Question 1

Which of these policy rule variables does not have the disadvantage of being hard to control?

Accepted Answer

A)  nominal GDP growth 
B)  high-powered money 
C)  the unemployment rate 
D)  the inflation rate 
A)  nominal GDP growth 
B)  high-powered money 
C)  the unemployment rate 
D)  the inflation rate

Question 2

The "effectiveness lag" in monetary policy is the amount of time it takes

Accepted Answer

A)  to collect the data to determine if a policy change is required. 
B)  for monetary policy to have an impact on inflation and unemployment. 
C)  for monetary policy to affect the money supply. 
D)  to collect the data to determine what effect monetary policy has had on the economy. 
A)  to collect the data to determine if a policy change is required. 
B)  for monetary policy to have an impact on inflation and unemployment. 
C)  for monetary policy to affect the money supply. 
D)  to collect the data to determine what effect monetary policy has had on the economy.

Question 3

A study of estimated multipliers in the major econometric models shows that

Accepted Answer

A)  the government-spending multiplier tends to increase and then later decrease over time. 
B)  the monetary multiplier is much larger than the government spending multiplier. 
C)  there is quite a bit of variation in the value of the multipliers among the models. 
D)  A and C are both correct. 
A)  the government-spending multiplier tends to increase and then later decrease over time. 
B)  the monetary multiplier is much larger than the government spending multiplier. 
C)  there is quite a bit of variation in the value of the multipliers among the models. 
D)  A and C are both correct.

Question 4

The activist response to the monetarist platform says that

Accepted Answer

A)  private spending may show some stability, but monetary or fiscal policy designed to stabilize it will just make things worse. 
B)  private spending is stable partly because consumption spending is based on permanent income. 
C)  even if prices are not completely flexible in the short-run, given time there is enough flexibility for the system to return to the natural level of real GDP. 
D)  None of the above. 
A)  private spending may show some stability, but monetary or fiscal policy designed to stabilize it will just make things worse. 
B)  private spending is stable partly because consumption spending is based on permanent income. 
C)  even if prices are not completely flexible in the short-run, given time there is enough flexibility for the system to return to the natural level of real GDP. 
D)  None of the above.

Question 5

The believer in policy ________ must be pessimistic about the ability of the private economy to self-stabilize and ________ about the accuracy of economic forecasting.

Accepted Answer

A)  activism, pessimistic 
B)  activism, optimistic 
C)  rules, pessimistic 
D)  rules, optimistic 
A)  activism, pessimistic 
B)  activism, optimistic 
C)  rules, pessimistic 
D)  rules, optimistic

Question 6

A monetary policy which is likely to bring about a "soft landing" requires that interest rates be ________ while inflation is ________ and unemployment is ________ the natural level.

Accepted Answer

A)  raised, rising, above 
B)  raised, falling, below 
C)  lowered, falling, above 
D)  lowered, rising, below 
A)  raised, rising, above 
B)  raised, falling, below 
C)  lowered, falling, above 
D)  lowered, rising, below

Question 7

In Gordon's early presentation of the IS-LM and AD/SRAS/LRAS models, macro policy was assumed to have ________ effects on aggregate demand.

Accepted Answer

A)  immediate and certain 
B)  immediate but uncertain 
C)  delayed but certain 
D)  delayed and uncertain 
A)  immediate and certain 
B)  immediate but uncertain 
C)  delayed but certain 
D)  delayed and uncertain

Question 8

With lags in monetary policy, an effective expansionary policy must be initiated many months ________ the start of the economic downturn it is intended to moderate, and this requires ________ economic forecasts.

Accepted Answer

A)  before, generating accurate 
B)  before, ignoring 
C)  after, generating accurate 
D)  after, ignoring 
A)  before, generating accurate 
B)  before, ignoring 
C)  after, generating accurate 
D)  after, ignoring

Question 9

Quarterly data for the years 1988-93 for the nominal federal funds interest rate and the output ratio show that the Fed

Accepted Answer

A)  reacted to a high output ratio by raising the interest rate. 
B)  reacted to a high output ratio by lowering the interest rate. 
C)  reacted to low output ratios but not to high output ratios. 
D)  did not react to movements in the output ratio. 
A)  reacted to a high output ratio by raising the interest rate. 
B)  reacted to a high output ratio by lowering the interest rate. 
C)  reacted to low output ratios but not to high output ratios. 
D)  did not react to movements in the output ratio.

Question 10

Which of the following groups of economic forecasters have been able to forecast "turning points" when the economy turned up or down?

