Deck 18: Epilogue

Question 1

Each of the following is something that economists know about the current state of the economy except

A) good estimates of the level of potential output.
B) good estimates of the current real wage level.
C) good estimates of the amount of unemployment.
D) the short-run determinants of investment.

Answer 1

the short-run determinants of investment.

Question 2

Each of the following is something that economists know about the current state of the economy except

A) good estimates of the general state of the labor market.
B) good estimates of the current real wage level
C) a good understanding of the impact of government policy on the economy.
D) good estimates of the rate of inflation

Answer 2

a good understanding of the impact of government policy on the economy.

Question 3

Each of the following is something that economists know about long-run growth except

A) demography - Malthus, population explosion, and the demographic revolution.
B) the long-run relationship between kinds of investment and productivity growth.
C) the importance of education.
D) the importance of a high rate of investment.

Answer 3

the long-run relationship between kinds of investment and productivity growth.

Question 4

Each of the following is something that economists know about long-run growth except

A) a good understanding of the development and diffusion of technology.
B) that better technology is the single most important key to sustained progress in material standards of living.
C) the importance of strong legal and institutional protections for private property.
D) the importance of a high rate of investment.

Question 5

Each of the following is something that economists know about long-run growth except

A) that government policy needs to provide the market economy with the right incentives and signals if it is to function.
B) that better technology is the single most important key to sustained progress in material standards of living.
C) the importance of strong legal and institutional protections for private property.
D) that central planning and central commands are the right kinds of government policy.

Question 6

Each of the following is something that economists know about long-run growth except

A) that activities with negative externalities like pollution need to be penalized.
B) that activities with positive externalities like research and development need to be encouraged.
C) the unimportance of strong legal and institutional protections for private property.
D) that central planning and central commands are the wrong kinds of government policy.

Question 7

Each of the following is something that economists know about business cycles, unemployment, and inflation in the long run except

A) that the market economy does tend to return to a position of near-full employment in the long run.
B) that markets for goods and labor don't always reach something like a supply-and-demand equilibrium.
C) that shifts in government spending will crowd out (or crowd in) consumption and investment.
D) that shortfalls of national saving or booms in investment will bring inflows of capital and the trade . deficits needed to finance them.

Question 8

Each of the following is something that economists know about business cycles, unemployment, and inflation in the long run except

A) the market economy does not tend to return to a position of near-full employment in the long run.
B) that markets for goods and labor do - absent large blockages - reach something like a supply-and-demand equilibrium.
C) that the central bank's policy is in the long run the absolutely crucial determinant of the price level and
The inflation rate.
D) that shortfalls of national saving or booms in investment will bring inflows of capital and the trade deficits needed to finance them.

Question 9

Each of the following is something that economists know about business cycles, unemployment, and inflation in the short run except

A) that the basic Keynesian sticky-price model still provides a good guide to the basic determinants of the level of aggregate demand.
B) that the aggregate supply-Phillips curve diagram still provides a guide to the relationship between the level of real aggregate demand and the rate of price increase.
C) that the Phillips curve is very stable.
D) that aggregate demand is the principal determinant of the level of real GDP in the short run.

Question 10

Each of the following is something that economists know about business cycles, unemployment, and inflation in the short run except

A) that the basic Keynesian sticky-price model still provides a good guide to the basic determinants of the level of aggregate demand.
B) that the Phillips curve is extremely volatile.
C) that anything that affects aggregate demand affects employment and output.
D) that aggregate supply is the principal determinant of the level of real GDP in the short run.

Question 11

Each of the following is something that economists know about business cycles, unemployment, and inflation in the short run except

A) that aggregate demand interacts with aggregate supply - the Phillips curve - to generate the inflation rate.
B) that the expected rate of inflation hardly ever changes.
C) that the natural rate of unemployment can undergo substantial shifts in a much more rapid time scale . than the changing composition of the labor force would suggest possible.
D) that aggregate demand is the principal determinant of the level of real GDP in the short run.

Question 12

Each of the following is something that economists know about business cycles, unemployment, and inflation in the short run except

A) that aggregate demand interacts with aggregate supply - the Phillips curve - to generate the level of real GDP.
B) that the expected rate of inflation depends critically on expectations of the central bank's competence and commitment to price stability.
C) that the natural rate of unemployment can undergo substantial shifts in a much more rapid time scale than the changing composition of the labor force would suggest possible.
D) that anything that affects aggregate demand affects employment and output.

Question 13

Each of the following is something that economists know about the making of macroeconomic policy except

A) that shifts in economic policy have uncertain and delayed effects on spending.
B) that economic policy affects output and prices with long and variable lags.
C) that fiscal policy is the most useful discretionary stabilization policy tool.
D) that peacetime inflation at a level high enough that it becomes an important part of voters' . consciousness is politically unacceptable in modern industrial democracies.

Question 14

Each of the following is something that economists know about the making of macroeconomic policy except

A) that automatic stabilizers are important factors that help eliminate the need for discretionary stabilization policy.
B) that economic policy affects output and prices with known lags.
C) that monetary policy is the most useful discretionary stabilization policy tool.
D) that growth in the money supply is the ultimate determinate of inflation.

Question 15

Each of the following is something that economists know about the making of macroeconomic policy except

A) that shifts in economic policy have certain and immediate effects on spending.
B) that controlling inflation can be accomplished at low cost if and only if investors, managers, and . workers have confidence in the central bank's commitment to control inflation.
C) that automatic stabilizers are important factors that help eliminate the need for discretionary stabilization policy.
D) that a good macroeconomic policy that seeks to avoid unnecessary unemployment and inflation must walk a fine lines.

Question 16

Each of the following is something that economists don't know but about which we are striving to learn except

A) the long-run relationship between kinds of investment and productivity growth.
B) the short-run determinants of investment.
C) why international financial markets have been so vulnerable to financial crises over the past decade.
D) that a high rate of investment is necessary for achieving successful economic growth.

Question 17

Each of the following is something that economists don't know but about which we are striving to learn except

A) the short-run determinants of investment.
B) the long-run relationship between kinds of savings and productivity growth.
C) why international financial markets have been so vulnerable to financial crises over the past decade.
D) the relative roles played by "monetary" shocks and "real" shocks in generating short-run business cycles.

Question 18

Each of the following is something that economists don't know about the impact of government policy on the economy except

A) the aggressiveness with which central bankers should pursue stabilization policy
B) the extent to which we should worry about large government budget deficits.
C) the ultimate determinate of inflation.
D) the lag structure involved with the effect of economic policy on output and prices.

Question 19

Each of the following is something that economists don't know about the microfoundations of macroeconomics except

A) how aggregate consumption and savings decisions are made.
B) what determines the large shifts in the natural rate of unemployment.
C) what can be done to lower the natural rate of unemployment.
D) when it is beneficial for businesses to undertake projects that involve investment spending.

Question 20

Each of the following is something that economists don't know about the microfoundations of macroeconomics except

A) the underlying reasons why wages and prices are slow to respond to shifts in aggregate demand.
B) how much time the average job losing worker should spend looking for a job.
C) why households and businesses hold some of their wealth as money.
D) how aggregate consumption and savings decisions are made.