Chat with AIExam 32: The Debate Over Monetary and Fiscal Policy
After September 11, 2001, a small group of economists argued that the economy's self-correcting mechanism would work to counteract the recessionary effects of the attack.
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VerifiedTrue
How do lags affect stabilization policy?
Your answer should include three specific types of lags.
(73) VerifiedLags make stabilization policy difficult, if not counterproductive.The first type of lag may be called a recognition lag or an information lag.This refers to the length of time it takes for policy makers to recognize that an economic problem has occurred.This lag is unavoidable in that data are almost always collected after conditions change.The second type of lag may be called the policy lag.This is the length of time it takes for policy makers to take appropriate action.With respect to this lag, monetary policy is much superior in that the FOMC has only twelve members and meets at least eight times per year.Congress, on the other hand, may take years to actually pass a tax law or a spending change.The third lag may be called the expenditure lag and refers to the length of time it takes for a particular policy to affect aggregate demand and the macroeconomy.In this case, fiscal policy has the advantage because changes in government spending directly affect the expenditure schedule and the level of income and employment.Monetary policy works more indirectly.It first affects interest rates and then investment spending and then aggregate demand.Because both fiscal and monetary policy have advantages and disadvantages, the problems of lags does not point to a clear superiority for either fiscal or monetary policy.
Which of the following is an example of unconventional monetary policy?
(82) VerifiedC
If the Fed's monetary policy causes a substantial decrease in interest rates, what is the most likely impact on velocity?
(68) The subprime mortgage bubble featured ____ leverage and the technology stock bubble featured ____ leverage.
(69) When will stabilization policy be most effective in combating inflation?
(94) According to the quantity theory of money currently used by monetarists, assuming velocity is constant (at a value of 5), a 10 percent increase in the money supply will raise
(81) If velocity remains relatively constant, changes in the money supply can have a predictable effect on nominal GDP.
(76) If the velocity of circulation is 10 and the money supply is $250, the value of transactions will be $25.
(79) During the financial crisis of 2007-2009 the interest rate spread on mortgage-backed securities over Treasury bills
(69) How do critics of discretionary stabilization policy view frequent changes in spending and tax policy?
(76) The "Taylor rule" for monetary policy provides the Fed with a
(81) In a typical year, how accurate are forecasts of inflation and real GDP?
(81) When salaries are paid more frequently, the velocity of money speeds up because individuals hold more cash.
(82) When comparing the Keynesian and monetarist approaches, the only substantive difference is that
(65) On a steeply sloped aggregate supply curve, monetary policy will affect primarily output.
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