Exam 16: The Policy Debate: Active or Passive

The figure below reflects the inverse relationship between the inflation rate and the unemployment rate.If the economy is initially at point c and aggregate demand increases,the economy will in the long run:

Which of the following is true about rational expectations?

Current thinking on the Phillips curve suggests that it would be best for policy makers to:

According to the rational expectations school,when monetary policy makers do exactly what is expected of them,their efforts to stimulate the economy will have no effect on employment.

If the price level increases more rapidly than expected,_____.

In general,the Fed has not embraced a fixed-growth-rate monetary policy because:

Opponents of inflation targets say that:

Those who favor an active approach to policy and those who favor a passive approach disagree not only on how quickly the government can act but also on how stable the economy basically is.

The government of Montesia had announced that it would keep its money supply unchanged in 2010.However,in 2011,the money supply increased,thereby ruining public expectations.This led to:

Brandon,an economist,is a believer of the rational expectations school.According to him,which of the following is likely to affect the levels of output and employment in an economy?

Which of the following is not assumed before the implementation of a policy?

One of the reasons fiscal and monetary policy can stimulate output and employment in the short run is that nominal wages increase faster than the price level.

Along the long-run Phillips curve,the economy is at an unemployment level that corresponds to an output level lower than the potential output level.

Suppose a recession surprises economic forecasters who did not see it coming.This is an example of a _____.

The Phillips curve shows:

After the 1960s,the short-run Phillips curve based on U.S.economic data:

Which of the following lags reduces the effectiveness of active policy?

Suppose the Fed announced a policy of rapid growth in the money supply in 2004,but then put the brakes on money expansion without any announcement.If in 2005,Fed officials announce again that an expansion is planned,it is most likely that:

Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?

The rational expectations school advocates the passive rule of a fixed-growth rate monetary policy because: