Question 1

Given the uncertainty about the effects of macro policy,economists generally propose that

Accepted Answer

A) macro policies should be more active,the lower the level of unemployment or inflation. 
B) changes in money growth should only be used for fine tuning the economy,not for correcting large imbalances (such as high inflation). 
C) money growth should be set at zero by constitutional amendment. 
D) elected officials should have more input in the determination of monetary policy. 
E) none of the above 
A) macro policies should be more active,the lower the level of unemployment or inflation. 
B) changes in money growth should only be used for fine tuning the economy,not for correcting large imbalances (such as high inflation). 
C) money growth should be set at zero by constitutional amendment. 
D) elected officials should have more input in the determination of monetary policy. 
E) none of the above

Question 2

The existence of the time inconsistency problem in macro policy suggests which of the following?

Accepted Answer

A) use fiscal and monetary policy to fine tune the economy. 
B) reduce the independence of the central bank. 
C) appoint someone who is more conservative (economically)than the rest of the government to head the central bank. 
D) intervene frequently in the foreign exchange market. 
E) eliminate rational expectations from econometric models used for forecasting. 
A) use fiscal and monetary policy to fine tune the economy. 
B) reduce the independence of the central bank. 
C) appoint someone who is more conservative (economically)than the rest of the government to head the central bank. 
D) intervene frequently in the foreign exchange market. 
E) eliminate rational expectations from econometric models used for forecasting.

Question 3

To deal with the time inconsistency problem associated with monetary policy,some have suggested that

Accepted Answer

A) the head of the central bank be chosen by election. 
B) the central bank implement expansionary monetary policy prior to election years. 
C) elected officials should have a direct influence on the implementation of monetary policy. 
D) all of the above 
E) none of the above 
A) the head of the central bank be chosen by election. 
B) the central bank implement expansionary monetary policy prior to election years. 
C) elected officials should have a direct influence on the implementation of monetary policy. 
D) all of the above 
E) none of the above

Question 4

A "conservative" central banker cares

Accepted Answer

A) less about inflation and more about unemployment than the government. 
B) more about economic growth and less about inflation. 
C) more about inflation and less about unemployment than the government. 
D) less about economic growth and more about inflation. 
A) less about inflation and more about unemployment than the government. 
B) more about economic growth and less about inflation. 
C) more about inflation and less about unemployment than the government. 
D) less about economic growth and more about inflation.

Question 5

One surprising insight from viewing policy as a "game" is that

Accepted Answer

A) central bankers should project an image of being conservative on economic policy matters,regardless of their personal views. 
B) it is more difficult to control inflation when the central bank is highly independent. 
C) uncertainty over the impact of policy makes little difference in designing an optimal policy. 
D) money growth has little or no impact on inflation in the long run. 
E) decreasing money growth may substantially increase the rate of inflation in the long run. 
A) central bankers should project an image of being conservative on economic policy matters,regardless of their personal views. 
B) it is more difficult to control inflation when the central bank is highly independent. 
C) uncertainty over the impact of policy makes little difference in designing an optimal policy. 
D) money growth has little or no impact on inflation in the long run. 
E) decreasing money growth may substantially increase the rate of inflation in the long run.

Question 6

In ________,would-be members of the Euro area signed the Stability and Growth Pact (SPG).

Accepted Answer

A) 1997 
B) 1998 
C) 1999 
D) 2000 
A) 1997 
B) 1998 
C) 1999 
D) 2000

Question 7

Suppose a government implements rules that result in a more independent central bank.What effect do you think this more independent central bank will eventually have on money growth and inflation in that country? Explain.

Accepted Answer

Research suggests as central bank indepe

Question 8

Research for a number of OECD countries suggests that inflation will be lower

Accepted Answer

A) the more independent the central bank. 
B) the less independent the central bank. 
C) if the heads of central banks are chosen by election. 
D) when the terms of the heads of central banks coincide with the terms of elected officials. 
A) the more independent the central bank. 
B) the less independent the central bank. 
C) if the heads of central banks are chosen by election. 
D) when the terms of the heads of central banks coincide with the terms of elected officials.

Question 9

Which of the following policies toward kidnappings would you recommend to authorities?

Accepted Answer

A) State policy of NO negotiations.If a kidnapping occurs,authorities should negotiate. 
B) State policy of negotiations.If a kidnapping occurs,authorities should NOT negotiate 
C) State policy of negotiations.If a kidnapping occurs,authorities should negotiate. 
D) none of the above 
A) State policy of NO negotiations.If a kidnapping occurs,authorities should negotiate. 
B) State policy of negotiations.If a kidnapping occurs,authorities should NOT negotiate 
C) State policy of negotiations.If a kidnapping occurs,authorities should negotiate. 
D) none of the above

Question 10

Those who are concerned about balanced budget amendments typically argue that balanced budget amendments

Accepted Answer

A) cause interest rates to be higher than they otherwise would be. 
B) would make fluctuations in output around the natural level of output greater. 
C) would increase spending in a recession. 
D) would reduce national saving. 
A) cause interest rates to be higher than they otherwise would be. 
B) would make fluctuations in output around the natural level of output greater. 
C) would increase spending in a recession. 
D) would reduce national saving.

