SOLVED

1) The time it takes for policymakers to obtain and to understand the data and to change the policy instrument based on that information is known as ________. A) the data, recognition, and effectiveness lags, respectively B) the recognition, data, and effectiveness lags, respectively C) the data, recognition, and implementation lags, respectively D) the recognition, implementation, and effectiveness lags, respectively E) none of the above 2) What do the legislative and implementation lags have in common? A) They are both more important for monetary than fiscal policy B) They are both more important for fiscal than monetary policy C) They are both harder to measure but less variable than the effectiveness lag D) They both take place before the data and recognition lags E) none of the above 3) Nonactivists believe that ________. A) there is a very rapid self-correcting mechanism since prices and wages are very flexible B) lags to policy implementation are so long that even the “correct” policies may lead to undesirable consequences C) policy interventions should take place less frequently than what Keynesians advocate D) all of the above E) none of the above 4) Activists believe that ________. A) frictions to the self-correcting mechanism of markets prevent prices and wages from being very flexible B) it takes a very long time to reach the long run C) Keynes was right with his statement “in the long-run, we are all dead” D) all of the above E) none of the above 5) Which statement is a good argument in support of policy activism? A) Policy lags are generally longer than the time it takes the self-correcting mechanism to work. B) Activist policies help to ensure stability of the real interest rate. C) Well-considered policies can assist the economy’s self-correcting mechanism, thus reducing the variability of inflation and unemployment. D) all of the above E) none of the above 6) An emphasis on inflation stability is compatible with a nonactivist stance only when shocks to the macroeconomy are ________. A) permanent supply shocks B) temporary supply shocks C) aggregate demand shocks D) all of the above E) none of the above 7) The American Recovery and Reinvestment Act of 2009 ________. A) was a result of the Obama administration adopting an activist approach to policymaking B) is still being debated after the fact in terms of its effectiveness C) was supported by some economists, and opposed by as many economists D) all of the above E) none of the above 8) The American Recovery and Reinvestment Act of 2009 ________. A) placed greater emphasis on monetary policy than fiscal policy B) finally put an end to the inflationary spiral that had begun in 2005 C) was intended to reverse the sharp increase in the equilibrium real interest rate D) all of the above E) none of the above 9) Suppose that wages and prices are quite flexible, so that the short-run aggregate supply curve is steep. In that case, ________. A) policies to stabilize inflation are probably needed more than policies to stabilize economic activity B) supply shocks will destabilize inflation, but have minimal impact on output C) demand shocks will destabilize output, but have minimal impact on inflation D) all of the above E) none of the above 10) Suppose that data for a particular economy over time suggest that its aggregate demand curve is both steep and shifts frequently. We might reasonably infer that ________. A) the central bank has an activist emphasis on the stability of economic activity B) wages and prices are remarkably flexible C) policy lags are quite long D) all of the above E) none of the above