Question 1

Which of the following is likely to have the shortest transmission lag?

Accepted Answer

A) a change in personal income tax rates 
B) a change in government expenditures 
C) an increase in subsidies paid to firms 
D) an increase in public-service employment 
A) a change in personal income tax rates 
B) a change in government expenditures 
C) an increase in subsidies paid to firms 
D) an increase in public-service employment A

Question 2

Non-activists

Accepted Answer

A) distrust the ability of the political process to formulate sensible economic policy. 
B) argue for a constant-growth-rate rule for the money supply. 
C) argue that more unemployment now may prevent a lot more unemployment in the future. 
D) All of the above. 
A) distrust the ability of the political process to formulate sensible economic policy. 
B) argue for a constant-growth-rate rule for the money supply. 
C) argue that more unemployment now may prevent a lot more unemployment in the future. 
D) All of the above. D

Question 3

According to the new classical macroeconomists,each of the following statements is true EXCEPT:

Accepted Answer

A) Disinflation will be harder to bring about because of the time-inconsistency problem. 
B) Policymakers are tempted to deviate from the preannounced policy once the public changes its expectations. 
C) Feedback rules are preferred to discretionary rules. 
D) Disinflation will be painless if the restrictive policies announced by the government are credible. 
A) Disinflation will be harder to bring about because of the time-inconsistency problem. 
B) Policymakers are tempted to deviate from the preannounced policy once the public changes its expectations. 
C) Feedback rules are preferred to discretionary rules. 
D) Disinflation will be painless if the restrictive policies announced by the government are credible. C

Question 4

The one main difficulty with a nominal GDP target rule for monetary policy is that it

Accepted Answer

A) is a difficult target to hit. 
B) provides no nominal anchor. 
C) requires a painful extinguishing response to an adverse supply shock. 
D) performs badly when there is unstable velocity. 
A) is a difficult target to hit. 
B) provides no nominal anchor. 
C) requires a painful extinguishing response to an adverse supply shock. 
D) performs badly when there is unstable velocity.

Question 5

In the Activists' Paradise,to increase real GDP without affecting the interest rate,it is necessary to change

Accepted Answer

A) only fiscal policy and shift the IS curve. 
B) only monetary policy and shift the LM curve. 
C) fiscal and monetary policies and shift both IS and LM. 
D) more policy instruments than policymakers are actually able to manipulate. 
A) only fiscal policy and shift the IS curve. 
B) only monetary policy and shift the LM curve. 
C) fiscal and monetary policies and shift both IS and LM. 
D) more policy instruments than policymakers are actually able to manipulate.

Question 6

In Taylor Rule equation,high value of parameter b indicates that

Accepted Answer

A) Fed cares more about avoiding recessions and high unemployment than about avoiding inflation. 
B) Fed cares more about avoiding inflation than about avoiding recessions and high unemployment. 
C) Fed cares more about avoiding recessions than about avoiding high unemployment. 
D) Fed cares more about avoiding high unemployment than about avoiding recessions. 
A) Fed cares more about avoiding recessions and high unemployment than about avoiding inflation. 
B) Fed cares more about avoiding inflation than about avoiding recessions and high unemployment. 
C) Fed cares more about avoiding recessions than about avoiding high unemployment. 
D) Fed cares more about avoiding high unemployment than about avoiding recessions.

Question 7

The economy has been compared to a supertanker on the ocean to make the point that

Accepted Answer

A) the larger the economy,the less it is influenced by other economies (the weather). 
B) it takes time for a policy change to overcome the economy's momentum and change its direction (as in steering an immense ship). 
C) a random shock affects all parts of the economy in the same way (as all of a ship rises or falls together with the waves). 
D) the larger the economy,the worse it is for the rest of the world when it goes into a recession (there is enough oil in a supertanker for a spill to stretch across the ocean). 
A) the larger the economy,the less it is influenced by other economies (the weather). 
B) it takes time for a policy change to overcome the economy's momentum and change its direction (as in steering an immense ship). 
C) a random shock affects all parts of the economy in the same way (as all of a ship rises or falls together with the waves). 
D) the larger the economy,the worse it is for the rest of the world when it goes into a recession (there is enough oil in a supertanker for a spill to stretch across the ocean).

Question 8

Gordon's plots of the effectiveness lags of monetary policy over the periods 1961-1975,1976-1990,and 1991-2007 show the effectiveness lags have become ________ and the overall response of GDP to monetary policy has ________.

Accepted Answer

A) shorter,decreased 
B) shorter,increased 
C) longer,decreased 
D) longer,increased 
A) shorter,decreased 
B) shorter,increased 
C) longer,decreased 
D) longer,increased

Question 9

Compared to the 1960s,the effectiveness lag is ________ due to ________.

Accepted Answer

A) shorter,changes in fiscal policy 
B) longer,structural changes in the economy 
C) shorter,deregulation 
D) longer,increased sensitivity of consumer spending to interest rates 
A) shorter,changes in fiscal policy 
B) longer,structural changes in the economy 
C) shorter,deregulation 
D) longer,increased sensitivity of consumer spending to interest rates

Question 10

During which of the following years did the Fed fail to pursue a policy aimed at stabilizing the output ratio?

Accepted Answer

A) 1988 
B) 1990 
C) 1994 
D) 1997 
A) 1988 
B) 1990 
C) 1994 
D) 1997

Question 11

Admission to the Euro required in 1997 that a country's government deficit not exceed ________ percent of GDP.

Accepted Answer

A) twenty 
B) fourteen 
C) seven 
D) three 
A) twenty 
B) fourteen 
C) seven 
D) three

Question 12

The major difference between the lag in monetary policy versus the lag in fiscal policy stems from the

Accepted Answer

A) data lag. 
B) legislative lag. 
C) recognition lag. 
D) transmission lag. 
A) data lag. 
B) legislative lag. 
C) recognition lag. 
D) transmission lag.

Question 13

In the early 1970s monetary growth was relatively stable yet unemployment and prices were quite unstable.This suggests that

Accepted Answer

A) policy activism is superior to policy rules. 
B) government spending must have been destabilizing. 
C) monetary rules will not iron out every short-run fluctuation resulting from shocks. 
D) the government was following a monetary rule. 
A) policy activism is superior to policy rules. 
B) government spending must have been destabilizing. 
C) monetary rules will not iron out every short-run fluctuation resulting from shocks. 
D) the government was following a monetary rule.

Question 14

A central bank commitment to a ________ rule for monetary growth can be conveyed by maintaining a ________ exchange rate.

Accepted Answer

A) rigid,fixed 
B) rigid,flexible 
C) flexible,fixed 
D) non-inflationary,flexible 
A) rigid,fixed 
B) rigid,flexible 
C) flexible,fixed 
D) non-inflationary,flexible

Question 15

Non-activists are most interested in

Accepted Answer

A) the short-run level of unemployment and the effectiveness of monetary policy. 
B) the long-run consequences of policies. 
C) the effectiveness of monetary policy and the short-run inflation rate. 
D) the short-run rate of inflation and level of unemployment. 
A) the short-run level of unemployment and the effectiveness of monetary policy. 
B) the long-run consequences of policies. 
C) the effectiveness of monetary policy and the short-run inflation rate. 
D) the short-run rate of inflation and level of unemployment.

Question 16

If both money demand and commodity demand are unstable,as many activists believe,which type of policy target(s)would most likely lead to a stable economy (assuming supply-side shocks are likely to occur)?

Accepted Answer

A) money supply target 
B) real GDP target 
C) interest rate target 
D) nominal GDP 
A) money supply target 
B) real GDP target 
C) interest rate target 
D) nominal GDP

Question 17

Twenty-four months after a 1 percentage point increase in the short-term (Treasury bill)interest rate,real GDP have fallen by about ________ in 1961-75,by ________ during 1976-1990,and by ________ during 1991-2007 period.88-2004.

Accepted Answer

A) 2%,1%,3% 
B) 0.1%,2%,1.8% 
C) 1.8%,0.9%,0.2% 
D) 0.2%,0.1%,0.9% 
A) 2%,1%,3% 
B) 0.1%,2%,1.8% 
C) 1.8%,0.9%,0.2% 
D) 0.2%,0.1%,0.9%

Question 18

Because of the lag of the effects of changes in monetary policy and the failure of forecasters to anticipate supply-side shocks as well as changes in money demand or velocity,activist policy changes have tended at times during the mid-1970s to

Accepted Answer

A) accelerate inflation during expansions. 
B) increase unemployment during recessions. 
C) accelerate inflation and increased unemployment. 
D) dampen inflation and decrease unemployment. 
A) accelerate inflation during expansions. 
B) increase unemployment during recessions. 
C) accelerate inflation and increased unemployment. 
D) dampen inflation and decrease unemployment.

Question 19

In the schematic theory of economic policy,consumer optimism is considered

Accepted Answer

A) a policy instrument. 
B) an exogenous nonpolicy variable. 
C) a structural relation. 
D) a target variable. 
E) an irrelevant side effect. 
A) a policy instrument. 
B) an exogenous nonpolicy variable. 
C) a structural relation. 
D) a target variable. 
E) an irrelevant side effect.

Question 20

The advantage of a nominal anchor is that it prevents a limitless rise in the

Accepted Answer

A) national debt. 
B) nominal interest rate. 
C) inflation rate. 
D) unemployment rate. 
A) national debt. 
B) nominal interest rate. 
C) inflation rate. 
D) unemployment rate.

Which of the following is likely to have the shortest transmission lag?

Non-activists

According to the new classical macroeconomists,each of the following statements is true EXCEPT:

The one main difficulty with a nominal GDP target rule for monetary policy is that it

In the Activists' Paradise,to increase real GDP without affecting the interest rate,it is necessary to change

In Taylor Rule equation,high value of parameter b indicates that

The economy has been compared to a supertanker on the ocean to make the point that

Gordon's plots of the effectiveness lags of monetary policy over the periods 1961-1975,1976-1990,and 1991-2007 show the effectiveness lags have become and the overall response of GDP to monetary policy has .