Accepted Answer

A)  Forecasters as the Fed. 
B)  Forecasters in branches of the government other than the Fed. 
C)  Forecasters at private firms. 
D)  None of the above. 
E)  All of the above. 
A)  Forecasters as the Fed. 
B)  Forecasters in branches of the government other than the Fed. 
C)  Forecasters at private firms. 
D)  None of the above. 
E)  All of the above.

Question 11

During the ________ output tended to exceed its natural level and inflation ________.

Accepted Answer

A)  late 1980s, accelerated 
B)  1990s, accelerated 
C)  1960s and early 1970s, accelerated 
D)  early 1980s, decelerated 
A)  late 1980s, accelerated 
B)  1990s, accelerated 
C)  1960s and early 1970s, accelerated 
D)  early 1980s, decelerated

Question 12

Data indicate that the economy's response to monetary policy became noticeably weaker and more stretched out during

Accepted Answer

A)  1961-75 
B)  1976-90 
C)  1991-2007 
D)  None of the above. The response has grown stronger and shorter. 
A)  1961-75 
B)  1976-90 
C)  1991-2007 
D)  None of the above. The response has grown stronger and shorter.

Question 13

Expenditure changes may be potentially inequitable, as are tax changes, because

Accepted Answer

A)  their spatial distribution must be determined by the legislature. 
B)  their spatial distribution must be determined by the Fed. 
C)  the government is slow to implement new programs. 
D)  unlike Japan, public works projects are the province of the executive branch. 
A)  their spatial distribution must be determined by the legislature. 
B)  their spatial distribution must be determined by the Fed. 
C)  the government is slow to implement new programs. 
D)  unlike Japan, public works projects are the province of the executive branch.

Question 14

Monetarists believe that there is a ________ link between money supply growth and target variables and that the public is ________ in movements in the money supply.

Accepted Answer

A)  strong, interested 
B)  strong, disinterested 
C)  tenuous, interested 
D)  tenuous, disinterested 
A)  strong, interested 
B)  strong, disinterested 
C)  tenuous, interested 
D)  tenuous, disinterested

Question 15

Activists believe that postwar instability is primarily the result of

Accepted Answer

A)  erratic growth of private investment. 
B)  uneven changes in real government expenditures. 
C)  uneven changes in private consumption of durables. 
D)  A and C are both correct. 
A)  erratic growth of private investment. 
B)  uneven changes in real government expenditures. 
C)  uneven changes in private consumption of durables. 
D)  A and C are both correct.

Question 16

To reduce economic volatility the Fed should push the economy toward a

Accepted Answer

A)  positive output ratio. 
B)  negative output ratio. 
C)  zero output ratio. 
D)  All of the above are consistent with reduced volatility. 
A)  positive output ratio. 
B)  negative output ratio. 
C)  zero output ratio. 
D)  All of the above are consistent with reduced volatility.

Question 17

During which of the following decades has the output ratio been staying closest to zero?

Accepted Answer

A)  1960s 
B)  1970s 
C)  1980s 
D)  1990s 
A)  1960s 
B)  1970s 
C)  1980s 
D)  1990s

Question 18

A policymaker would prefer that the lag in the effect of a policy be

Accepted Answer

A)  long and variable in magnitude or size. 
B)  short and fixed in magnitude or size. 
C)  long and fixed in magnitude or size. 
D)  short and variable in magnitude or size. 
A)  long and variable in magnitude or size. 
B)  short and fixed in magnitude or size. 
C)  long and fixed in magnitude or size. 
D)  short and variable in magnitude or size.

Question 19

Non-activists believe that the principal source of AD instability is

Accepted Answer

A)  private investment spending. 
B)  private consumption spending. 
C)  erratic government policy. 
D)  All of the above. 
A)  private investment spending. 
B)  private consumption spending. 
C)  erratic government policy. 
D)  All of the above.

Question 20

Monetarists believe that the major source of macroeconomic instability lies in

Accepted Answer

A)  the private investment sector and the government sector. 
B)  the government sector. 
C)  private corporations and the government sector. 
D)  export and import sector. 
A)  the private investment sector and the government sector. 
B)  the government sector. 
C)  private corporations and the government sector. 
D)  export and import sector.

Which of these policy rule variables does not have the disadvantage of being hard to control?

The "effectiveness lag" in monetary policy is the amount of time it takes

A study of estimated multipliers in the major econometric models shows that

The activist response to the monetarist platform says that

The believer in policy must be pessimistic about the ability of the private economy to self-stabilize and about the accuracy of economic forecasting.