Question 11

Arguments for placing restraints on policy makers fall into which of the following?

Accepted Answer

A) policy makers understand completely how the economy operates 
B) policy makers have good intentions,but end up doing more harm than good 
C) policy makers do what is best for them,not necessarily what is best for the country 
D) all of the above 
E) both B and C 
A) policy makers understand completely how the economy operates 
B) policy makers have good intentions,but end up doing more harm than good 
C) policy makers do what is best for them,not necessarily what is best for the country 
D) all of the above 
E) both B and C

Question 12

In which of the following political systems would a political business cycle be more likely to occur?

Accepted Answer

A) a democracy with elections that occur on a regular basis 
B) a parliamentary 
C) communist-type economies 
D) socialist-type economies 
E) a democracy with elections that occur on an irregular basis 
A) a democracy with elections that occur on a regular basis 
B) a parliamentary 
C) communist-type economies 
D) socialist-type economies 
E) a democracy with elections that occur on an irregular basis

Question 13

During democratic presidential administration since 1948,economic growth was highest in ________ year of the administration?

Accepted Answer

A) first 
B) second 
C) third 
D) fourth 
A) first 
B) second 
C) third 
D) fourth

Question 14

Which of the following is the most powerful argument for putting restraints on policy makers (as opposed to self-restraint by policy makers themselves)?

Accepted Answer

A) time inconsistency 
B) uncertainty about Okun's coefficient 
C) uncertainty about the natural rate of unemployment 
D) uncertainty about the timing of policy impacts 
E) disagreements about the proper structure of an econometric model 
A) time inconsistency 
B) uncertainty about Okun's coefficient 
C) uncertainty about the natural rate of unemployment 
D) uncertainty about the timing of policy impacts 
E) disagreements about the proper structure of an econometric model

Question 15

To solve the "time inconsistency" problem in macro policy,a nation may well have to

Accepted Answer

A) restrict itself in the present from taking certain policy moves in the future. 
B) lift all restrictions on future policy moves. 
C) present policy moves to the public,for example,in a referendum. 
D) use the courts to settle policy disputes. 
E) make the central bank more responsive to the popular will. 
A) restrict itself in the present from taking certain policy moves in the future. 
B) lift all restrictions on future policy moves. 
C) present policy moves to the public,for example,in a referendum. 
D) use the courts to settle policy disputes. 
E) make the central bank more responsive to the popular will.

Question 16

Analysis of macro policy and theory has resulted in of the following views?

Accepted Answer

A) there should be no constraints imposed on fiscal or monetary policy. 
B) a constitutional amendment is the most appropriate method to constrain fiscal policy. 
C) the heads of the central bank should be chosen by popular elections. 
D) all of the above 
E) none of the above 
A) there should be no constraints imposed on fiscal or monetary policy. 
B) a constitutional amendment is the most appropriate method to constrain fiscal policy. 
C) the heads of the central bank should be chosen by popular elections. 
D) all of the above 
E) none of the above

Question 17

Balanced budget amendments are believed to be destabilizing.Explain why this is so.

Accepted Answer

When an economy enters a recession,tax r

Question 18

What are the new rules of the Euro Plus Pact adopted in 2011?

Accepted Answer

It requires member countries t

Question 19

Research by Alberto Alesina has documented differences and similarities in the average annual rates of growth in output during each year of Democratic and Republican administrations.Briefly explain what the pattern of these differences and similarities is.

Accepted Answer

The growth rates are similar in the firs

Question 20

Discuss the time inconsistency problem and explain how it relates to monetary policy.

Accepted Answer

The time inconsistency of optimal policy

Exam 22: Should Policy Makers Be Restrained

Given the uncertainty about the effects of macro policy,economists generally propose that

The existence of the time inconsistency problem in macro policy suggests which of the following?

To deal with the time inconsistency problem associated with monetary policy,some have suggested that

A "conservative" central banker cares

One surprising insight from viewing policy as a "game" is that

In ________,would-be members of the Euro area signed the Stability and Growth Pact (SPG).

Suppose a government implements rules that result in a more independent central bank.What effect do you think this more independent central bank will eventually have on money growth and inflation in that country? Explain.

Research for a number of OECD countries suggests that inflation will be lower

Which of the following policies toward kidnappings would you recommend to authorities?

Those who are concerned about balanced budget amendments typically argue that balanced budget amendments

Arguments for placing restraints on policy makers fall into which of the following?

In which of the following political systems would a political business cycle be more likely to occur?

During democratic presidential administration since 1948,economic growth was highest in ________ year of the administration?

Which of the following is the most powerful argument for putting restraints on policy makers (as opposed to self-restraint by policy makers themselves)?

To solve the "time inconsistency" problem in macro policy,a nation may well have to

Analysis of macro policy and theory has resulted in of the following views?

Balanced budget amendments are believed to be destabilizing.Explain why this is so.

What are the new rules of the Euro Plus Pact adopted in 2011?

Research by Alberto Alesina has documented differences and similarities in the average annual rates of growth in output during each year of Democratic and Republican administrations.Briefly explain what the pattern of these differences and similarities is.

Discuss the time inconsistency problem and explain how it relates to monetary policy.

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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