Chap017 - Chapter 17 Policy Chapter 17 Policy Multiple...

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Chapter 17 - Policy Chapter 17 Policy Multiple Choice Questions 1. Formulating an appropriate policy response to an economic disturbance is difficult since policy makers are often unsure about a. The timing and magnitude of the effects of a proposed policy measure b. Whether a disturbance is temporary or permanent c. How the economy really works d. How a proposed policy measure affects people's expectations E . All of the above Difficulty: Easy 2. Policies designed to stabilize economic activity are handicapped by a. Incomplete information about the way the economy works b. Uncertainty about the length or magnitude of a disturbance c. Lags or delays between the time a decision is made and the time it begins to affect economic behavior d. Incomplete information about the way expectations are formed and how expectations affect responses to policies E . All of the above Difficulty: Easy 3. If a central bank believes that an economic disturbance will negatively affect GDP in the current quarter but will have little permanent effect, then it should Difficulty: Medium 17-1
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Chapter 17 - Policy 4. Designing successful economic stabilization policy is difficult since policy makers Difficulty: Medium 5. Economic disturbances are likely to be caused by Difficulty: Easy 6. Stabilization policy is affected by inside lags, which are a. Longer for monetary policy than for fiscal policy b. Made up of the recognition, decision, and discretionary lags C . Made up of the recognition, decision, and action lags d. The length of time it takes for a policy to affect the economy after its implementation e. Caused by bureaucrats inside the government Difficulty: Medium
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