Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

A) increasing expenditures 
B) reducing the rate of inflation 
C) reducing unemployment 
D) raising taxes 
E)  none of the above

Question 3

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

Question 4

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

The answer of Suppose a government implements rules that result...

Question 5

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

Question 6

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

Question 7

Analysis of U.S.growth rates shows that growth rate of output tends to be highest in which year of a presidential administration?

Accepted Answer

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

Question 8

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

The answer of Assume a country has presidential elections every...

Question 9

For this question,assume that the there exists uncertainty about the impact of monetary policy on the macroeconomy.Given this information,it would be most appropriate for the central bank to increase money growth

Accepted Answer

A) at the midpoint of a recession. 
B) by more than the increase that will yield the desired response. 
C) by less than the increase that will yield the desired response. 
D) by an amount equal to the increase that will yield the desired response. 
E)  only after it is certain that the economy has entered a recession.

Question 10

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

Accepted Answer

The answer of What are the new rules of the...

Question 11

In macroeconomics,game theory focuses on the strategic interactions between which of the following groups of agents?

Accepted Answer

A) individuals; firms 
B) individuals and firms; policy makers 
C) policy makers; economic forecasters 
D) individuals and firms; economic forecasters

Question 12

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.

Question 13

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 answer of Research by Alberto Alesina has documented differences...

Question 14

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%

Question 15

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

Question 16

Game theory analysis of macro policy suggests that as voters become more short-sighted

Accepted Answer

A) policy makers will be tempted to raise taxes. 
B) policy makers will be forced to balance the budget. 
C) policy makers will adopt policies today to achieve balanced budgets in the future. 
D) all of the above 
E)  none of the above

Question 17

The PAYGO rule was allowed to expire in which year?

Accepted Answer

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

Question 18

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

Question 19

Which of the following statements is true about the United States over the past fifty years?

Accepted Answer

A) There is no evidence of political business cycles in the United States. 
B) The debt-to-GDP ratio has been roughly constant. 
C) Under either party, output growth has been generally higher in the year preceding an election than in other years. 
D) none of the above

Question 20

Suppose an elected official wishes to introduce a new government program.Under a PAYGO rule,this new program would be adopted only if

Accepted Answer

A) the budget deficit is reduced by the same amount as the costs of the new program. 
B) the budget deficit is reduced by half the amount of the costs of the new program. 
C) the new program does not result in an increase in the current or future budget deficit. 
D) none of the above

Exam 21: Should Policy Makers Be Restrained