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Macro Section IV,
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Consumer confidence drops.
If the government was to
use DASK monetary policy it
would:
A.
B.
C.
D.
E.
Spend more
Tax more and reduce the deficit
Tax more and increase the deficit
Increase the money supply
Increase interest rate targets
Consumer confidence drops.
If the government was to
use DASK fiscal policy it
would:
A.
B.
C.
D.
E.
Spend more
Tax more and reduce the deficit
Tax more and increase the deficit
Increase the money supply
Increase interest rate targets
Investment demand is rising
and inflation is increasing. If
the government was to use
DASK monetary policy it
would:
A.
B.
C.
D.
E.
Spend more
Tax more and reduce the deficit
Tax more and increase the deficit
Increase the money supply
Increase interest rate targets
Investment demand is rising
and inflation is increasing. If
the government was to use
DASK fiscal policy it would:
A.
B.
C.
D.
E.
Spend more
Tax more and reduce the deficit
Tax more and increase the deficit
Increase the money supply
Increase interest rate targets
Which of the following is not
part of a DASK policy?
A.
B.
C.
D.
E.
Stimulate Aggregate Demand during a recession
Stabilize unemployment
Assumes inflation-unemployment trade-off
Follows policy rules
Allowing policy makers to determine the best
action
Why shouldn’t a government
use a DASK policy?
A.
B.
C.
D.
E.
Government can’t act fast enough
Economy doesn’t function as they think it does
Policy doesn’t effect the economy as planned
Discretion leads to manipulation
All the above
Which
movement
would be most
undesirable?
1
12%
8%
3
2
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
A.
B.
C.
D.
Upward
Downward
To the left
To the right
4%
6%
8%
People expect
inflation to be
8%, and it
really is 8%.
The economy
will be at
which point?
1
12%
8%
3
B. 3
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
A. 2
2
C.4
D. 5
6%
8%
E. 6
People expect
inflation to be
12%, and it
really is 8%.
The economy
will be at
which point?
1
12%
8%
3
B. 3
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
A. 2
2
C.4
D. 5
6%
8%
E. 6
People expect
inflation to be
12%, and it
really is 8%.
Unemployment
will be?
1
12%
8%
3
B. 6%
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
A. 4%
2
C.8%
6%
8%
D. More than 8%
Inflation is 4%
and people
expect it. The
Fed increases
inflation which
surprises people.
The economy
would head
towards?
A. 2
B. 3
1
12%
8%
3
2
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
C.4
D. 5
6%
8%
E. 6
Inflation is 4%
and people
expect it. The
Fed increases
inflation which
people expect.
The economy
would head
towards?
A. 2
B. 3
1
12%
8%
3
2
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
C.4
D. 5
6%
8%
E. 6
The economy
moves from
point 6 to
point 3. This
supports this
concept:
1
12%
8%
3
2
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
A. Money Neutrality
B. Inflation-Unemployment Trade-off
C. Stagflation
6%
8%
The economy
moves from
point 6 to
point 4. This
supports this
concept:
1
12%
8%
3
2
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
A. Money Neutrality
B. Inflation-Unemployment Trade-off
C. Stagflation
6%
8%
This change
represents a
tighter
monetary
policy which
surprises
people
1
12%
8%
3
2 to 1
2 to 3
2 to 4
2 to 5
5
4
ExI =12%
7
6
4%
ExI =8%
ExI =4%
4%
A.
B.
C.
D.
2
6%
8%
Original Keynesian Theory
supported which concept?
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
During the 1950’s, higher
inflation was found to be
correlated with lower
unemployment. This
supports this concept:
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
During the 1960’s, the
government engineered
higher inflation.
Unemployment fell. This
supports this concept:
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
A single downward
sloping Phillips Curve
suggests
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
The Long Run Vertical
Phillips Curve suggests
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
This might be the most
notable and unexpected
macroeconomic phenomenon
of the 1970’s.
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
In 1982, the government
reduced inflation rapidly.
The unemployment rate
rose. This supports which
concept:
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
The economic experiences of
the 1950’s, 60’s, 70’s and
80’s suggest this concept is
true:
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
Government policy activists
necessarily believe in this
A.
B.
C.
D.
Money Neutrality
Inflation-Unemployment Trade-off
Stagflation
Multiple Phillips Curves
The next set of questions
uses the following answers
A. Delays or Lags
B. Unintended Consequences
C. Mistakes
As the government runs a
deficit, crowding out
occurs
A. Delays or Lags
B. Unintended Consequences
C. Mistakes
A inflationary bias occurs
A. Delays or Lags
B. Unintended Consequences
C. Mistakes
The Political Cycle
A. Delays or Lags
B. Unintended Consequences
C. Mistakes
The government debates
spending cuts for several
years as the economy
recovers
A. Delays or Lags
B. Unintended Consequences
C. Mistakes
People expect the Fed’s new
loose money policy which
results in higher inflation and
no effect on unemployment
A. Delays or Lags
B. Unintended Consequences
C. Mistakes
The recession is supply
driven and not Keynesian
Demand driven
A. Delays or Lags
B. Unintended Consequences
C. Mistakes
The government provides
tax cuts to pharmaceutical
companies who provide
large campaign
contributions
A. Delays or Lags
B. Unintended Consequences
C. Mistakes