Question 1

A "conservative" central banker cares

Accepted Answer

A) less about inflation and more about unemployment than the government. 
B) more about economic growth and less about inflation. 
C) more about inflation and less about unemployment than the government. 
D) less about economic growth and more about inflation. 
A) less about inflation and more about unemployment than the government. 
B) more about economic growth and less about inflation. 
C) more about inflation and less about unemployment than the government. 
D) less about economic growth and more about inflation.

Question 2

What were some of the key features in terms of fiscal policy of the Stability and Growth Pact signed in 1997 by would-be members of the Euro?

Accepted Answer

The Stability and Growth pact: (1)commit

Question 3

The existence of the time inconsistency problem in macro policy suggests which of the following?

Accepted Answer

A) Use fiscal and monetary policy to fine tune the economy. 
B) Reduce the independence of the central bank. 
C) Appoint someone who is more conservative (economically)than the rest of the government to head the central bank. 
D) Intervene frequently in the foreign exchange market. 
E)  Eliminate rational expectations from econometric models used for forecasting. 
A) Use fiscal and monetary policy to fine tune the economy. 
B) Reduce the independence of the central bank. 
C) Appoint someone who is more conservative (economically)than the rest of the government to head the central bank. 
D) Intervene frequently in the foreign exchange market. 
E)  Eliminate rational expectations from econometric models used for forecasting.

Question 4

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 highest?

Accepted Answer

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

Question 5

What are the main rules of the Budget Enforcement Act of 1990?

Accepted Answer

The two main rules are: 1)it i

Question 6

Explain what a PAYGO rule is.

Accepted Answer

A PAYGO rule requires that any newly pro

Question 7

The idea that the economy operates like a complicated,predictable machine is an important aspect of

Accepted Answer

A) game theory. 
B) attrition theory. 
C) the theory of strategic interaction. 
D) time inconsistency theory. 
E)  optimal control theory. 
A) game theory. 
B) attrition theory. 
C) the theory of strategic interaction. 
D) time inconsistency theory. 
E)  optimal control theory.

Question 8

Explain spending caps set by the Budget Enforcement Act.

Accepted Answer

The Budget Enforcement Act imposed const

Question 9

Based on an analysis of macroeconomic outcomes under Republican and Democratic administrations,we would expect which of the following to occur?

Accepted Answer

A) Growth rates to be generally higher under Republican administrations. 
B) Macroeconomic policy to be relatively contractionary under Democratic administrations. 
C) Unemployment rates to be generally higher under Democratic administrations. 
D) Inflation rates to be generally lower under Democratic administrations. 
E)  none of the above 
A) Growth rates to be generally higher under Republican administrations. 
B) Macroeconomic policy to be relatively contractionary under Democratic administrations. 
C) Unemployment rates to be generally higher under Democratic administrations. 
D) Inflation rates to be generally lower under Democratic administrations. 
E)  none of the above

Question 10

In 1994,Republicans introduced their "Contract with America." This plan

Accepted Answer

A) included a PAYGO rule. 
B) would restrict the ability of monetary policy to affect the economy in the short run. 
C) included a line item veto. 
D) would make the Federal Reserve even more independent than it already is. 
E)  all of the above 
A) included a PAYGO rule. 
B) would restrict the ability of monetary policy to affect the economy in the short run. 
C) included a line item veto. 
D) would make the Federal Reserve even more independent than it already is. 
E)  all of the above

Question 11

Balanced budget amendments are believed to be destabilizing.Explain why this is so.

Accepted Answer

When an economy enters a recession,tax r

Question 12

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

Accepted Answer

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

Question 13

Explain whether uncertainty should cause policy makers to do more or do less to stabilize the economy.

Accepted Answer

As uncertainty increases,polic

Question 14

Research indicates that the more independent the central bank,

Accepted Answer

A) the smaller the budget deficit. 
B) the higher the nominal interest rate. 
C) the lower the rate of inflation. 
D) the larger the time inconsistency problem in making policy. 
E)  the greater the likelihood of a "war of attrition" over policy. 
A) the smaller the budget deficit. 
B) the higher the nominal interest rate. 
C) the lower the rate of inflation. 
D) the larger the time inconsistency problem in making policy. 
E)  the greater the likelihood of a "war of attrition" over policy.

Question 15

In ________,would-be members of the Euro area signed the Stability and Growth Pact (SPG).

Accepted Answer

A) 1997 
B) 1998 
C) 1999 
D) 2000 
A) 1997 
B) 1998 
C) 1999 
D) 2000

Question 16

The Masstricht treaty set the budget ratio to GDP to be ________ in order for countries to qualify to join the Euro area.

Accepted Answer

A) below 60% 
B) below 70% 
C) below 80% 
D) below 90% 
A) below 60% 
B) below 70% 
C) below 80% 
D) below 90%

Question 17

As uncertainty about the effects of policy on output decreases,we would expect that

Accepted Answer

A) policy makers would be more frequently implement fine tuning policies. 
B) policy makers would implement more active policies. 
C) policy makers would implement less active policies. 
D) both A and B 
E)  both A and C 
A) policy makers would be more frequently implement fine tuning policies. 
B) policy makers would implement more active policies. 
C) policy makers would implement less active policies. 
D) both A and B 
E)  both A and C

Question 18

Suppose a government have a stated policy that it will not negotiate with hostage takers.Now someone is taken hostage,what would be the best policy for the government? Explain.

Accepted Answer

The best policy of the governm

Question 19

Assume that political business cycles do not exist.Given this assumption,we would expect,all else fixed,the output growth to be highest in which period?

Accepted Answer

A) just prior to an election 
B) just after an election 
C) in the first year of an administration 
D) in the second year of an administration 
E)  none of the above 
A) just prior to an election 
B) just after an election 
C) in the first year of an administration 
D) in the second year of an administration 
E)  none of the above

Question 20

The hostage taking example was developed by

Accepted Answer

A) John Nash. 
B) Kydland and Prescott. 
C) John Harsanyi. 
D) Reinhard Selten. 
A) John Nash. 
B) Kydland and Prescott. 
C) John Harsanyi. 
D) Reinhard Selten.

Exam 21: Should Policy Makers Be Restrained

A "conservative" central banker cares

What were some of the key features in terms of fiscal policy of the Stability and Growth Pact signed in 1997 by would-be members of the Euro?

The existence of the time inconsistency problem in macro policy suggests which of the following?

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 highest?

What are the main rules of the Budget Enforcement Act of 1990?

Explain what a PAYGO rule is.

The idea that the economy operates like a complicated,predictable machine is an important aspect of

Explain spending caps set by the Budget Enforcement Act.

Based on an analysis of macroeconomic outcomes under Republican and Democratic administrations,we would expect which of the following to occur?

In 1994,Republicans introduced their "Contract with America." This plan

Balanced budget amendments are believed to be destabilizing.Explain why this is so.

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

Explain whether uncertainty should cause policy makers to do more or do less to stabilize the economy.

Research indicates that the more independent the central bank,

In ________,would-be members of the Euro area signed the Stability and Growth Pact (SPG).

The Masstricht treaty set the budget ratio to GDP to be ________ in order for countries to qualify to join the Euro area.

As uncertainty about the effects of policy on output decreases,we would expect that

Suppose a government have a stated policy that it will not negotiate with hostage takers.Now someone is taken hostage,what would be the best policy for the government? Explain.

Assume that political business cycles do not exist.Given this assumption,we would expect,all else fixed,the output growth to be highest in which period?

The hostage taking example was developed by

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