Question 1

According to the rational expectations theory,monetary policy is fully anticipated and therefore only affects:​

Accepted Answer

A) the level of real GDP. 
B) the level of real investment. 
C) the price level. 
D) the level of real consumption. 
E) the level of exports. 
A) the level of real GDP. 
B) the level of real investment. 
C) the price level. 
D) the level of real consumption. 
E) the level of exports.

Question 2

According to the rational expectations school,_____.​

Accepted Answer

A) on average people have very little idea of what to expect from government policy makers 
B) people form expectations by focusing only on the private sector 
C) changes in the expected price level shift the aggregate demand curve 
D) people do not consider likely government policies when forming expectations,choosing to remain rationally ignorant 
E) people form expectations,in part,by considering the probable future actions of government policy makers 
A) on average people have very little idea of what to expect from government policy makers 
B) people form expectations by focusing only on the private sector 
C) changes in the expected price level shift the aggregate demand curve 
D) people do not consider likely government policies when forming expectations,choosing to remain rationally ignorant 
E) people form expectations,in part,by considering the probable future actions of government policy makers

Question 3

A credible policy designed to lower inflation is likely to push the economy into recession.​

Accepted Answer

A) True 
 B)False

Question 4

If inflationary expectations increase,we can infer that:​

Accepted Answer

A) unemployment is above the natural rate. 
B) the economy is not on the long-run Phillips curve. 
C) the short-run Phillips curve is shifting to the left. 
D) output is below potential GDP. 
E) the unemployment rate is at the natural rate. 
A) unemployment is above the natural rate. 
B) the economy is not on the long-run Phillips curve. 
C) the short-run Phillips curve is shifting to the left. 
D) output is below potential GDP. 
E) the unemployment rate is at the natural rate.

Question 5

The rational expectations school advocates:​

Accepted Answer

A) Monetarism. 
B) Keynesianism. 
C) the use of fiscal policy. 
D) the use of monetary policy. 
E) a passive approach to policy. 
A) Monetarism. 
B) Keynesianism. 
C) the use of fiscal policy. 
D) the use of monetary policy. 
E) a passive approach to policy.

Question 6

The immediate effects of a discretionary increase in government spending are represented by a:​

Accepted Answer

A) rightward shift of the aggregate demand curve. 
B) leftward shift of the aggregate demand curve. 
C) rightward shift of the Phillips curve. 
D) leftward shift of the Phillips curve. 
E) movement along the Phillips curve. 
A) rightward shift of the aggregate demand curve. 
B) leftward shift of the aggregate demand curve. 
C) rightward shift of the Phillips curve. 
D) leftward shift of the Phillips curve. 
E) movement along the Phillips curve.

Question 7

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.​

Accepted Answer

A) they act so as to prevent the price level from increasing 
B) their actions lead to a further increase in output 
C) they are likely to negotiate for relatively lower wages. 
D) the monetary authority is forced to cancel its planned recessionary policy 
E) both output and employment increase even more than was originally planned 
A) they act so as to prevent the price level from increasing 
B) their actions lead to a further increase in output 
C) they are likely to negotiate for relatively lower wages. 
D) the monetary authority is forced to cancel its planned recessionary policy 
E) both output and employment increase even more than was originally planned

Question 8

After World War II the average U.S.recession has lasted:​

Accepted Answer

A) a few months. 
B) about half a year. 
C) a little less than a year. 
D) about three weeks. 
E) about two years. 
A) a few months. 
B) about half a year. 
C) a little less than a year. 
D) about three weeks. 
E) about two years.

Question 9

Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?​

Accepted Answer

A) The level of real GDP would be higher in the long run with the active approach,while it will be lower with the passive approach. 
B) The level of real GDP would be lower in the long run with the active approach,while it will be higher with the passive approach. 
C) The price level would be higher and the level of real GDP would be lower in the long run with the active approach,whereas the price level would be lower and real GDP level would be higher with the passive approach. 
D) Only the price level would be lower in the long run with the active approach,whereas it would be higher with the passive approach. 
E) Only the price level would be higher in the long run with the active approach,whereas it would be lower with the passive approach. 
A) The level of real GDP would be higher in the long run with the active approach,while it will be lower with the passive approach. 
B) The level of real GDP would be lower in the long run with the active approach,while it will be higher with the passive approach. 
C) The price level would be higher and the level of real GDP would be lower in the long run with the active approach,whereas the price level would be lower and real GDP level would be higher with the passive approach. 
D) Only the price level would be lower in the long run with the active approach,whereas it would be higher with the passive approach. 
E) Only the price level would be higher in the long run with the active approach,whereas it would be lower with the passive approach.