Compared to the 1960s,the effectiveness lag is due to .

During which of the following years did the Fed fail to pursue a policy aimed at stabilizing the output ratio?

Admission to the Euro required in 1997 that a country's government deficit not exceed ________ percent of GDP.

The major difference between the lag in monetary policy versus the lag in fiscal policy stems from the

In the early 1970s monetary growth was relatively stable yet unemployment and prices were quite unstable.This suggests that

A central bank commitment to a rule for monetary growth can be conveyed by maintaining a exchange rate.

Non-activists are most interested in

If both money demand and commodity demand are unstable,as many activists believe,which type of policy target(s)would most likely lead to a stable economy (assuming supply-side shocks are likely to occur)?

Twenty-four months after a 1 percentage point increase in the short-term (Treasury bill)interest rate,real GDP have fallen by about in 1961-75,by during 1976-1990,and by during 1991-2007 period.88-2004.

Because of the lag of the effects of changes in monetary policy and the failure of forecasters to anticipate supply-side shocks as well as changes in money demand or velocity,activist policy changes have tended at times during the mid-1970s to

In the schematic theory of economic policy,consumer optimism is considered

The advantage of a nominal anchor is that it prevents a limitless rise in the

What Is Macroeconomics

The Measurement of Income,prices,and Unemployment

Income and Interest Rates: the Keynesian Cross Model and the Is Curve

Strong and Weak Policy Effects in the Is-Lm Model

Financial Markets, financial Regulation, and Economic Instability

The Government Budget, the Government Debt, and the Limitations of Fiscal Policy

International Trade, exchange Rates, and Macroeconomic Policy

Aggregate Demand, aggregate Supply, and the Great Depression

Inflation: Its Causes and Cures

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

Money,banks,and the Federal Reserve

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro and New Keynesian Macro

Conclusion: Where We Stand

Filters

Exam 14: The Goals, tools, and Rules of Monetary Policy

Which of the following is likely to have the shortest transmission lag?

Non-activists

According to the new classical macroeconomists,each of the following statements is true EXCEPT:

The one main difficulty with a nominal GDP target rule for monetary policy is that it

In the Activists' Paradise,to increase real GDP without affecting the interest rate,it is necessary to change

In Taylor Rule equation,high value of parameter b indicates that

The economy has been compared to a supertanker on the ocean to make the point that

Gordon's plots of the effectiveness lags of monetary policy over the periods 1961-1975,1976-1990,and 1991-2007 show the effectiveness lags have become ________ and the overall response of GDP to monetary policy has ________.

Compared to the 1960s,the effectiveness lag is ________ due to ________.

During which of the following years did the Fed fail to pursue a policy aimed at stabilizing the output ratio?

Admission to the Euro required in 1997 that a country's government deficit not exceed ________ percent of GDP.

The major difference between the lag in monetary policy versus the lag in fiscal policy stems from the

In the early 1970s monetary growth was relatively stable yet unemployment and prices were quite unstable.This suggests that

A central bank commitment to a ________ rule for monetary growth can be conveyed by maintaining a ________ exchange rate.

Non-activists are most interested in

If both money demand and commodity demand are unstable,as many activists believe,which type of policy target(s)would most likely lead to a stable economy (assuming supply-side shocks are likely to occur)?

Twenty-four months after a 1 percentage point increase in the short-term (Treasury bill)interest rate,real GDP have fallen by about ________ in 1961-75,by ________ during 1976-1990,and by ________ during 1991-2007 period.88-2004.

Because of the lag of the effects of changes in monetary policy and the failure of forecasters to anticipate supply-side shocks as well as changes in money demand or velocity,activist policy changes have tended at times during the mid-1970s to

In the schematic theory of economic policy,consumer optimism is considered

The advantage of a nominal anchor is that it prevents a limitless rise in the

What Is Macroeconomics

The Measurement of Income,prices,and Unemployment

Income and Interest Rates: the Keynesian Cross Model and the Is Curve

Strong and Weak Policy Effects in the Is-Lm Model

Financial Markets, financial Regulation, and Economic Instability

The Government Budget, the Government Debt, and the Limitations of Fiscal Policy

International Trade, exchange Rates, and Macroeconomic Policy

Aggregate Demand, aggregate Supply, and the Great Depression

Inflation: Its Causes and Cures

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

Money,banks,and the Federal Reserve

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro and New Keynesian Macro

Conclusion: Where We Stand

Filters

Gordon's plots of the effectiveness lags of monetary policy over the periods 1961-1975,1976-1990,and 1991-2007 show the effectiveness lags have become and the overall response of GDP to monetary policy has .

Compared to the 1960s,the effectiveness lag is due to .

A central bank commitment to a rule for monetary growth can be conveyed by maintaining a exchange rate.

Twenty-four months after a 1 percentage point increase in the short-term (Treasury bill)interest rate,real GDP have fallen by about in 1961-75,by during 1976-1990,and by during 1991-2007 period.88-2004.