The theory of rational expectations states that a. expected inflation will be no different from actual inflation, on average. b. expectations are based on all possible information. c. individuals always act optimally. d. expected inflation will be lower than actual inflation. ANSWER A
Date: September 10th, 2020
An argument against inflation targeting is that a. the Fed does not completely control inflation. b. it rules out stabilization policy. c. puts too much emphasis on low inflation. d. All of the above ANSWER D
Date: September 10th, 2020
In today’s Fed, its primary strategy is to a. target the federal funds rate in the short-run, target inflation in the long-run. b. target inflation c. target the money supply. d. target the federal funds rate in the short-run, balance inflation and output goals in the long-run. ANSWER D
Date: September 10th, 2020
If the consumption function is C = 120 +_.8(Y-T) in the basic Keynesian model, then in the government spending multiplier is: a. 5. b. 4. c. 1.25. d. .8 ANSWER A
Date: September 10th, 2020
The most volatile component of GDP over the business cycle is a. consumption. b. net exports. c. investment. d. government purchases. ANSWER C
Date: September 10th, 2020
In response to a temporary increase in government spending, the representative consumer consumes A) more and takes more leisure. B) more and takes less leisure. C) less and takes more leisure. D) less and takes less leisure. ANSWER D
Date: September 10th, 2020
If depreciation is equal to investment ________. A) capital per-worker rises over time B) capital per-worker is stable C) capital per-worker falls over time D) capital per worker equals saving ANSWER B
Date: September 10th, 2020
Taxes impose a cost on letting land remain idle. Indicate whether the statement is true or false ANSWER TRUE
Date: September 10th, 2020
If real wages fall as output rises, then in the classical model it must be the case that a. labor demand rose. b. labor demand fell. c. labor supply rose. d. labor supply fell. e. none of the above. ANSWER C
Date: September 10th, 2020
If depreciation is less than investment ________. A) capital per-worker is falling B) capital per-worker is rising C) capital per-worker is constant D) capital per worker is greater than saving ANSWER B
Date: September 10th, 2020
