Question 1

Economists of the rational expectations school believe that expansionary monetary policy is fully effective only if:

Accepted Answer

A) the policy is anticipated by workers and firms. 
B) it causes the aggregate supply curve to shift to the left. 
C) the economy is operating at or above its potential output level. 
D) policy makers follow through on their previously announced plans. 
E) the policy is totally unexpected. 
A) the policy is anticipated by workers and firms. 
B) it causes the aggregate supply curve to shift to the left. 
C) the economy is operating at or above its potential output level. 
D) policy makers follow through on their previously announced plans. 
E) the policy is totally unexpected.

Question 2

One way of expressing the concept of the short-run Phillips curve is to say that:

Accepted Answer

A) the cost of reducing unemployment is higher inflation. 
B) nothing but good comes from reducing unemployment. 
C) the cost of reducing inflation is lower unemployment. 
D) aggregate supply and aggregate demand will always be equal at the potential output level. 
E) the best economic policy is one that attempts to make the rate of inflation equal to the rate of unemployment. 
A) the cost of reducing unemployment is higher inflation. 
B) nothing but good comes from reducing unemployment. 
C) the cost of reducing inflation is lower unemployment. 
D) aggregate supply and aggregate demand will always be equal at the potential output level. 
E) the best economic policy is one that attempts to make the rate of inflation equal to the rate of unemployment.

Question 3

Active macroeconomic policy would move to close an expansionary gap by decreasing aggregate demand.

Accepted Answer

A) True 
 B)False

Question 4

The reason why self-correction works to close a recessionary gap is because:

Accepted Answer

A) a labor shortage causes wages to increase. 
B) a labor surplus causes wages to increase. 
C) a labor shortage causes wages to fall. 
D) a labor surplus causes wages to fall. 
E) a labor surplus causes price to fall. 
A) a labor shortage causes wages to increase. 
B) a labor surplus causes wages to increase. 
C) a labor shortage causes wages to fall. 
D) a labor surplus causes wages to fall. 
E) a labor surplus causes price to fall.

Question 5

According to the rational expectations theory,people's predictions about the future course of governmental economic policy influence the position of the short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 6

After World War II the average U.S.recession has lasted:

Accepted Answer

A) a few months. 
B) about half a year. 
C) a little less than a year. 
D) about three weeks. 
E) about two years. 
A) a few months. 
B) about half a year. 
C) a little less than a year. 
D) about three weeks. 
E) about two years.

Question 7

If the actual inflation rate exceeds the expected inflation rate,then:

Accepted Answer

A) the economy is operating along the long-run Phillips curve. 
B) unemployment exceeds the natural rate. 
C) maintaining the existing unemployment rate will require increasing inflation in the long run. 
D) the actual rate will tend to fall toward the expected rate. 
E) unemployment will tend to decrease in the long run. 
A) the economy is operating along the long-run Phillips curve. 
B) unemployment exceeds the natural rate. 
C) maintaining the existing unemployment rate will require increasing inflation in the long run. 
D) the actual rate will tend to fall toward the expected rate. 
E) unemployment will tend to decrease in the long run.

Question 8

If resource owners anticipated a monetary growth rate of 6 percent,but the money supply actually grew at only 2 percent,then:

Accepted Answer

A) real wages would fall. 
B) output would decrease. 
C) output would increase. 
D) output would increase,but only if nominal wages were increased more rapidly than prices. 
E) the expected inflation rate was less than the actual rate. 
A) real wages would fall. 
B) output would decrease. 
C) output would increase. 
D) output would increase,but only if nominal wages were increased more rapidly than prices. 
E) the expected inflation rate was less than the actual rate.

Question 9

Suppose policy makers are concerned about a shortage of long-term capital investment.To remedy the problem,various plans to cut capital gains taxes have been suggested.The delay in picking a plan is called the _____.

Accepted Answer

A) implementation lag 
B) policy coordination problem 
C) decision-making lag 
D) recognition lag 
E) effectiveness lag 
A) implementation lag 
B) policy coordination problem 
C) decision-making lag 
D) recognition lag 
E) effectiveness lag

Question 10

The _____ lag is typically longer for fiscal policy than monetary policy.

Accepted Answer

A) supply 
B) cyclical 
C) effectiveness 
D) implementation 
E) recognition 
A) supply 
B) cyclical 
C) effectiveness 
D) implementation 
E) recognition

Question 11

Which of the following is true of the Fed?

Accepted Answer

A) The law lets the Fed decide how best to promote full employment and output in the U.S.economy. 
B) It relies heavily on Congressional appropriations. 
C) The president sits on the Board of Governors. 
D) Congress must approve any new monetary policy. 
E) The president must approve any new monetary policy. 
A) The law lets the Fed decide how best to promote full employment and output in the U.S.economy. 
B) It relies heavily on Congressional appropriations. 
C) The president sits on the Board of Governors. 
D) Congress must approve any new monetary policy. 
E) The president must approve any new monetary policy.

Question 12

The figure below reflects the inverse relationship between real GDP and the price level.If the economy is initially at point c and aggregate demand is stable,in the long run,the economy will:

Accepted Answer

A) move toward point a 
B) move toward point b 
C) stay at point c 
D) move toward point d 
E) move toward point f 
A) move toward point a 
B) move toward point b 
C) stay at point c 
D) move toward point d 
E) move toward point f

Question 13

When self-correction works to eliminate an expansionary gap,_____.

Accepted Answer

A) both money wages and real wages increase 
B) money wages increase while real wages decrease 
C) both money wages and real wages decrease 
D) money wages decrease while real wages increase 
E) money wages remain unchanged 
A) both money wages and real wages increase 
B) money wages increase while real wages decrease 
C) both money wages and real wages decrease 
D) money wages decrease while real wages increase 
E) money wages remain unchanged

Question 14

A policy to increase aggregate demand to cure a recessionary gap may succeed;however,inflation is a likely result.

Accepted Answer

A) True 
 B)False

Question 15

Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 16

The wage rate considered acceptable to workers engaged in collective bargaining will be determined in part by what monetary policy workers expect in the near future.

Accepted Answer

A) True 
 B)False

Question 17

If inflationary expectations increase,we can infer that:

Accepted Answer

A) unemployment is above the natural rate. 
B) the economy is not on the long-run Phillips curve. 
C) the short-run Phillips curve is shifting to the left. 
D) output is below potential GDP. 
E) the unemployment rate is at the natural rate. 
A) unemployment is above the natural rate. 
B) the economy is not on the long-run Phillips curve. 
C) the short-run Phillips curve is shifting to the left. 
D) output is below potential GDP. 
E) the unemployment rate is at the natural rate.

Question 18

Which of the following is an outcome of prolonged unemployment?

Accepted Answer

A) An improvement in labor skills 
B) An increase in the inflation rate 
C) A rise in potential GDP 
D) A fall in potential GDP 
E) An increase in the size of the labor force 
A) An improvement in labor skills 
B) An increase in the inflation rate 
C) A rise in potential GDP 
D) A fall in potential GDP 
E) An increase in the size of the labor force

Question 19

Passive macroeconomic policy would rely on natural market forces and automatic stabilizers to close an expansionary gap.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following macroeconomic variables is most dependent on whether the government pursues an active approach to policy or a passive approach to policy?

Accepted Answer

A) Aggregate supply 
B) Aggregate demand 
C) Money demand 
D) Money supply 
E) Interest rate 
A) Aggregate supply 
B) Aggregate demand 
C) Money demand 
D) Money supply 
E) Interest rate

Economists of the rational expectations school believe that expansionary monetary policy is fully effective only if:

One way of expressing the concept of the short-run Phillips curve is to say that:

Active macroeconomic policy would move to close an expansionary gap by decreasing aggregate demand.

The reason why self-correction works to close a recessionary gap is because:

According to the rational expectations theory,people's predictions about the future course of governmental economic policy influence the position of the short-run aggregate supply curve.

After World War II the average U.S.recession has lasted:

If the actual inflation rate exceeds the expected inflation rate,then:

If resource owners anticipated a monetary growth rate of 6 percent,but the money supply actually grew at only 2 percent,then:

Suppose policy makers are concerned about a shortage of long-term capital investment.To remedy the problem,various plans to cut capital gains taxes have been suggested.The delay in picking a plan is called the _____.

The _____ lag is typically longer for fiscal policy than monetary policy.

Which of the following is true of the Fed?

The figure below reflects the inverse relationship between real GDP and the price level.If the economy is initially at point c and aggregate demand is stable,in the long run,the economy will:

When self-correction works to eliminate an expansionary gap,_____.

A policy to increase aggregate demand to cure a recessionary gap may succeed;however,inflation is a likely result.

Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.

The wage rate considered acceptable to workers engaged in collective bargaining will be determined in part by what monetary policy workers expect in the near future.

If inflationary expectations increase,we can infer that:

Which of the following is an outcome of prolonged unemployment?

Passive macroeconomic policy would rely on natural market forces and automatic stabilizers to close an expansionary gap.

Which of the following macroeconomic variables is most dependent on whether the government pursues an active approach to policy or a passive approach to policy?

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

International Trade

International Finance

Economic Development

Filters

Exam 16: The Policy Debate: Active or Passive

Economists of the rational expectations school believe that expansionary monetary policy is fully effective only if:

One way of expressing the concept of the short-run Phillips curve is to say that:

Active macroeconomic policy would move to close an expansionary gap by decreasing aggregate demand.

The reason why self-correction works to close a recessionary gap is because:

According to the rational expectations theory,people's predictions about the future course of governmental economic policy influence the position of the short-run aggregate supply curve.

After World War II the average U.S.recession has lasted:

If the actual inflation rate exceeds the expected inflation rate,then:

If resource owners anticipated a monetary growth rate of 6 percent,but the money supply actually grew at only 2 percent,then:

Suppose policy makers are concerned about a shortage of long-term capital investment.To remedy the problem,various plans to cut capital gains taxes have been suggested.The delay in picking a plan is called the _____.

The _____ lag is typically longer for fiscal policy than monetary policy.

Which of the following is true of the Fed?

The figure below reflects the inverse relationship between real GDP and the price level.If the economy is initially at point c and aggregate demand is stable,in the long run,the economy will:

When self-correction works to eliminate an expansionary gap,_____.

A policy to increase aggregate demand to cure a recessionary gap may succeed;however,inflation is a likely result.

Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.

The wage rate considered acceptable to workers engaged in collective bargaining will be determined in part by what monetary policy workers expect in the near future.

If inflationary expectations increase,we can infer that:

Which of the following is an outcome of prolonged unemployment?

Passive macroeconomic policy would rely on natural market forces and automatic stabilizers to close an expansionary gap.

Which of the following macroeconomic variables is most dependent on whether the government pursues an active approach to policy or a passive approach to policy?

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

International Trade

International Finance

Economic Development

Filters