Question 10

An increase in the expected inflation rate will:​

Accepted Answer

A) shift the short-run Phillips curve upward and to the right. 
B) shift the short-run Phillips curve downward and to the left. 
C) not shift the short-run Phillips curve unless the unemployment rate changes. 
D) cause the unemployment rate associated with each inflation rate to decrease. 
E) tend to increase production unless the actual inflation rate also increases. 
A) shift the short-run Phillips curve upward and to the right. 
B) shift the short-run Phillips curve downward and to the left. 
C) not shift the short-run Phillips curve unless the unemployment rate changes. 
D) cause the unemployment rate associated with each inflation rate to decrease. 
E) tend to increase production unless the actual inflation rate also increases.

Question 11

If the price level increases more rapidly than expected,_____.​

Accepted Answer

A) output will decrease 
B) output will increase 
C) output will not change 
D) real wages will increase 
E) unemployment will increase 
A) output will decrease 
B) output will increase 
C) output will not change 
D) real wages will increase 
E) unemployment will increase

Question 12

Brandon,an economist,is a believer of the rational expectations school.According to him,which of the following is likely to affect the levels of output and employment in an economy?​

Accepted Answer

A) An expansionary monetary policy,if it is fully anticipated 
B) A recessionary monetary policy,if it is fully anticipated 
C) A monetary policy that is unanticipated 
D) A fiscal policy that is anticipated 
E) The Fed's announcement of no change in monetary policy 
A) An expansionary monetary policy,if it is fully anticipated 
B) A recessionary monetary policy,if it is fully anticipated 
C) A monetary policy that is unanticipated 
D) A fiscal policy that is anticipated 
E) The Fed's announcement of no change in monetary policy

Question 13

Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.​

Accepted Answer

A) True 
 B)False

Question 14

In its original form,the Phillips curve depicted a situation in which an economy could reduce its unemployment rate by holding the inflation rate steady.​

Accepted Answer

A) True 
 B)False

Question 15

Passive policy advocates rely on the economy's natural ability to correct itself in case of unemployment because of:​

Accepted Answer

A) the lack of any real concern for those who have no jobs. 
B) the conviction that unemployment is relatively harmless. 
C) the belief that active economic policy is likely to be either ineffective or harmful. 
D) the desire to await further economic data before intervening. 
E) the belief in the law of diminishing returns. 
A) the lack of any real concern for those who have no jobs. 
B) the conviction that unemployment is relatively harmless. 
C) the belief that active economic policy is likely to be either ineffective or harmful. 
D) the desire to await further economic data before intervening. 
E) the belief in the law of diminishing returns.

Question 16

According to economists of the rational expectations school,_____.​

Accepted Answer

A) the passive approach must be adopted because they believe the economy is too complex 
B) individual forecasts about policies can never be right 
C) anticipated monetary policy can affect the output level 
D) discretionary policy can stabilize the economy 
E) discretionary policy should be completely avoided 
A) the passive approach must be adopted because they believe the economy is too complex 
B) individual forecasts about policies can never be right 
C) anticipated monetary policy can affect the output level 
D) discretionary policy can stabilize the economy 
E) discretionary policy should be completely avoided

Question 17

The unemployment rate can remain below the natural rate,but only _____.​

Accepted Answer

A) in the long run 
B) with continuous deflation 
C) with a continuously increasing inflation rate 
D) with a series of adverse supply shocks 
E) if the money supply is constant 
A) in the long run 
B) with continuous deflation 
C) with a continuously increasing inflation rate 
D) with a series of adverse supply shocks 
E) if the money supply is constant

Question 18

Which of the following is a problem associated with an active policy such as a stimulus package?​

Accepted Answer

A) Increase in the unemployment rate 
B) Increase in inflationary pressure 
C) Increase in the market interest rate 
D) Decrease in the market interest rate 
E) Decrease in money demand 
A) Increase in the unemployment rate 
B) Increase in inflationary pressure 
C) Increase in the market interest rate 
D) Decrease in the market interest rate 
E) Decrease in money demand

Question 19

Opponents of inflation targets say that:​

Accepted Answer

A) such targets encourage workers to expect a low and stable inflation rate and hold down demands for wage increases. 
B) the Fed pays less attention to jobs and economic growth when it sets such targets. 
C) such targets encourage firms to plan on a low and stable inflation rate and hold down price increases. 
D) such targets encourage investors to plan on a low and stable inflation rate and hold down demands for interest rate increases. 
E) the Fed pays more attention to jobs and economic growth when it sets such targets. 
A) such targets encourage workers to expect a low and stable inflation rate and hold down demands for wage increases. 
B) the Fed pays less attention to jobs and economic growth when it sets such targets. 
C) such targets encourage firms to plan on a low and stable inflation rate and hold down price increases. 
D) such targets encourage investors to plan on a low and stable inflation rate and hold down demands for interest rate increases. 
E) the Fed pays more attention to jobs and economic growth when it sets such targets.

