Download Sample quiz 7

Quiz 7
(1) The time between a shock to the economy and the policy action responding to that
shock is called the:
a.
b.
c.
d.
Automatic stabilizer
Time inconsistency of policy
Inside lag
Outside lag
(2) Following one is especially true in the United States:
a.
b.
c.
d.
Fiscal policy has small inside lag
Monetary policy has small inside lag
Monetary policy has small outside lag
Fiscal policy has zero inside lag
(3) The fact that traditional method of policy evaluation do not take into account the
impact of policy on expectations is known as :
a.
b.
c.
d.
Stabilization policy
The political business cycle
The Lucas critique
Okun’s law
(4) The interest rate at which banks make loans to other banks is called the :
a.
b.
c.
d.
Prime rate
Federal Reserve discount rate
Treasury bill rate
Federal funds rate
(5) John Taylor’s rule for targeting the federal funds rate proposes increasing the
federal funds rate as:
a.
b.
c.
d.
Inflation decreases, real GDP exceeds the natural level of output
Inflation decreases, real GDP falls short of the natural level of output
Inflation increases, real GDP falls short of the natural level of output
Inflation increases, real GDP exceeds the natural level of output
(6) Monetary policy rules that target nominal variables would target any of the
following except the:
a. Price level
b. Money supply
c. Unemployment rate
d. Nominal GDP
(7) Suppose, in a given year federal government’s reported budget deficit is $28
billion, inflation is 8.6 percent, and the government debt at the beginning of the
year is $495 billion, then the deficit is overstated (approximately) by:
a.
b.
c.
d.
$ 398 billion
$ 4229 billion
$ 34 billion
$ 43 billion
(8) According to the traditional viewpoint, a tax cut without a cut in government
spending would result in:
a.
b.
c.
d.
Decrease in domestic interest rate and depreciation of domestic currency
Decrease in domestic interest rate and appreciation of domestic currency
Increase in domestic interest rate and depreciation of domestic currency
Increase in domestic interest rate and appreciation of domestic currency
(9) According to the theory of Ricardian equivalence, a tax cut that has no plans to
reduce government spending results in:
e.
f.
g.
h.
Increase in public saving and increase in private saving
Decrease in public saving and increase in private saving
Decrease in public saving and decrease in private saving
Increase in public saving and decrease in private saving
(10) When President George Bush lowered tax withholding in 1992 without
lowering the amount of tax owed, surveys showed that:
a.
b.
c.
d.
Almost everyone spent the higher take-home pay
Almost everyone saved the higher take-home pay
A majority of the respondents said they would spend the higher take-home pay,
but a significant minority said they would save it
A majority of the respondents said they would save the higher take-home
pay, but a significant minority said they would spend it