke 
A) Friedman 
B) Keynes 
C) Modigliani 
D) Greenspan 
E)  Bernanke

Question 16

Research for a number of OECD countries suggests that inflation will be lower

Accepted Answer

A) the more independent the central bank. 
B) the less independent the central bank. 
C) if the heads of central banks are chosen by election. 
D) when the terms of the heads of central banks coincide with the terms of elected officials. 
A) the more independent the central bank. 
B) the less independent the central bank. 
C) if the heads of central banks are chosen by election. 
D) when the terms of the heads of central banks coincide with the terms of elected officials.

Question 17

To deal with the time inconsistency problem associated with monetary policy,some have suggested that

Accepted Answer

A) the head of the central bank be chosen by election. 
B) the central bank implement expansionary monetary policy prior to election years. 
C) elected officials should have a direct influence on the implementation of monetary policy. 
D) all of the above 
E)  none of the above 
A) the head of the central bank be chosen by election. 
B) the central bank implement expansionary monetary policy prior to election years. 
C) elected officials should have a direct influence on the implementation of monetary policy. 
D) all of the above 
E)  none of the above

Question 18

Fine tuning represents which of the following?

Accepted Answer

A) policy makers' attempts to minimize the deviations of actual output from the natural level of output 
B) policy makers' attempts to achieve zero inflation 
C) policy makers' attempts to minimize fluctuations in interest rates 
D) policy makers' attempts to maintain a given rate of growth in the nominal money supply 
E)  policy makers' attempts to minimize variations in the real exchange rate 
A) policy makers' attempts to minimize the deviations of actual output from the natural level of output 
B) policy makers' attempts to achieve zero inflation 
C) policy makers' attempts to minimize fluctuations in interest rates 
D) policy makers' attempts to maintain a given rate of growth in the nominal money supply 
E)  policy makers' attempts to minimize variations in the real exchange rate

Question 19

One surprising insight from viewing policy as a "game" is that

Accepted Answer

A) central bankers should project an image of being conservative on economic policy matters, regardless of their personal views. 
B) it is more difficult to control inflation when the central bank is highly independent. 
C) uncertainty over the impact of policy makes little difference in designing an optimal policy. 
D) money growth has little or no impact on inflation in the long run. 
E)  decreasing money growth may substantially increase the rate of inflation in the long run. 
A) central bankers should project an image of being conservative on economic policy matters, regardless of their personal views. 
B) it is more difficult to control inflation when the central bank is highly independent. 
C) uncertainty over the impact of policy makes little difference in designing an optimal policy. 
D) money growth has little or no impact on inflation in the long run. 
E)  decreasing money growth may substantially increase the rate of inflation in the long run.

Question 20

Arguments for placing restraints on policy makers fall into which of the following?

Accepted Answer

A) policy makers understand completely how the economy operates 
B) policy makers have good intentions, but end up doing more harm than good 
C) policy makers do what is best for them, not necessarily what is best for the country 
D) all of the above 
E)  both B and C 
A) policy makers understand completely how the economy operates 
B) policy makers have good intentions, but end up doing more harm than good 
C) policy makers do what is best for them, not necessarily what is best for the country 
D) all of the above 
E)  both B and C

Exam 21: Should Policy Makers Be Restrained

Wars of attrition arise in which of the following contexts?

Once people believe the Fed's commitment to keep unemployment at the natural rate,the Fed can reduce unemployment below the natural rate

All of the macroeconometric models currently in use

Econometric models of the U.S.economy generally agree

Which of the following is not an example of the issue of time inconsistency?

In the United States,presidential elections occur every four years.If a political business cycle exists in the United States,in which year of a presidential term,all else fixed,would we expect output growth to be lowest?

Use "wars of attrition" to explain the debate about deficit reduction.

Which of the following was one of the main rules in the 1990 "Budget Enforcement Act"?

First,what can be done to increase central bank credibility? Second,why is central bank credibility important?

Which of the following policies toward kidnappings would you recommend to authorities?

Which of the theory is better to think about policy?

Which of the following is the most powerful argument for putting restraints on policy makers (as opposed to self-restraint by policy makers themselves)?

Given the uncertainty about the effects of macro policy,economists generally propose that

Democratic administrations generally are relatively more concerned about which of the following?

Who is best known for arguing about the fine tuning of monetary policy?

Research for a number of OECD countries suggests that inflation will be lower

To deal with the time inconsistency problem associated with monetary policy,some have suggested that

Fine tuning represents which of the following?

One surprising insight from viewing policy as a "game" is that

Arguments for placing restraints on policy makers fall into which of the following?

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

Financial Markets Ii: the Extended Is-Lm Model

The Labor Market

The Phillips Curve, the Natural Rate of Unemployment, and Inflation

From the Short to the Medium Run: the Is-Lm-Pc Model

The Facts of Growth

Saving, capital Accumulation, and Output

Technological Progress and Growth

Technological Progress: the Short, the Medium, and the Long Run

Financial Markets and Expectations

Expectations, consumption, and Investment

Expectations, output, and Policy

Openness in Goods and Financial Markets

The Goods Market in an Open Economy

Output, the Interest Rate, and the Exchange Rate

Exchange Rate Regimes

Fiscal Policy: a Summing up

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

Appendix

Filters