Exam 17: Macro Policy Debate: Active or Passive

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The early Phillips curve showed a tradeoff between unemployment and inflation because it was drawn for a period in which the main source of instability was aggregate demand.

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The main policy conclusion of the rational expectations school is

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If the economy were in a recession,which of the following policies would a person who favors an active approach to policy be most likely to support?

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In the early 1960s,the discovery of the Phillips curve relationship caused economists and policy makers to think that they understood the tradeoffs between

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According to the natural rate hypothesis,unemployment can

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An important implication of the natural rate hypothesis is that regardless of concerns about __________,the government policy that results in __________ is generally the optimal long-run policy.

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Evidence indicates that inflation rates are

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Time required __________ is not a time lag associated with using discretionary policy to correct an economic problem.

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Which of the following statements supports the passive approach to a recessionary gap?

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If the advice of those who favor a passive approach to policy is correct,how would a recessionary gap eventually close?

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The long-run Phillips curve

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According to the rational expectations school,a correctly anticipated expansionary monetary policy will

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If the time for an economy to self-correct is shorter than the active policy lags,

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The average U.S.recession (after World War II)has lasted

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The natural rate hypothesis claims that policy makers can have considerable success in reducing unemployment through monetary and fiscal policy.

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Exhibit 16-3 Exhibit 16-3   -According to those who favor a passive approach to policy,where will the economy in Exhibit 16-3 end up once the expansionary gap is eliminated? -According to those who favor a passive approach to policy,where will the economy in Exhibit 16-3 end up once the expansionary gap is eliminated?

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Suppose that policy makers are concerned about a shortage of long-term capital investment.To remedy the problem,various plans to cut capital gains taxes have been suggested.The delay in picking a plan is called the

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Exhibit 16-1 Exhibit 16-1   -According to those who favor an active approach to policy,how can the economy shown in Exhibit 16-1 attain equilibrium at potential output? -According to those who favor an active approach to policy,how can the economy shown in Exhibit 16-1 attain equilibrium at potential output?

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Some of those who favor a passive approach to policy disapprove of government intervention in the economy because they think government policy makers do not know which policy is correct.

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Which of the following is not a potential problem with active policy for policy makers?

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