Question 1

Application of the time inconsistency problem to monetary policy suggests that,without some mechanism to ensure commitment,the

Accepted Answer

A)  rate of inflation will be higher than it would be with commitment. 
B)  level of real output will be lower than it would be with commitment. 
C)  rate of inflation will be higher and the level of real output will be lower than it would be with commitment. 
D)  rate of inflation and the level of real output will be higher than it would be with commitment. 
E)  the rate of inflation will be higher and the level of real output would be indeterminant than it would be with commitment. 
A)  rate of inflation will be higher than it would be with commitment. 
B)  level of real output will be lower than it would be with commitment. 
C)  rate of inflation will be higher and the level of real output will be lower than it would be with commitment. 
D)  rate of inflation and the level of real output will be higher than it would be with commitment. 
E)  the rate of inflation will be higher and the level of real output would be indeterminant than it would be with commitment. A

Question 2

The existence of large government budget deficits

Accepted Answer

A)  offers the most convincing explanation of both moderate inflations and hyperinflations. 
B)  offers a convincing explanation for moderate inflations, but is less successful in explaining hyperinflations. 
C)  offers a convincing explanation for hyperinflations, but is less successful in explaining moderate inflations. 
D)  is rarely an important factor in either moderate inflations or hyperinflations. 
E)  is rarely an important factor in explaining any types of inflation. 
A)  offers the most convincing explanation of both moderate inflations and hyperinflations. 
B)  offers a convincing explanation for moderate inflations, but is less successful in explaining hyperinflations. 
C)  offers a convincing explanation for hyperinflations, but is less successful in explaining moderate inflations. 
D)  is rarely an important factor in either moderate inflations or hyperinflations. 
E)  is rarely an important factor in explaining any types of inflation. C

Question 3

The Phillips curve describes the

Accepted Answer

A)  negative relationship between the inflation rate and real aggregate economic activity. 
B)  negative relationship between the inflation rate and the unemployment rate. 
C)  negative relationship between the inflation rate and real wage rate. 
D)  positive relationship between the inflation rate and real aggregate economic activity. 
E)  positive relationship between the inflation rate and the unemployment rate. 
A)  negative relationship between the inflation rate and real aggregate economic activity. 
B)  negative relationship between the inflation rate and the unemployment rate. 
C)  negative relationship between the inflation rate and real wage rate. 
D)  positive relationship between the inflation rate and real aggregate economic activity. 
E)  positive relationship between the inflation rate and the unemployment rate. D

Question 4

Of the following five decades,there was a Phillips curve with a less favourable trade-off in the

Accepted Answer

A)  1960s. 
B)  1960s and 1970s. 
C)  1980s. 
D)  1980s and 1990s. 
E)  2000s. 
A)  1960s. 
B)  1960s and 1970s. 
C)  1980s. 
D)  1980s and 1990s. 
E)  2000s.

Question 5

Rational expectations hypothesis deals with economic agents who

Accepted Answer

A)  use past trends and behaviour to predict future trends and behaviour. 
B)  do not make systematic errors because they use all information efficiently. 
C)  attempt to maximize profits by considering their pricing and output decisions. 
D)  are concerned about minimizing costs and losses in order to remain competitive in the short run. 
E)  can correctly predict government policy and stock market fluctuations. 
A)  use past trends and behaviour to predict future trends and behaviour. 
B)  do not make systematic errors because they use all information efficiently. 
C)  attempt to maximize profits by considering their pricing and output decisions. 
D)  are concerned about minimizing costs and losses in order to remain competitive in the short run. 
E)  can correctly predict government policy and stock market fluctuations.

Question 6

All historical periods of hyperinflation can be traced back to

Accepted Answer

A)  irresponsible multinational corporations. 
B)  the existence of large government budget deficits. 
C)  irresponsible monetary policy. 
D)  an appreciation of the domestic exchange rate. 
E)  lower rates of government spending. 
A)  irresponsible multinational corporations. 
B)  the existence of large government budget deficits. 
C)  irresponsible monetary policy. 
D)  an appreciation of the domestic exchange rate. 
E)  lower rates of government spending.

