Those who favor a passive approach to policy often argue that changes in prices and wages will shift the:
a. short-run aggregate supply curve before active policy shifts the aggregate demand curve.
b. short-run aggregate supply curve only after active policy shifts the aggregate demand curve.
c. short-run aggregate supply curve more than active policy shifts the aggregate demand curve.
d. short-run aggregate supply curve less than active policy shifts the aggregate demand curve.
e. short-run aggregate supply curve in a direction opposite the shift in the aggregate demand curve
QUESTION 2The _____ lag is typically longer for fiscal policy than monetary policy.
a. supply
b. cyclical
c. effectiveness
d. implementation
e. recognition
QUESTION 3After World War II the average U.S. recession has lasted:
a. a few months.
b. about half a year.
c. a little less than a year.
d. about three weeks.
e. about two years.
QUESTION 4Which of the following pairs of lags are typically shorter for monetary policy than for fiscal policy?
a. The recognition lag and the implementation lag
b. The effectiveness lag and the decision-making lag
c. The decision-making lag and the implementation lag
d. The implementation lag and the effectiveness lag
e. The recognition lag and the effectiveness lag
QUESTION 5An implementation lag is the time it takes:
a. for policy makers to decide what to do.
b. for the chosen policy to have its full impact on the economy.
c. to identify trouble in the economy and to assess its severity.
d. to put a selected policy into action.
e. before a policy's effects on the economy are noticed by ordinary people.
QUESTION 6Suppose a recession surprises economic forecasters who did not see it coming. This is an example of a _____.
a. cyclical lag
b. recognition lag
c. decision-making lag
d. implementation lag
e. effectiveness lag
QUESTION 7Those who favor a passive approach to policy believe that:
a. discretionary monetary policy can be used to help the economy since monetary policy lags are short.
b. discretionary fiscal policy can be used to help the economy since fiscal policy lags are short.
c. lags associated with implementing policies are too long and unstable for discretionary policy to be effective.
d. despite the lags involved, implementing discretionary policy is preferable to inaction.
e. automatic stabilizers cannot be used to help the economy since monetary policy lags are short.
QUESTION 8The time required _____ is not a time lag associated with using discretionary policy to correct an economic problem.
a. to recognize the problem
b. to decide how to handle the problem
c. to set a policy change in action
d. for a policy to affect economic variables
e. to observe public reaction after a policy announcement is made
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