Question 1

Non-activists

Accepted Answer

A)  distrust the ability of the political process to formulate sensible economic policy. 
B)  argue for a constant-growth-rate rule for the money supply. 
C)  argue that more unemployment now may prevent a lot more unemployment in the future. 
D)  All of the above. 
A)  distrust the ability of the political process to formulate sensible economic policy. 
B)  argue for a constant-growth-rate rule for the money supply. 
C)  argue that more unemployment now may prevent a lot more unemployment in the future. 
D)  All of the above.

Question 2

In which of the following years did oil price movements contribute to holding down inflation?

Accepted Answer

A)  1986 
B)  1998 
C)  2001 
D)  All of the above. 
A)  1986 
B)  1998 
C)  2001 
D)  All of the above.

Question 3

According to the new classical macroeconomists, each of the following statements is true EXCEPT

Accepted Answer

A)  disinflation will be harder to bring about because of the time-inconsistency problem. 
B)  policymakers are tempted to deviate from the preannounced policy once the public changes its expectations. 
C)  feedback rules are preferred to discretionary rules. 
D)  disinflation will be painless if the restrictive policies announced by the government are credible. 
A)  disinflation will be harder to bring about because of the time-inconsistency problem. 
B)  policymakers are tempted to deviate from the preannounced policy once the public changes its expectations. 
C)  feedback rules are preferred to discretionary rules. 
D)  disinflation will be painless if the restrictive policies announced by the government are credible.

Question 4

The economy has been compared to a supertanker on the ocean to make the point that

Accepted Answer

A)  the larger the economy, the less it is influenced by other economies (the weather). 
B)  it takes time for a policy change to overcome the economy's momentum and change its direction (as in steering an immense ship). 
C)  a random shock affects all parts of the economy in the same way (as all of a ship rises or falls together with the waves). 
D)  the larger the economy, the worse it is for the rest of the world when it goes into a recession (there is enough oil in a supertanker for a spill to stretch across the ocean). 
A)  the larger the economy, the less it is influenced by other economies (the weather). 
B)  it takes time for a policy change to overcome the economy's momentum and change its direction (as in steering an immense ship). 
C)  a random shock affects all parts of the economy in the same way (as all of a ship rises or falls together with the waves). 
D)  the larger the economy, the worse it is for the rest of the world when it goes into a recession (there is enough oil in a supertanker for a spill to stretch across the ocean).

Question 5

Activists-believe that AD is unstable because

Accepted Answer

A)  business and consumer attitudes and expectations shift. 
B)  monetary policy is variable. 
C)  fiscal policy effects are unpredictable. 
D)  Both B and C are correct. 
A)  business and consumer attitudes and expectations shift. 
B)  monetary policy is variable. 
C)  fiscal policy effects are unpredictable. 
D)  Both B and C are correct.

Question 6

Among the prospective rules that set target variables directly, only the nominal GDP rule

Accepted Answer

A)  provides a nominal anchor. 
B)  is easy for the Fed to achieve. 
C)  allows a neutral response to a supply shock. 
D)  is insulated from the effects of unstable velocity. 
A)  provides a nominal anchor. 
B)  is easy for the Fed to achieve. 
C)  allows a neutral response to a supply shock. 
D)  is insulated from the effects of unstable velocity.

Question 7

Admission to the Euro required in 1997 that a country's government debt not exceed ________ percent of GDP.

Accepted Answer

A)  seven 
B)  fifteen 
C)  twenty-five 
D)  sixty 
A)  seven 
B)  fifteen 
C)  twenty-five 
D)  sixty

Question 8

Which of the following monetary policies could reduce the amplitude of oscillations of output around its natural level?

Accepted Answer

A)  raising interest rates before actual output attains its natural level 
B)  lowering interest rates when an economy is still overheated 
C)  lowering interest rates when output is above its natural level 
D)  all of the above. 
A)  raising interest rates before actual output attains its natural level 
B)  lowering interest rates when an economy is still overheated 
C)  lowering interest rates when output is above its natural level 
D)  all of the above.

Question 9

In the Activists' Paradise, to increase real GDP without affecting the interest rate, it is necessary to change

Accepted Answer

A)  only fiscal policy and shift the IS curve. 
B)  only monetary policy and shift the LM curve. 
C)  fiscal and monetary policies and shift both IS and LM. 
D)  more policy instruments than policymakers are actually able to manipulate. 
A)  only fiscal policy and shift the IS curve. 
B)  only monetary policy and shift the LM curve. 
C)  fiscal and monetary policies and shift both IS and LM. 
D)  more policy instruments than policymakers are actually able to manipulate.

Question 10

Dividing fiscal policy into two instruments has the effect of introducing another policy target:

Accepted Answer

A)  the interest rate. 
B)  the national debt. 
C)  the unemployment rate. 
D)  the division of output between public and private spending. 
A)  the interest rate. 
B)  the national debt. 
C)  the unemployment rate. 
D)  the division of output between public and private spending.