Question 7

Recently,inflation in Canada has been

Accepted Answer

A)  very volatile and is of significant public concern. 
B)  rising, and is of significant public concern. 
C)  rising, but is off little public concern. 
D)  constant, yet still of significant public concern. 
E)  quite low, and of little public concern. 
A)  very volatile and is of significant public concern. 
B)  rising, and is of significant public concern. 
C)  rising, but is off little public concern. 
D)  constant, yet still of significant public concern. 
E)  quite low, and of little public concern.

Question 8

In the central bank commitment story,high inflation in Canada during the 1970s was caused by

Accepted Answer

A)  lower interest rates. 
B)  a deterioration of the trade balance. 
C)  an appreciation of the domestic exchange rate. 
D)  the inability of the Bank of Canada to commit to not using surprise inflation to increase output in the short run. 
E)  a commitment on the part of the federal government to reduce government spending. 
A)  lower interest rates. 
B)  a deterioration of the trade balance. 
C)  an appreciation of the domestic exchange rate. 
D)  the inability of the Bank of Canada to commit to not using surprise inflation to increase output in the short run. 
E)  a commitment on the part of the federal government to reduce government spending.

Question 9

There is a

Accepted Answer

A)  negative correlation between the rate of change in nominal wages and the rate of change in other money prices. 
B)  positive correlation between the unemployment rate and the deviation of aggregate economic activity from trend. 
C)  negative correlation between the unemployment rate and the deviation of aggregate economic activity from trend. 
D)  negative correlation between aggregate economic activity and the inflation rate. 
E)  negative correlation between the rate of change in nominal wages and the unemployment rate. 
A)  negative correlation between the rate of change in nominal wages and the rate of change in other money prices. 
B)  positive correlation between the unemployment rate and the deviation of aggregate economic activity from trend. 
C)  negative correlation between the unemployment rate and the deviation of aggregate economic activity from trend. 
D)  negative correlation between aggregate economic activity and the inflation rate. 
E)  negative correlation between the rate of change in nominal wages and the unemployment rate.

Question 10

When the Friedman-Lucas money surprise model is incorporated into the Phillips curve,

Accepted Answer

A)  when the inflation rate is greater than the expected inflation rate, output is equal to trend output. 
B)  when the inflation rate is less than the expected inflation rate, output is greater than trend output. 
C)  when the inflation rate is equal to the expected inflation rate, then output is equal to trend output. 
D)  when the inflation rate is rising, then output is below trend output. 
E)  when the expected inflation rate rises, output falls. 
A)  when the inflation rate is greater than the expected inflation rate, output is equal to trend output. 
B)  when the inflation rate is less than the expected inflation rate, output is greater than trend output. 
C)  when the inflation rate is equal to the expected inflation rate, then output is equal to trend output. 
D)  when the inflation rate is rising, then output is below trend output. 
E)  when the expected inflation rate rises, output falls.

Question 11

To prevent the Bank of Canada from using discretion is to impose some rule to govern monetary policy such as

Accepted Answer

A)  real interest rate targeting. 
B)  inflation targeting. 
C)  money supply targeting. 
D)  unemployment targeting. 
E)  aggregate output targeting. 
A)  real interest rate targeting. 
B)  inflation targeting. 
C)  money supply targeting. 
D)  unemployment targeting. 
E)  aggregate output targeting.

Question 12

According to the Friedman-Lucas money surprise model,there is a positive relationship between the deviation of the inflation rate from what it is expected to be,and the

Accepted Answer

A)  level of government spending. 
B)  the value of the domestic exchange rate. 
C)  level of interest rates. 
D)  deviation of real output from trend. 
E)  level of consumer spending. 
A)  level of government spending. 
B)  the value of the domestic exchange rate. 
C)  level of interest rates. 
D)  deviation of real output from trend. 
E)  level of consumer spending.

Question 13

Which of the following models helps to explain the Phillips curve?

Accepted Answer

A)  monetary intertemporal model 
B)  Keynesian sticky wage model 
C)  efficiency wage model. 
D)  Friedman-Lucas money-surprise model. 
E)  Solow residual model. 
A)  monetary intertemporal model 
B)  Keynesian sticky wage model 
C)  efficiency wage model. 
D)  Friedman-Lucas money-surprise model. 
E)  Solow residual model.

Question 14

In the Central Bank Learning Story,if i < i*,the central bank is happier if

Accepted Answer

A)  inflation falls and output increases. 
B)  inflation increases and output falls. 
C)  inflation falls and output falls. 
D)  inflation is constant and output increases. 
E)  inflation increases and output increases. 
A)  inflation falls and output increases. 
B)  inflation increases and output falls. 
C)  inflation falls and output falls. 
D)  inflation is constant and output increases. 
E)  inflation increases and output increases.

Question 15

According to the Friedman-Lucas money surprise model,when the inflation rate is equal to the expected inflation rate,then

Accepted Answer

A)  interest rates fall. 
B)  the value of the domestic exchange rate rises. 
C)  output is equal to trend output. 
D)  interest rates rise. 
E)  the trade balance improves. 
A)  interest rates fall. 
B)  the value of the domestic exchange rate rises. 
C)  output is equal to trend output. 
D)  interest rates rise. 
E)  the trade balance improves.

Question 16

The Governor of the Bank of Canada

Accepted Answer

A)  can be fired by the Prime Minister for failing to meet inflation targets. 
B)  cannot be fired by the Prime Minister for failing to meet inflation targets. 
C)  can be fired by the Bank of Canada by the Prime Minister for failing to meet inflation targets. 
D)  cannot be fired by the Bank of Canada by the Prime Minister for failing to meet inflation targets. 
E)  is responsible to the Prime Minister for meeting inflation targets. 
A)  can be fired by the Prime Minister for failing to meet inflation targets. 
B)  cannot be fired by the Prime Minister for failing to meet inflation targets. 
C)  can be fired by the Bank of Canada by the Prime Minister for failing to meet inflation targets. 
D)  cannot be fired by the Bank of Canada by the Prime Minister for failing to meet inflation targets. 
E)  is responsible to the Prime Minister for meeting inflation targets.

Question 17

According to the Central Bank Commitment Story,

Accepted Answer

A)  central banks need to be given wide latitude in using their discretion. 
B)  central bank discretion is dangerous. 
C)  central banks need to be isolated from political considerations. 
D)  central banks should be responsible to the executive, as opposed to the legislative branch of government. 
E)  central banks need to be isolated from financial market pressures. 
A)  central banks need to be given wide latitude in using their discretion. 
B)  central bank discretion is dangerous. 
C)  central banks need to be isolated from political considerations. 
D)  central banks should be responsible to the executive, as opposed to the legislative branch of government. 
E)  central banks need to be isolated from financial market pressures.

Question 18

According to the Friedman-Lucas money surprise model,we should expect a stable relationship between

Accepted Answer

A)  the inflation rate and the level of real output. 
B)  the inflation rate and deviations of real output from trend. 
C)  deviations in the inflation rate from what it is expected to be and the level of real output from trend. 
D)  deviations in the inflation rate from what it is expected to be and deviations in real output from trend. 
E)  the inflation rate and the level of real output over the long periods of time only. 
A)  the inflation rate and the level of real output. 
B)  the inflation rate and deviations of real output from trend. 
C)  deviations in the inflation rate from what it is expected to be and the level of real output from trend. 
D)  deviations in the inflation rate from what it is expected to be and deviations in real output from trend. 
E)  the inflation rate and the level of real output over the long periods of time only.

