978-1259723223 Test Bank TBChap039 Part 6

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A c c e s s i b i l i t y :

Keyboard Navigation

216.

Crowding–out results from

217.

From a monetarist perspective, an expansionary fiscal policy’s effect on aggregate demand

would be offset by

218.

According to rational expectations theory, discretionary monetary and fiscal policy will be

ineffective primarily because of the

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A.

successes of macroeconomic policymakers

B.

inability of policymakers to time decisions properly.

C. reaction of the public to the expected effects of policy changes.

D. slow impact of policy to stimulate changes in real output and employment.

219.

The theory of rational expectations calls for monetary policy rules because

220.

According to rational expectations theory, instantaneous market adjustments make

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Topic:

Rules or Discretion?

221.

In the rational expectations view,

222.

In the rational expectations view, the best approach to fiscal policy is for the government

to

223.

In 2012, the Fed adopted a flexible version of

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Blooms: Remember

Difficulty:

01 Easy

Learning Objective: 39-03 Identify and describe the variations of the debate over ” rules”

versus ” discretion” in conducting stabilization policy.

Test Bank: II

Topic:

Rules or Discretion?

224.

With inflation targeting, the Federal Reserve would be required to announce its targeted

band for

225.

Under its recent policy of inflation targeting, the Fed has committed to adjusting monetary

policy as necessary to achieve a target inflation rate of

226.

Mainstream economists contend that a policy rule based on the equation of exchange

breaks down because

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A. there is a tight relationship between the money supply and nominal GDP.

B. velocity is more variable and unpredictable than expected.

C. the money supply increases at a constant, not a variable, rate.

D. nominal GDP is directly related to changes in the price level.

227.

In the mainstream view, the crowding-out effect from the use of fiscal policy is

228.

Which of the following ideas is associated with mainstream economics?

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Topic:

Rules or Discretion?

229.

Mainstream economists support

230.

Which economic perspective would be most closely associated with the view that

discretionary monetary policy is an effective force for stabilizing the economy?

231.

Which of the following economic perspectives would be most opposed to a balanced-

budget rule?

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Blooms: Remember

Difficulty:

01 Easy

Learning Objective: 39-03 Identify and describe the variations of the debate over ” rules”

versus ” discretion” in conducting stabilization policy.

Test Bank: II

Topic:

Rules or Discretion?

232.

According to mainstream economic analysis, a balanced-budget rule for fiscal policy

would be

233.

An idea from monetarism that has been absorbed into mainstream macroeconomics would

be the

234.

Which monetarist idea has been absorbed into mainstream macroeconomics?

235.

The rational expectations view that expectations regarding policy and its effects are

important to consider

236.

According to rational expectations theory, observed instability in the private economy

would most likely be due to

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written consent of McGraw-Hill Education.

Difficulty:

02 Medium

Learning Objective: 39-04 Summarize the fundamental ideas and policy implications

of mainstream macroeconomics, monetarism, and rational expectations theory.

Test Bank: II

Topic:

Summary of Alternative Views

237.

The most likely advocates for a monetary rule would be

238.

The policy position that the supply of money should be increased at a constant rate each

year is most closely associated with the views of

239.

The view that anticipated changes in the money supply will have no effect on the

economy‘s output would most likely be a proposition of

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C. real-business-cycle theory.

D. monetarism.

240.

Mainstream macroeconomics would suggest that fiscal policy

241.

Economist Abba Lerner compared the economy to a car needing

242.

Economist Milton Friedman compared the economy to a car needing

243.

According to economist Milton Friedman, a major reason for macroeconomic instability is

244.

In the aftermath of the Great Recession of 2007–2009, a new breed of “market

monetarists” suggested that the Fed and other central banks should use which of the following

to adjust monetary policy?