A monetary policy which is likely to bring about a "soft landing" requires that interest rates be while inflation is and unemployment is the natural level.

In Gordon's early presentation of the IS-LM and AD/SRAS/LRAS models, macro policy was assumed to have ________ effects on aggregate demand.

With lags in monetary policy, an effective expansionary policy must be initiated many months the start of the economic downturn it is intended to moderate, and this requires economic forecasts.

Quarterly data for the years 1988-93 for the nominal federal funds interest rate and the output ratio show that the Fed

Which of the following groups of economic forecasters have been able to forecast "turning points" when the economy turned up or down?

During the output tended to exceed its natural level and inflation .

Data indicate that the economy's response to monetary policy became noticeably weaker and more stretched out during

Expenditure changes may be potentially inequitable, as are tax changes, because

Monetarists believe that there is a link between money supply growth and target variables and that the public is in movements in the money supply.

Activists believe that postwar instability is primarily the result of

To reduce economic volatility the Fed should push the economy toward a

During which of the following decades has the output ratio been staying closest to zero?

A policymaker would prefer that the lag in the effect of a policy be

Non-activists believe that the principal source of AD instability is

Monetarists believe that the major source of macroeconomic instability lies in

What Is Macroeconomics

The Measurement of Income, Prices, and Unemployment

Spending, Income, and Interest Rates

Monetary and Fiscal Policy in the Is-Lm Model

The Government Budget, Foreign Borrowing, and the Twin Deficits

International Trade, Exchange Rates, and Macroeconomic Policy

Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

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

The Government Budget, the Public Debt, and Social Security

Money and Financial Markets

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro Confronts New Keynesian Macro

Conclusion: Where We Stand

Filters

Exam 14: Stabilization Policy in the Closed and Open Economy

Which of these policy rule variables does not have the disadvantage of being hard to control?

The "effectiveness lag" in monetary policy is the amount of time it takes

A study of estimated multipliers in the major econometric models shows that

The activist response to the monetarist platform says that

The believer in policy ________ must be pessimistic about the ability of the private economy to self-stabilize and ________ about the accuracy of economic forecasting.

A monetary policy which is likely to bring about a "soft landing" requires that interest rates be ________ while inflation is ________ and unemployment is ________ the natural level.

In Gordon's early presentation of the IS-LM and AD/SRAS/LRAS models, macro policy was assumed to have ________ effects on aggregate demand.

With lags in monetary policy, an effective expansionary policy must be initiated many months ________ the start of the economic downturn it is intended to moderate, and this requires ________ economic forecasts.

Quarterly data for the years 1988-93 for the nominal federal funds interest rate and the output ratio show that the Fed

Which of the following groups of economic forecasters have been able to forecast "turning points" when the economy turned up or down?

During the ________ output tended to exceed its natural level and inflation ________.

Data indicate that the economy's response to monetary policy became noticeably weaker and more stretched out during

Expenditure changes may be potentially inequitable, as are tax changes, because

Monetarists believe that there is a ________ link between money supply growth and target variables and that the public is ________ in movements in the money supply.

Activists believe that postwar instability is primarily the result of

To reduce economic volatility the Fed should push the economy toward a

During which of the following decades has the output ratio been staying closest to zero?

A policymaker would prefer that the lag in the effect of a policy be

Non-activists believe that the principal source of AD instability is

Monetarists believe that the major source of macroeconomic instability lies in

What Is Macroeconomics

The Measurement of Income, Prices, and Unemployment

Spending, Income, and Interest Rates

Monetary and Fiscal Policy in the Is-Lm Model

The Government Budget, Foreign Borrowing, and the Twin Deficits

International Trade, Exchange Rates, and Macroeconomic Policy

Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

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

The Government Budget, the Public Debt, and Social Security

Money and Financial Markets

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro Confronts New Keynesian Macro

Conclusion: Where We Stand

Filters

The believer in policy must be pessimistic about the ability of the private economy to self-stabilize and about the accuracy of economic forecasting.

A monetary policy which is likely to bring about a "soft landing" requires that interest rates be while inflation is and unemployment is the natural level.

With lags in monetary policy, an effective expansionary policy must be initiated many months the start of the economic downturn it is intended to moderate, and this requires economic forecasts.

During the output tended to exceed its natural level and inflation .

Monetarists believe that there is a link between money supply growth and target variables and that the public is in movements in the money supply.