Question 20

One way of expressing the concept of the short-run Phillips curve is to say that:​

Accepted Answer

A) the cost of reducing unemployment is higher inflation. 
B) nothing but good comes from reducing unemployment. 
C) the cost of reducing inflation is lower unemployment. 
D) aggregate supply and aggregate demand will always be equal at the potential output level. 
E) the best economic policy is one that attempts to make the rate of inflation equal to the rate of unemployment. 
A) the cost of reducing unemployment is higher inflation. 
B) nothing but good comes from reducing unemployment. 
C) the cost of reducing inflation is lower unemployment. 
D) aggregate supply and aggregate demand will always be equal at the potential output level. 
E) the best economic policy is one that attempts to make the rate of inflation equal to the rate of unemployment.

According to the rational expectations theory,monetary policy is fully anticipated and therefore only affects:

According to the rational expectations school,_____.

A credible policy designed to lower inflation is likely to push the economy into recession.

If inflationary expectations increase,we can infer that:

The rational expectations school advocates:

The immediate effects of a discretionary increase in government spending are represented by a:

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.

After World War II the average U.S.recession has lasted:

Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?

An increase in the expected inflation rate will:

If the price level increases more rapidly than expected,_____.

Brandon,an economist,is a believer of the rational expectations school.According to him,which of the following is likely to affect the levels of output and employment in an economy?

Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.

In its original form,the Phillips curve depicted a situation in which an economy could reduce its unemployment rate by holding the inflation rate steady.

Passive policy advocates rely on the economy's natural ability to correct itself in case of unemployment because of:

According to economists of the rational expectations school,_____.

The unemployment rate can remain below the natural rate,but only _____.

Which of the following is a problem associated with an active policy such as a stimulus package?

Opponents of inflation targets say that:

One way of expressing the concept of the short-run Phillips curve is to say that:

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

International Trade

International Finance

Economic Development

Filters

Exam 16: Macro Policy Debate: Active or Passive

According to the rational expectations theory,monetary policy is fully anticipated and therefore only affects:​

According to the rational expectations school,_____.​

A credible policy designed to lower inflation is likely to push the economy into recession.​

If inflationary expectations increase,we can infer that:​

The rational expectations school advocates:​

The immediate effects of a discretionary increase in government spending are represented by a:​

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.​

After World War II the average U.S.recession has lasted:​

Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?​

An increase in the expected inflation rate will:​

If the price level increases more rapidly than expected,_____.​

Brandon,an economist,is a believer of the rational expectations school.According to him,which of the following is likely to affect the levels of output and employment in an economy?​

Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.​

In its original form,the Phillips curve depicted a situation in which an economy could reduce its unemployment rate by holding the inflation rate steady.​

Passive policy advocates rely on the economy's natural ability to correct itself in case of unemployment because of:​

According to economists of the rational expectations school,_____.​

The unemployment rate can remain below the natural rate,but only _____.​

Which of the following is a problem associated with an active policy such as a stimulus package?​

Opponents of inflation targets say that:​

One way of expressing the concept of the short-run Phillips curve is to say that:​

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

International Trade

International Finance

Economic Development

Filters

According to the rational expectations theory,monetary policy is fully anticipated and therefore only affects:

According to the rational expectations school,_____.

A credible policy designed to lower inflation is likely to push the economy into recession.

If inflationary expectations increase,we can infer that:

The rational expectations school advocates:

The immediate effects of a discretionary increase in government spending are represented by a:

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.

After World War II the average U.S.recession has lasted:

Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?

An increase in the expected inflation rate will:

If the price level increases more rapidly than expected,_____.

Brandon,an economist,is a believer of the rational expectations school.According to him,which of the following is likely to affect the levels of output and employment in an economy?

Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.

In its original form,the Phillips curve depicted a situation in which an economy could reduce its unemployment rate by holding the inflation rate steady.

Passive policy advocates rely on the economy's natural ability to correct itself in case of unemployment because of:

According to economists of the rational expectations school,_____.

The unemployment rate can remain below the natural rate,but only _____.

Which of the following is a problem associated with an active policy such as a stimulus package?

Opponents of inflation targets say that:

One way of expressing the concept of the short-run Phillips curve is to say that: