Question 1

In the simple monetary policy rule, a large   
means that the central bank is aggressively fighting inflation.

Accepted Answer

A) True 
 B)False

Question 2

The aggregate demand (AD) curve is given by:

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E)    . 
A)    . 
B)    . 
C)    . 
D)    . 
E)    .

Question 3

Refer to the following figure when answering the following questions.
Figure 13.3: Aggregate Supply Curve  
-Consider Figure 13.3. If there is a positive inflation shock, ceteris paribus, the economy would move from point ________ to point ________.

Accepted Answer

A)  c; d 
B)  c; b 
C)  c; e 
D)  b; e 
E)  Not enough information is given. 
A)  c; d 
B)  c; b 
C)  c; e 
D)  b; e 
E)  Not enough information is given.

Question 4

Refer to the following figure when answering the following questions.
Figure 13.3: Aggregate Supply Curve  
-Consider Figure 13.3. If rebels in Nigeria, a major oil-producing country, temporarily hijack privately owned and operated oil wells, this would be characterized in the aggregate supply curve as a movement from point ________ to point ________.

Accepted Answer

A)  c; b 
B)  c; e 
C)  c; d 
D)  b; e 
E)  Not enough information is given. 
A)  c; b 
B)  c; e 
C)  c; d 
D)  b; e 
E)  Not enough information is given.

Question 5

The simple monetary rule states that if the current rate of inflation is below the inflation target, interest rates should fall.

Accepted Answer

A) True 
 B)False

Question 6

If the current rate of inflation is 4 percent, using the values suggested by Professor Taylor,   the Taylor rule predicts a federal funds rate of ________ percent.

Accepted Answer

A)  1 
B)  4.5 
C)  3 
D)  4 
E)  0.5 
A)  1 
B)  4.5 
C)  3 
D)  4 
E)  0.5

Question 7

The fact that any model that utilizes adaptive expectations necessarily will be misspecified is called:

Accepted Answer

A)  Okun's law. 
B)  time inconsistency. 
C)  the Lucas critique. 
D)  the Slutsky paradox. 
E)  monetarism. 
A)  Okun's law. 
B)  time inconsistency. 
C)  the Lucas critique. 
D)  the Slutsky paradox. 
E)  monetarism.

Question 8

The advantage of an explicit inflation target is that it:

Accepted Answer

A)  helps anchor inflation expectations. 
B)  allows banks to set interest rates. 
C)  stabilizes employment. 
D)  raises the marginal product of capital. 
E)  completely eradicates discretionary monetary policy. 
A)  helps anchor inflation expectations. 
B)  allows banks to set interest rates. 
C)  stabilizes employment. 
D)  raises the marginal product of capital. 
E)  completely eradicates discretionary monetary policy.

Question 9

Refer to the following figure when answering the following questions.
Figure 13.2: AD Curve  
-Consider Figure 13.2. Each of the aggregate demand curves pictured represents a different economy. In which economy is the central bank most concerned with inflation?

Accepted Answer

A)  Economy 4 
B)  Economy 1 
C)  Economy 3 
D)  Economy 2 
E)  Not enough information is given. 
A)  Economy 4 
B)  Economy 1 
C)  Economy 3 
D)  Economy 2 
E)  Not enough information is given.

Question 10

The figure below shows inflation and the federal funds rate for the years 1970-1991. What policy rule does the Fed appear to be following during this period? Suppose the Fed adopts a different policy rule, to manage inflation expectations. Derive your own monetary policy rule that takes inflation expectations into consideration.Figure 13.6: Inflation and the Federal Funds Rate: 1970-1991

Accepted Answer

The Fed appears to be following the simp

Question 11

Economic forecasters use the term structure of interest rates, the federal funds rate, and unemployment claims as economic indicators.

Accepted Answer

A) True 
 B)False

Question 12

Canada has an explicit inflation target.

Accepted Answer

A) True 
 B)False

Question 13

The simple monetary policy rule discussed at length in the text is:

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E)    . 
A)    . 
B)    . 
C)    . 
D)    . 
E)    .

Question 14

If policymakers suffer from time inconsistency, they would be better off adopting and sticking to policy rules.

Accepted Answer

A) True 
 B)False

Question 15

In the presence of rational expectations, the central banks' willingness to battle inflation:

Accepted Answer

A)  causes future inflation. 
B)  becomes a determinant of past inflation. 
C)  undermines the ability to fight inflation. 
D)  becomes a determinant of expected inflation. 
E)  weakens the central government. 
A)  causes future inflation. 
B)  becomes a determinant of past inflation. 
C)  undermines the ability to fight inflation. 
D)  becomes a determinant of expected inflation. 
E)  weakens the central government.

Question 16

Central banks always use monetary rules to dictate monetary policy.

Accepted Answer

A) True 
 B)False

Question 17

The simple monetary policy rule discussed in the chapter "dictates" the:

Accepted Answer

A)  optimal rate of inflation. 
B)  choice of federal funds rate. 
C)  marginal product of capital. 
D)  natural rate of unemployment. 
E)  None of these answers is correct. 
A)  optimal rate of inflation. 
B)  choice of federal funds rate. 
C)  marginal product of capital. 
D)  natural rate of unemployment. 
E)  None of these answers is correct.

