Exam 21: The Role of Expectations in Macroeconomic Policy

If the public believes that the commitment to a nominal anchor is not credible,the effect of a positive aggregate demand shock is for ________.

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(Multiple Choice)

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Question 1

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According to the Lucas critique,what is the proper way to evaluate a proposal that reduces government borrowing by raising taxes and reducing government spending?

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(Essay)

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Question 2

Correct Answer:

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The Lucas critique emphasizes that changes in economic policy are likely to affect expectations of future policy and economic conditions,and such expectations have a strong impact on the behavioral response to the policy.Though aggregate income is reduced when taxes rise and government spending is reduced,people might expect that the reduction in government borrowing will lead to better economic conditions in the future.Proper policy evaluation must recognize that such optimism can counter the decrease in aggregate demand that might otherwise occur.

The expected benefits of central bank independence include avoidance of ________.

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(Multiple Choice)

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Question 3

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Which of the following is most consistent with the time-inconsistency problem?

(Multiple Choice)

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Question 4

Swiss experience in the 1980s evidences the ________.

(Multiple Choice)

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Question 5

The effects of the negative supply shocks of 1973,1979 and 2007 were different due to the ________.

(Multiple Choice)

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Question 6

For monetarists,the sole source of fluctuations in aggregate demand is ________.

(Multiple Choice)

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Question 7

Under what circumstances might it be "rational" to rely on adaptive expectations?

(Essay)

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Question 8

Monetary policy credibility has the benefit of ________.

(Multiple Choice)

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Question 9

The dual mandate of the Federal Reserve System is to maintain ________.

(Multiple Choice)

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Question 10

Suppose you need an estimate of future inflation (to decide,for example,whether a particular security is a good investment).How might you formulate a rational expectation?

(Essay)

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Question 11

The country with the highest degree of central bank independence in the period 1973-88 was ________.

(Multiple Choice)

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Question 12

The Swiss National Bank established the practice of targeting monetary aggregates in ________.

(Multiple Choice)

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Question 13

Which of the following is not,in general,an aspect of inflation targeting?

(Multiple Choice)

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Question 14

Central bank independence ________.

(Multiple Choice)

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Question 15

The strength of the movement in the short-run aggregate supply schedule,in response to an aggregate demand shock is determined by ________.

(Multiple Choice)

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Question 16

How are rule-based policies similar to adaptive expectations?

(Essay)

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Question 17

Paul Volcker was appointed to head the Federal Reserve System by ________.

(Multiple Choice)

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Question 18

Rational expectations are more accurate than adaptive expectations,________.

(Multiple Choice)

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Question 19

Assume that prices have risen in a given economy by an average of 5 percent over the last nine years.If consumers base their expectations about future price movements on that knowledge alone their forecasts rely on ________.

(Multiple Choice)

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Question 20

Showing 1 - 20 of 86

Exam 21: The Role of Expectations in Macroeconomic Policy

If the public believes that the commitment to a nominal anchor is not credible,the effect of a positive aggregate demand shock is for ________.

According to the Lucas critique,what is the proper way to evaluate a proposal that reduces government borrowing by raising taxes and reducing government spending?

The expected benefits of central bank independence include avoidance of ________.

Which of the following is most consistent with the time-inconsistency problem?

Swiss experience in the 1980s evidences the ________.

The effects of the negative supply shocks of 1973,1979 and 2007 were different due to the ________.

For monetarists,the sole source of fluctuations in aggregate demand is ________.

Under what circumstances might it be "rational" to rely on adaptive expectations?

Monetary policy credibility has the benefit of ________.

The dual mandate of the Federal Reserve System is to maintain ________.

Suppose you need an estimate of future inflation (to decide,for example,whether a particular security is a good investment).How might you formulate a rational expectation?

The country with the highest degree of central bank independence in the period 1973-88 was ________.

The Swiss National Bank established the practice of targeting monetary aggregates in ________.

Which of the following is not,in general,an aspect of inflation targeting?

Central bank independence ________.

The strength of the movement in the short-run aggregate supply schedule,in response to an aggregate demand shock is determined by ________.

How are rule-based policies similar to adaptive expectations?

Paul Volcker was appointed to head the Federal Reserve System by ________.

Rational expectations are more accurate than adaptive expectations,________.

Assume that prices have risen in a given economy by an average of 5 percent over the last nine years.If consumers base their expectations about future price movements on that knowledge alone their forecasts rely on ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

Modern Business Cycle Theory

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