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| 1 | |
Which of the following is not true about disinflation? |
| | A) | Disinflation is a substantial reduction in the rate of inflation |
| | B) | Disinflation results in low unemployment and high growth |
| | C) | Costs of disinflation are high |
| | D) | The central bank targets low inflation, not disinflation |
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| 2 | |
If the central bank decides to respond to an expansionary gap through enforcing its inflation target, then: |
| | A) | The central bank tightens monetary policy, and aggregate demand shifts to the left |
| | B) | The central bank eases monetary policy, and aggregate demand shifts to the left |
| | C) | The central bank tightens monetary policy, and aggregate demand shifts to the right |
| | D) | The central bank eases monetary policy, and aggregate demand shifts to the right |
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| 3 | |
If the central bank chooses to close a recessionary gap, then: |
| | A) | The central bank eases monetary policy, and aggregate supply shifts to the right |
| | B) | The central bank eases monetary policy, and aggregate demand shifts to the right |
| | C) | The central bank tightens monetary policy, and aggregate supply shifts to the left |
| | D) | The central bank tightens monetary policy, and aggregate demand shifts to the left |
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| 4 | |
Anchored inflationary expectations refers to the fact that: |
| | A) | People's expectations of future inflation change if inflation rises temporarily |
| | B) | People's unchanging expectations exaggerate the response to an aggregate supply shock |
| | C) | People's unchanging expectations lengthen the time required to close a recessionary gap from a shock |
| | D) | People's expectations of future inflation do not change even if inflation rises temporarily |
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| 5 | |
Core inflation excludes: |
| | A) | Energy and automobiles |
| | B) | Energy and capital goods |
| | C) | Energy and food |
| | D) | Energy and services |
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| 6 | |
Which of the following factors affects the credibility of monetary policy? |
| | A) | Degree of central bank independence |
| | B) | The announcement of explicit inflation targets |
| | C) | Established reputation for fighting inflation |
| | D) | All of the above |
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| 7 | |
A central bank that is not strongly committed to achieving and maintaining low inflation is known as: |
| | A) | An inflation dove |
| | B) | An inflation hawk |
| | C) | An inflation bird |
| | D) | None of the above |
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| 8 | |
Which of the following is more successful in maintaining stable output and employment in the short and long run? |
| | A) | An inflation dove |
| | B) | An inflation hawk |
| | C) | An inflation bird |
| | D) | None of the above |
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| 9 | |
A tax reduction: |
| | A) | Increases aggregate demand and decreases long run aggregate supply |
| | B) | Decreases aggregate demand and increases long run aggregate supply |
| | C) | Increases aggregate demand and increases long run aggregate supply |
| | D) | Decreases aggregate demand and decreases long run aggregate supply |
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| 10 | |
A tax reduction that shifts the aggregate demand curve more than the long run aggregate supply curve results in: |
| | A) | Inflation decreasing |
| | B) | Inflation remaining constant |
| | C) | Inflation increasing |
| | D) | None of the above |
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| 11 | |
The inside lag is: |
| | A) | Shorter for monetary policy than for fiscal policy |
| | B) | Longer for monetary policy than for fiscal policy |
| | C) | The delay between policy implementation and major policy effects |
| | D) | None of the above |
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| 12 | |
Americans work more than Europeans because of all except which of the following? |
| | A) | US average work week is longer |
| | B) | Marginal interest rates are lower in the US |
| | C) | US has more generous social security systems |
| | D) | US has less unionization |
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