Question 1

The PAYGO rule was allowed to expire in which year?

Accepted Answer

A) 1990 
B) 1991 
C) 2002 
D) the PAYGO rule still exists 
A) 1990 
B) 1991 
C) 2002 
D) the PAYGO rule still exists D

Question 2

Explain whether uncertainty should cause policy makers to do more or do less to stabilize the economy.

Accepted Answer

As uncertainty increases,policy makers should do less.Alternatively,more active policies would actually lead to more uncertainty.This is based on,as Blanchard notes,multiplicative uncertainty.

Question 3

Suppose we compare the average growth rates of output for Republican and Democratic administrations.In which year,on average,is the difference in growth rates for Republican and Democratic administrations greatest?

Accepted Answer

A) first 
B) second 
C) third 
D) fourth 
E) the growth rates are nearly identical for both parties 
A) first 
B) second 
C) third 
D) fourth 
E) the growth rates are nearly identical for both parties B

Question 4

Which of the theory is better to think about policy?

Accepted Answer

A) game theory 
B) optimal control theory 
C) expectations theory 
D) none of the above 
A) game theory 
B) optimal control theory 
C) expectations theory 
D) none of the above

Question 5

Analysis of U.S.budget deficits in the United States between 1990 and 2000 indicates that which of the following is primarily responsible for the reduction in the budget deficit?

Accepted Answer

A) decrease in spending 
B) increase in tax revenues 
C) decrease in spending and increase in tax revenues 
D) lower interest rates 
E) increases in tax rates 
A) decrease in spending 
B) increase in tax revenues 
C) decrease in spending and increase in tax revenues 
D) lower interest rates 
E) increases in tax rates

Question 6

In the United States,presidential elections occur every four years.If a political business cycle exists in the United States,in which year of a presidential term,all else fixed,would we expect output growth to be lowest?

Accepted Answer

A) the first or second year 
B) the second or third year 
C) the third or fourth year 
D) the fourth year 
A) the first or second year 
B) the second or third year 
C) the third or fourth year 
D) the fourth year

Question 7

Explain what a PAYGO rule is.

Accepted Answer

A PAYGO rule requires that any newly pro

Question 8

Fine tuning represents which of the following?

Accepted Answer

A) policy makers' attempts to minimize the deviations of actual output from the natural level of output 
B) policy makers' attempts to achieve zero inflation 
C) policy makers' attempts to minimize fluctuations in interest rates 
D) policy makers' attempts to maintain a given rate of growth in the nominal money supply 
E) policy makers' attempts to minimize variations in the real exchange rate 
A) policy makers' attempts to minimize the deviations of actual output from the natural level of output 
B) policy makers' attempts to achieve zero inflation 
C) policy makers' attempts to minimize fluctuations in interest rates 
D) policy makers' attempts to maintain a given rate of growth in the nominal money supply 
E) policy makers' attempts to minimize variations in the real exchange rate

Question 9

Who is best known for arguing about the long and variable lags of monetary policy?

Accepted Answer

A) Friedman 
B) Keynes 
C) Phillips 
D) Greenspan 
E) Bernanke 
A) Friedman 
B) Keynes 
C) Phillips 
D) Greenspan 
E) Bernanke

Question 10

Explain spending caps set by the Budget Enforcement Act.

Accepted Answer

The Budget Enforcement Act imposed const

Question 11

Who is best known for arguing about the fine tuning of monetary policy?

Accepted Answer

A) Friedman 
B) Keynes 
C) Modigliani 
D) Greenspan 
E) Bernanke 
A) Friedman 
B) Keynes 
C) Modigliani 
D) Greenspan 
E) Bernanke

Question 12

Democratic administrations generally are relatively more concerned about which of the following?

Accepted Answer

A) reducing government expenditures 
B) reducing the rate of inflation 
C) reducing the unemployment rate 
D) balancing budget deficits 
E) balancing trade deficits 
A) reducing government expenditures 
B) reducing the rate of inflation 
C) reducing the unemployment rate 
D) balancing budget deficits 
E) balancing trade deficits

Question 13

The Masstricht treaty set the budget ratio to GDP to be ________ in order for countries to qualify to join the Euro area.

Accepted Answer

A) below 3% 
B) below 4% 
C) below 5% 
D) below 6% 
A) below 3% 
B) below 4% 
C) below 5% 
D) below 6%

Question 14

Suppose a government have a stated policy that it will not negotiate with hostage takers.Now someone is taken hostage,what would be the best policy for the government? Explain.

Accepted Answer

The best policy of the governm

Question 15

Research indicates that the more independent the central bank,

Accepted Answer

A) the smaller the budget deficit. 
B) the higher the nominal interest rate. 
C) the lower the rate of inflation. 
D) the larger the time inconsistency problem in making policy. 
E) the greater the likelihood of a "war of attrition" over policy. 
A) the smaller the budget deficit. 
B) the higher the nominal interest rate. 
C) the lower the rate of inflation. 
D) the larger the time inconsistency problem in making policy. 
E) the greater the likelihood of a "war of attrition" over policy.