Question 18

If the current rate of inflation is 1 percent, using the values suggested by Professor Taylor,   , the Taylor rule predicts a federal funds rate of ________ percent.

Accepted Answer

A)  0 
B)  1.5 
C)  1 
D)  0.5 
E)  3.5 
A)  0 
B)  1.5 
C)  1 
D)  0.5 
E)  3.5

Question 19

When the central bank pursues expansionary monetary policy and all other economic agents build this into their decision making, ________ rise(s) with no economic benefit; this is called the ________ problem.

Accepted Answer

A)  output; policy lag 
B)  unemployment; time inconsistency 
C)  expectations; adaptive expectations 
D)  inflation; time inconsistency 
E)  inflation; discretionary 
A)  output; policy lag 
B)  unemployment; time inconsistency 
C)  expectations; adaptive expectations 
D)  inflation; time inconsistency 
E)  inflation; discretionary

Question 20

Refer to the following figure (an aggregate supply/aggregate demand model) when answering the following questions.
Figure 13.4: AS/AD Model  
-Consider Figure 13.4. Unrest in the Middle Eastern country of Syria would cause the economy to initially move from point ________ to point ________; eventually the economy would return to the steady state at point ________.

Accepted Answer

A)  c; a; b 
B)  c; d; a 
C)  a; d; a 
D)  b; a; c 
E)  Not enough information is given. 
A)  c; a; b 
B)  c; d; a 
C)  a; d; a 
D)  b; a; c 
E)  Not enough information is given.

In the simple monetary policy rule, a large means that the central bank is aggressively fighting inflation.

The aggregate demand (AD) curve is given by:

Refer to the following figure when answering the following questions. Figure 13.3: Aggregate Supply Curve -Consider Figure 13.3. If there is a positive inflation shock, ceteris paribus, the economy would move from point to point .

The simple monetary rule states that if the current rate of inflation is below the inflation target, interest rates should fall.

If the current rate of inflation is 4 percent, using the values suggested by Professor Taylor, the Taylor rule predicts a federal funds rate of ________ percent.

The fact that any model that utilizes adaptive expectations necessarily will be misspecified is called:

The advantage of an explicit inflation target is that it:

Refer to the following figure when answering the following questions. Figure 13.2: AD Curve -Consider Figure 13.2. Each of the aggregate demand curves pictured represents a different economy. In which economy is the central bank most concerned with inflation?

Economic forecasters use the term structure of interest rates, the federal funds rate, and unemployment claims as economic indicators.

Canada has an explicit inflation target.

The simple monetary policy rule discussed at length in the text is:

If policymakers suffer from time inconsistency, they would be better off adopting and sticking to policy rules.

In the presence of rational expectations, the central banks' willingness to battle inflation:

Central banks always use monetary rules to dictate monetary policy.

The simple monetary policy rule discussed in the chapter "dictates" the:

If the current rate of inflation is 1 percent, using the values suggested by Professor Taylor, , the Taylor rule predicts a federal funds rate of ________ percent.

When the central bank pursues expansionary monetary policy and all other economic agents build this into their decision making, rise(s) with no economic benefit; this is called the problem.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 13: Stabilization Policy and the Asad Framework

In the simple monetary policy rule, a large means that the central bank is aggressively fighting inflation.

The aggregate demand (AD) curve is given by:

Refer to the following figure when answering the following questions. Figure 13.3: Aggregate Supply Curve -Consider Figure 13.3. If there is a positive inflation shock, ceteris paribus, the economy would move from point ________ to point ________.

The simple monetary rule states that if the current rate of inflation is below the inflation target, interest rates should fall.

If the current rate of inflation is 4 percent, using the values suggested by Professor Taylor, the Taylor rule predicts a federal funds rate of ________ percent.

The fact that any model that utilizes adaptive expectations necessarily will be misspecified is called:

The advantage of an explicit inflation target is that it:

Refer to the following figure when answering the following questions. Figure 13.2: AD Curve -Consider Figure 13.2. Each of the aggregate demand curves pictured represents a different economy. In which economy is the central bank most concerned with inflation?

Economic forecasters use the term structure of interest rates, the federal funds rate, and unemployment claims as economic indicators.

Canada has an explicit inflation target.

The simple monetary policy rule discussed at length in the text is:

If policymakers suffer from time inconsistency, they would be better off adopting and sticking to policy rules.

In the presence of rational expectations, the central banks' willingness to battle inflation:

Central banks always use monetary rules to dictate monetary policy.

The simple monetary policy rule discussed in the chapter "dictates" the:

If the current rate of inflation is 1 percent, using the values suggested by Professor Taylor, , the Taylor rule predicts a federal funds rate of ________ percent.

When the central bank pursues expansionary monetary policy and all other economic agents build this into their decision making, ________ rise(s) with no economic benefit; this is called the ________ problem.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Refer to the following figure when answering the following questions. Figure 13.3: Aggregate Supply Curve -Consider Figure 13.3. If there is a positive inflation shock, ceteris paribus, the economy would move from point to point .

When the central bank pursues expansionary monetary policy and all other economic agents build this into their decision making, rise(s) with no economic benefit; this is called the problem.