Under which of the following circumstances would

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CH15

Under which of the following circumstances would stabilization policy be from ECON 235 at Vienna Uni.

7 .   In the short run , which of the following would most likely result from an increase in interest rates ?
a ) 
b ) an increase in the equilibrium price level and a reduction in equilibrium output
c ) a reduction in the equilibrium price level and an increase in equilibrium output
d ) an increase in both equilibrium GDP and the price level
e ) an increase in the equilibrium price level and no change in output
Answer:  a )   a reduction in both equilibrium output and the price level
8 .   Under which of the following circumstances would stabilization policy be ineffective but not counterproductive ?
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9 .   Which of the following is not a policy lag associated with stabilization policy ?
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10 .   Which of the following is true of policy lags ?
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11 .   Which of the following creates the least risk that stabilization policy will be either ineffective or counterproductive ?
a ) Uncertainty regarding the magnitude of the expenditure multiplier
b ) The possibility of a Ricardian - equivalence saving response to a tax cut perceived to be temporary
c ) The likelihood of crowding out following a tax reduction
d ) 
e ) The implementation lag associated with fiscal policy
Answer:  d )   The decision lag associated with monetary policy
12 .   Compared to monetary policy , fiscal policy
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13 .   Crowding out refers to
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14 .   The difference between crowding out and Ricardian equivalence is
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15 .   The Phillips Curve illustrates a short run relationship between
a ) inflation and interest rates
b ) 
c ) interest rates and exchange rates
d ) income and unemployment
e ) unemployment and inflation
Answer:  b )   interest rates and income
16 .   The empirical relationship between inflation and unemployment is known as
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17 .   An inverse relationship between unemployment and inflation arises
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18 .   According to the short run Phillips Curve model , if the inflation rate is above the rate anticipated by the general public , then
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8.Under which of the following circumstances would stabilization policy be ineffective but not counterproductive?a)There is a negative output gap of $60 billion, the expenditure multiplier is 3, and government increases its purchases by $20 billionb)There is a positive output gap of $10 billion, the expenditure multiplier is 2, and government reduces its purchases by $20 billionc)The implementation lag for stabilization policy is of such length that the economy corrects itself before the policy has an impactd)Expansionary fiscal policy crowds out investment on a dollar-for-dollar basise)The inflation resulting from an adverse supply shock is misinterpreted as being the result of a demand shock
9.Which of the following is not a policy lag associated with stabilization policy?
10. Which of the following is true of policy lags?
11. Which of the following creates the least risk that stabilization policy will be either ineffective or counterproductive?
12. Compared to monetary policy, fiscal policya)has a shorter decision lagb)is used for more purposes and seeks to achieve more goals
c)is a more flexible tool for stabilizationd)is less likely to be offset by changes in household or firm behaviore)is not subject to as much information lag

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