Exam 16: Macro Policy Debate: Active or Passive

Economists in the rational expectations school believe a certain circumstance needs to exist in order for expansionary monetary policy to be fully effective.What is that circumstance?  

When self-correction works to eliminate an expansionary gap, how are money wages and real wages affected?  

Which of the following is a belief generally held by individuals who are opposed to using policy to stabilize the economy?  

What does the long-run Phillips curve represent?  

Suppose the Bank of Canada announces a policy of rapid growth in the money supply, but then puts the brakes on money expansion without any announcement.According to the rational expectations school, what will the short-run result likely be?  

Which of the following is NOT a valid criticism of discretionary fiscal policy?  

Exhibit 15-3 -Refer to the graph in the exhibit.What is the most desirable of the points shown?  

What relationship does the Phillips curve show?  

According to the rational expectations school, what will be the effect of a correctly anticipated expansionary monetary policy?  

Which of the following is illustrated by the short-run Phillips curve?  

What is the shape of the long-run Phillips curve?  

Suppose the economy had been operating along a given short-run Phillips curve for several years, and then the economy experienced a year of stagflation.How would the year of stagflation be represented?  

What is the short-run Phillips curve based on?  

Suppose an economy is experiencing an expansionary gap.Which of the following best characterizes what happens in such an environment?  

Which term refers to the time it takes to identify a problem and determine its seriousness?  

In the event of a recession, which of the following is the most likely policy stance of people who advocate a passive approach to economic policy?  

Suppose an active approach to policy is followed.How would an expansionary gap eventually close?  

Exhibit 15-2 -Refer to the graph in the exhibit.According to policymakers who favour a passive approach to policy, where will the economy end up once the expansionary gap is eliminated?  

Which of the following is NOT required in order for a policy of governmental intervention in the economy to be effective?  

Suppose self-correction works.Then, all things equal, a policy that continually increases aggregate demand is implemented.What kind of economic outcome will this policy lead to?