Question 11

Observers of the economy often complain that indicators of economic activity are often contradictory. This is an example of the ________ lag.

Accepted Answer

A)  data 
B)  recognition 
C)  legislative 
D)  effectiveness 
A)  data 
B)  recognition 
C)  legislative 
D)  effectiveness

Question 12

The advantage of a nominal anchor is that it prevents a limitless rise in the

Accepted Answer

A)  national debt. 
B)  nominal interest rate. 
C)  inflation rate. 
D)  unemployment rate. 
A)  national debt. 
B)  nominal interest rate. 
C)  inflation rate. 
D)  unemployment rate.

Question 13

According to the Monetarists, "Policy activism" is difficult if not impossible to perform successfully because

Accepted Answer

A)  the timing of policy impacts on nominal GDP are known. 
B)  the magnitude, size of impacts are known. 
C)  the timing and magnitude of the impact of AD disturbances are known, forecasted with precision. 
D)  Monetarists believe all of the above are correct. 
A)  the timing of policy impacts on nominal GDP are known. 
B)  the magnitude, size of impacts are known. 
C)  the timing and magnitude of the impact of AD disturbances are known, forecasted with precision. 
D)  Monetarists believe all of the above are correct.

Question 14

A clear-cut "rules versus discretion" debate is no longer possible because those economists advocating rules for ________, such as ________, must leave the Fed with plenty of discretionary power.

Accepted Answer

A)  policy instruments, the money supply 
B)  policy instruments, the inflation rate 
C)  target variables, the money supply 
D)  target variables, the inflation rate 
A)  policy instruments, the money supply 
B)  policy instruments, the inflation rate 
C)  target variables, the money supply 
D)  target variables, the inflation rate

Question 15

The increase of the real money supply by 10% by the Federal Reserve when the unemployment rate rises by 1% is an example of

Accepted Answer

A)  the conduct of procyclical monetary policy. 
B)  the utilization of feedback policy rule. 
C)  the utilization of rigid policy rule. 
D)  the conduct of nondiscretionary fiscal policy. 
A)  the conduct of procyclical monetary policy. 
B)  the utilization of feedback policy rule. 
C)  the utilization of rigid policy rule. 
D)  the conduct of nondiscretionary fiscal policy.

Non-activists

In which of the following years did oil price movements contribute to holding down inflation?

According to the new classical macroeconomists, each of the following statements is true EXCEPT

The economy has been compared to a supertanker on the ocean to make the point that

Activists-believe that AD is unstable because

Among the prospective rules that set target variables directly, only the nominal GDP rule

Admission to the Euro required in 1997 that a country's government debt not exceed ________ percent of GDP.

Which of the following monetary policies could reduce the amplitude of oscillations of output around its natural level?

In the Activists' Paradise, to increase real GDP without affecting the interest rate, it is necessary to change

Dividing fiscal policy into two instruments has the effect of introducing another policy target:

Observers of the economy often complain that indicators of economic activity are often contradictory. This is an example of the ________ lag.

The advantage of a nominal anchor is that it prevents a limitless rise in the

According to the Monetarists, "Policy activism" is difficult if not impossible to perform successfully because

A clear-cut "rules versus discretion" debate is no longer possible because those economists advocating rules for , such as , must leave the Fed with plenty of discretionary power.

The increase of the real money supply by 10% by the Federal Reserve when the unemployment rate rises by 1% is an example of

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

Non-activists

In which of the following years did oil price movements contribute to holding down inflation?

According to the new classical macroeconomists, each of the following statements is true EXCEPT

The economy has been compared to a supertanker on the ocean to make the point that

Activists-believe that AD is unstable because

Among the prospective rules that set target variables directly, only the nominal GDP rule

Admission to the Euro required in 1997 that a country's government debt not exceed ________ percent of GDP.

Which of the following monetary policies could reduce the amplitude of oscillations of output around its natural level?

In the Activists' Paradise, to increase real GDP without affecting the interest rate, it is necessary to change

Dividing fiscal policy into two instruments has the effect of introducing another policy target:

Observers of the economy often complain that indicators of economic activity are often contradictory. This is an example of the ________ lag.

The advantage of a nominal anchor is that it prevents a limitless rise in the

According to the Monetarists, "Policy activism" is difficult if not impossible to perform successfully because

A clear-cut "rules versus discretion" debate is no longer possible because those economists advocating rules for ________, such as ________, must leave the Fed with plenty of discretionary power.

The increase of the real money supply by 10% by the Federal Reserve when the unemployment rate rises by 1% is an example of

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

A clear-cut "rules versus discretion" debate is no longer possible because those economists advocating rules for , such as , must leave the Fed with plenty of discretionary power.