Question 19

According to the Central Bank Learning Story,if the central bank believes that the Phillips curve relationship is stable,it will choose a point at which real output will be

Accepted Answer

A)  below trend and inflation will be lower than expected inflation. 
B)  below trend and inflation will be higher than expected inflation. 
C)  above trend and inflation will be lower than expected inflation. 
D)  above trend and inflation will be higher than expected inflation. 
E)  above trend and inflation will be at expected inflation. 
A)  below trend and inflation will be lower than expected inflation. 
B)  below trend and inflation will be higher than expected inflation. 
C)  above trend and inflation will be lower than expected inflation. 
D)  above trend and inflation will be higher than expected inflation. 
E)  above trend and inflation will be at expected inflation.

Question 20

In the Central Bank Learning Story,if i > i*,the central bank is happier if

Accepted Answer

A)  inflation falls and output increases. 
B)  inflation increases and output falls. 
C)  inflation falls and output falls. 
D)  inflation increases and output increases. 
E)  inflation is constant and output increases. 
A)  inflation falls and output increases. 
B)  inflation increases and output falls. 
C)  inflation falls and output falls. 
D)  inflation increases and output increases. 
E)  inflation is constant and output increases.

Application of the time inconsistency problem to monetary policy suggests that,without some mechanism to ensure commitment,the

The existence of large government budget deficits

The Phillips curve describes the

Of the following five decades,there was a Phillips curve with a less favourable trade-off in the

Rational expectations hypothesis deals with economic agents who

All historical periods of hyperinflation can be traced back to

Recently,inflation in Canada has been

In the central bank commitment story,high inflation in Canada during the 1970s was caused by

There is a

When the Friedman-Lucas money surprise model is incorporated into the Phillips curve,

To prevent the Bank of Canada from using discretion is to impose some rule to govern monetary policy such as

According to the Friedman-Lucas money surprise model,there is a positive relationship between the deviation of the inflation rate from what it is expected to be,and the

Which of the following models helps to explain the Phillips curve?

In the Central Bank Learning Story,if i < i*,the central bank is happier if

According to the Friedman-Lucas money surprise model,when the inflation rate is equal to the expected inflation rate,then

The Governor of the Bank of Canada

According to the Central Bank Commitment Story,

According to the Friedman-Lucas money surprise model,we should expect a stable relationship between

According to the Central Bank Learning Story,if the central bank believes that the Phillips curve relationship is stable,it will choose a point at which real output will be

In the Central Bank Learning Story,if i > i*,the central bank is happier if

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Filters

Exam 18: Money, Inflation, and Banking: A Deeper Look

Application of the time inconsistency problem to monetary policy suggests that,without some mechanism to ensure commitment,the

The existence of large government budget deficits

The Phillips curve describes the

Of the following five decades,there was a Phillips curve with a less favourable trade-off in the

Rational expectations hypothesis deals with economic agents who

All historical periods of hyperinflation can be traced back to

Recently,inflation in Canada has been

In the central bank commitment story,high inflation in Canada during the 1970s was caused by

There is a

When the Friedman-Lucas money surprise model is incorporated into the Phillips curve,

To prevent the Bank of Canada from using discretion is to impose some rule to govern monetary policy such as

According to the Friedman-Lucas money surprise model,there is a positive relationship between the deviation of the inflation rate from what it is expected to be,and the

Which of the following models helps to explain the Phillips curve?

In the Central Bank Learning Story,if i < i*,the central bank is happier if

According to the Friedman-Lucas money surprise model,when the inflation rate is equal to the expected inflation rate,then

The Governor of the Bank of Canada

According to the Central Bank Commitment Story,

According to the Friedman-Lucas money surprise model,we should expect a stable relationship between

According to the Central Bank Learning Story,if the central bank believes that the Phillips curve relationship is stable,it will choose a point at which real output will be

In the Central Bank Learning Story,if i > i*,the central bank is happier if

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Filters