Question 16

Which of the following best defines time inconsistency?

Accepted Answer

A) the increasing inaccuracy of econometric models as the time horizon becomes longer. 
B) the tendency for the rise in output to be greater in the early years of a president's term,and smaller in the later years. 
C) the effects of political electoral cycles on the business cycle. 
D) the tendency for policy makers to deviate from a pre-announced optimal policy once agents in the economy have adjusted their behavior and expectations based on the pre-announced policy 
E) the effect of economic uncertainty on short-run stabilization policy. 
A) the increasing inaccuracy of econometric models as the time horizon becomes longer. 
B) the tendency for the rise in output to be greater in the early years of a president's term,and smaller in the later years. 
C) the effects of political electoral cycles on the business cycle. 
D) the tendency for policy makers to deviate from a pre-announced optimal policy once agents in the economy have adjusted their behavior and expectations based on the pre-announced policy 
E) the effect of economic uncertainty on short-run stabilization policy.

Question 17

Assume a country has presidential elections every three years.If a political business cycle exists in this country,explain any differences in the average annual growth rates of output for each year of a typical administration.

Accepted Answer

Political business cycles represent the

Question 18

What are the main rules of the Budget Enforcement Act of 1990?

Accepted Answer

The two main rules are: 1)it i

Question 19

The idea that the economy operates like a complicated,predictable machine is an important aspect of

Accepted Answer

A) game theory. 
B) attrition theory. 
C) the theory of strategic interaction. 
D) time inconsistency theory. 
E) optimal control theory. 
A) game theory. 
B) attrition theory. 
C) the theory of strategic interaction. 
D) time inconsistency theory. 
E) optimal control theory.

Question 20

Which of the following is NOT an example of the issue of time inconsistency?

Accepted Answer

A) a central bank announced to maintain low inflation and at the same time increased money supply 
B) a government stated that they will not negotiate with hostage takers.When someone is taken hostage,it negotiates 
C) a mom says to her kids no cookie before meals and she never gives cookies before her kids eat their meals. 
D) a person on diet eats ice cream for dinner 
A) a central bank announced to maintain low inflation and at the same time increased money supply 
B) a government stated that they will not negotiate with hostage takers.When someone is taken hostage,it negotiates 
C) a mom says to her kids no cookie before meals and she never gives cookies before her kids eat their meals. 
D) a person on diet eats ice cream for dinner

Exam 22: Should Policy Makers Be Restrained

The PAYGO rule was allowed to expire in which year?

Explain whether uncertainty should cause policy makers to do more or do less to stabilize the economy.

Suppose we compare the average growth rates of output for Republican and Democratic administrations.In which year,on average,is the difference in growth rates for Republican and Democratic administrations greatest?

Which of the theory is better to think about policy?

Analysis of U.S.budget deficits in the United States between 1990 and 2000 indicates that which of the following is primarily responsible for the reduction in the budget deficit?

In the United States,presidential elections occur every four years.If a political business cycle exists in the United States,in which year of a presidential term,all else fixed,would we expect output growth to be lowest?

Explain what a PAYGO rule is.

Fine tuning represents which of the following?

Who is best known for arguing about the long and variable lags of monetary policy?

Explain spending caps set by the Budget Enforcement Act.

Who is best known for arguing about the fine tuning of monetary policy?

Democratic administrations generally are relatively more concerned about which of the following?

The Masstricht treaty set the budget ratio to GDP to be ________ in order for countries to qualify to join the Euro area.

Suppose a government have a stated policy that it will not negotiate with hostage takers.Now someone is taken hostage,what would be the best policy for the government? Explain.

Research indicates that the more independent the central bank,

Which of the following best defines time inconsistency?

Assume a country has presidential elections every three years.If a political business cycle exists in this country,explain any differences in the average annual growth rates of output for each year of a typical administration.

What are the main rules of the Budget Enforcement Act of 1990?

The idea that the economy operates like a complicated,predictable machine is an important aspect of

Which of the following is NOT an example of the issue of time inconsistency?

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

The Labor Market

Putting All Markets Togetherthe As-Ad Model

The Phillips Curve,the Natural Rate of Unemployment,and Inflation

The Crisis

The Facts of Growth

Saving,capital Accumulation,and Output

Technological Progress and Growth

Technological Progress: the Short,the Medium,and the Long Run

Expectations: the Basic Tools

Financial Markets and Expectations

Expectations,consumption,and Investment

Expectations,output,and Policy

Openness in Goods and Financial Markets

The Goods Market in an Open Economy

Output,the Interest Rate,and the Exchange Rate

Exchange Rate Regimes

Fiscal Policy: a Summing up

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

an Introduction to National Income and Product Accounts

an Introduction to Econometrics

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