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110B_blanchard_4e_Ch 24 Homework Questions

110B_blanchard_4e_Ch 24 Homework Questions - be highest A...

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110B Ch 24 Homework Questions 1. According to ______, the economy operates like a complicated, predictable machine. A. optimal control theory. B. game theory. C. physics. 2. Time inconsistency is defined as A. the increasing inaccuracy of econometric models as the time horizon becomes longer. B. the effect of economic uncertainty on short-run stabilization policy. C. the tendency for the rise in output to be greater in the early years of a president's term, and smaller in the later years. D. the tendency for policy makers to deviate from a pre-announced optimal policy once agents in the economy have adjusted their behavior and expectations based on the pre-announced policy. 3. Time inconsistency occurs because policymakers tried to A. do better for the economy. B. further their own interest. C. win the elections. 4. In the United States, presidential elections occur every four years. If a political business cycle exists in the United States, in which year of a presidential term would we expect output growth to
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Unformatted text preview: be highest? A. the first year. B. the second year. C. the third year D. the fourth year. 5. Fine tuning represents policy makers' attempts to A. minimize fluctuations in interest rates B. minimize variations in the real exchange rate C. achieve zero inflation D. minimize the deviations of actual output from the natural level of output. 6. As uncertainty about the effects of policy on output decreases, we would expect that: A. policy makers would implement more active policies. B. policy makers would more frequently implement fine tuning policies. C. policy makers would implement less active policies. D. both A and B E. both A and C. 7. Research suggest that the less independent the central bank, A. the smaller the time inconsistency problem in making policy. B. the larger the budget deficit. C. the higher the rate of inflation. D. the more stable the government. 8. Discuss why an independent central bank can handle the problem of time inconsistency....
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