Question 1

The inflation associated with the oil embargoes of the 1970s resulted in:

Accepted Answer

A) reduced unemployment because aggregate demand increased. 
B) reduced unemployment because aggregate demand fell. 
C) increased unemployment because aggregate demand increased. 
D) increased unemployment because aggregate demand fell. 
E) increased unemployment because aggregate supply fell. 
A) reduced unemployment because aggregate demand increased. 
B) reduced unemployment because aggregate demand fell. 
C) increased unemployment because aggregate demand increased. 
D) increased unemployment because aggregate demand fell. 
E) increased unemployment because aggregate supply fell.

Question 2

Suppose we observe several years of falling inflation rates for an economy.Which of the following would best explain this phenomenon?

Accepted Answer

A) Unemployment is probably at the natural rate. 
B) The unemployment rate must be rising. 
C) The unemployment rate must be below the natural rate. 
D) The unemployment rate is probably above the natural rate. 
E) Aggregate output must be increasing. 
A) Unemployment is probably at the natural rate. 
B) The unemployment rate must be rising. 
C) The unemployment rate must be below the natural rate. 
D) The unemployment rate is probably above the natural rate. 
E) Aggregate output must be increasing.

Question 3

The long-run Phillips curve suggests that changing the rate of unemployment in the economy has no impact on the inflation rate.

Accepted Answer

A) True 
 B)False

Question 4

If the short-run equilibrium output of the United States exceeds the potential output,the Fed:

Accepted Answer

A) employs an active monetary policy to close a recessionary gap. 
B) employs an active monetary policy to close an expansionary gap. 
C) relies on a passive approach to close a recessionary gap. 
D) relies on a passive approach to close an expansionary gap. 
E) employs an expansionary fiscal policy. 
A) employs an active monetary policy to close a recessionary gap. 
B) employs an active monetary policy to close an expansionary gap. 
C) relies on a passive approach to close a recessionary gap. 
D) relies on a passive approach to close an expansionary gap. 
E) employs an expansionary fiscal policy.

Question 5

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.

Accepted Answer

A) they act so as to prevent the price level from increasing 
B) their actions lead to a further increase in output 
C) they are likely to negotiate for relatively lower wages. 
D) the monetary authority is forced to cancel its planned recessionary policy 
E) both output and employment increase even more than was originally planned 
A) they act so as to prevent the price level from increasing 
B) their actions lead to a further increase in output 
C) they are likely to negotiate for relatively lower wages. 
D) the monetary authority is forced to cancel its planned recessionary policy 
E) both output and employment increase even more than was originally planned

Question 6

According to the active policy approach,the elimination of a recessionary policy _____.

Accepted Answer

A) can only be achieved by decreasing wages 
B) requires a public policy of wage and price controls 
C) should be accomplished by stimulating aggregate demand 
D) will increase unemployment 
E) will cause a recession 
A) can only be achieved by decreasing wages 
B) requires a public policy of wage and price controls 
C) should be accomplished by stimulating aggregate demand 
D) will increase unemployment 
E) will cause a recession

Question 7

As people come to expect higher inflation,the long-run Phillips curve shifts leftward.

Accepted Answer

A) True 
 B)False

Question 8

The main policy conclusion of the rational expectations school is that:

Accepted Answer

A) fiscal policy lags are so long and variable that such policy is worthless,but monetary policy can be helpful. 
B) monetary policy lags are so long and variable that such policy is worthless,but fiscal policy can be helpful. 
C) both monetary and fiscal policy can be helpful if policy makers correctly anticipate the plans of firms and households. 
D) both monetary and fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers. 
E) neither monetary nor fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers. 
A) fiscal policy lags are so long and variable that such policy is worthless,but monetary policy can be helpful. 
B) monetary policy lags are so long and variable that such policy is worthless,but fiscal policy can be helpful. 
C) both monetary and fiscal policy can be helpful if policy makers correctly anticipate the plans of firms and households. 
D) both monetary and fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers. 
E) neither monetary nor fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers.

Question 9

Which of the following central banks does not have an explicit inflation target?

Accepted Answer

A) The Bank of England 
B) The Federal Reserve 
C) Swiss National Bank 
D) European Central Bank 
E) The Reserve Bank of India 
A) The Bank of England 
B) The Federal Reserve 
C) Swiss National Bank 
D) European Central Bank 
E) The Reserve Bank of India

Question 10

The unemployment rate can remain below the natural rate,but only _____.

Accepted Answer

A) in the long run 
B) with continuous deflation 
C) with a continuously increasing inflation rate 
D) with a series of adverse supply shocks 
E) if the money supply is constant 
A) in the long run 
B) with continuous deflation 
C) with a continuously increasing inflation rate 
D) with a series of adverse supply shocks 
E) if the money supply is constant

The inflation associated with the oil embargoes of the 1970s resulted in:

Suppose we observe several years of falling inflation rates for an economy.Which of the following would best explain this phenomenon?

The long-run Phillips curve suggests that changing the rate of unemployment in the economy has no impact on the inflation rate.

If the short-run equilibrium output of the United States exceeds the potential output,the Fed:

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.

According to the active policy approach,the elimination of a recessionary policy _____.

As people come to expect higher inflation,the long-run Phillips curve shifts leftward.

The main policy conclusion of the rational expectations school is that:

Which of the following central banks does not have an explicit inflation target?

The unemployment rate can remain below the natural rate,but only _____.

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

The inflation associated with the oil embargoes of the 1970s resulted in:

Suppose we observe several years of falling inflation rates for an economy.Which of the following would best explain this phenomenon?

The long-run Phillips curve suggests that changing the rate of unemployment in the economy has no impact on the inflation rate.

If the short-run equilibrium output of the United States exceeds the potential output,the Fed:

Some economists believe that when workers and firms expect a recessionary monetary policy,_____.

According to the active policy approach,the elimination of a recessionary policy _____.

As people come to expect higher inflation,the long-run Phillips curve shifts leftward.

The main policy conclusion of the rational expectations school is that:

Which of the following central banks does not have an explicit inflation target?

The unemployment rate can remain below the natural rate,but only _____.

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