Assignment_5 - ECON 410.502 Macroeconomic Theory Spring...

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Page 1 ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Assignment #5 Notice : (1) There are 25 multiple-choice problems and 2 analytic (short-answer) problems. This assignment is due on April 30, 2010 , class time. Please submit before the class starts. (2) Solutions of this assignment will be posted on the web after the due date. Name: ____________________
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Page 2 Problem 1~25: Multiple choice problems Please choose your answer and circle the corresponding capital letter (A, B, C, D) 1. Increasing government spending when the economy is in a recession is an example of: A) active monetary policy. B) active fiscal policy. C) passive monetary policy. D) passive fiscal policy. 2. The concerns of economists who favor passive over active policy are most closely associated with their: A) preference for using monetary policy rather than fiscal policy for stabilization. B) view that policy made by rules is superior to policy made by discretion. C) belief that shocks to modern economies are not large enough to require any policy response. D) doubt that the correct policy will be implemented at the correct time. 3. The time between a policy action and its influence on the economy is called the: A) automatic stabilizer. B) time-inconsistency of policy. C) inside lag. D) outside lag. 4. The lag between the time that economic stimulus is needed and the time that a tax cut is passed by Congress is an example of a: A) fiscal inside lag. B) fiscal outside lag. C) monetary inside lag. D) monetary outside lag. 5. If people's expectations of inflation are formed rationally rather than based on adaptive expectations and if policymakers make a credible policy move to reduce inflation, then the costs of reducing inflation will be ______ traditional estimates of the sacrifice ratio. A) much higher than B) much lower than C) exactly equal to D) approximately 2 percent greater than
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Page 3 6. According to the Lucas critique, when economists evaluate alternative policies they must take into consideration: A) how the policies will affect expectations and behavior. B) whether the policy will offset the impact of automatic stabilizers. C) the stage of the political business cycle in which the policy is to be implemented. D) the length of the inside lags associated with the policies. 7. If policymakers are free to analyze events as they occur and choose whatever policy
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Assignment_5 - ECON 410.502 Macroeconomic Theory Spring...

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