The time it takes for a new policy to register its full impact on the economy after it has been put in force is known as the_____.
a. activity lag
b. decision-making lag
c. effectiveness lag
d. implementation lag
e. recognition lag
QUESTION 2Long time lags hamper the effectiveness of economic policy because:
a. people don't want to wait for economic recovery.
b. the longer unemployment lasts, the more intense inflation becomes.
c. by the time the impact of a policy is felt, a new problem may have come along that requires a different policy, which may make the economic situation even worse.
d. if inflation is allowed to continue for too long, it becomes immune to policy interference.
e. if unemployment is allowed to continue for too long, it becomes immune to policy interference.
QUESTION 3Which of the following is true of lags associated with discretionary policy?
a. Such lags extend only from the time a problem occurs in the economy through the time it is recognized by the government.
b. Such lags extend only from the time a problem is recognized by the government through the time an agreed-on policy is approved of.
c. Such lags extend only from the time a policy is approved through the time the policy is implemented.
d. Such lags can be reduced by taxation.
e. Such lags extend only from the time a problem occurs in the economy through the time a corrective policy has an impact on the economy.
QUESTION 4Which of the following lags reduces the effectiveness of active policy?
a. Preliminary lag
b. Accounting lag
c. Self-correction lag
d. Recognition lag
e. Execution lag
QUESTION 5During inflation, the optimal discretionary fiscal policy would be _____.
a. to decrease taxes
b. to increase government spending
c. to decrease the reserve ratio
d. to increase taxes
e. to decrease the market interest rate
QUESTION 6If the short-run equilibrium output of the United States exceeds the potential output, the Fed:
a. employs an active monetary policy to close a recessionary gap.
b. employs an active monetary policy to close an expansionary gap.
c. relies on a passive approach to close a recessionary gap.
d. relies on a passive approach to close an expansionary gap.
e. employs an expansionary fiscal policy.
QUESTION 7The country of Glassen has experienced an expansionary gap for the last three years. The advocates of passive policy are likely to suggest a policy which causes _____.
a. the short-run aggregate supply to shift to the left.
b. the short-run aggregate supply to shift to the right.
c. rising prices to shift the aggregate demand to the left.
d. wages to fall relatively quickly.
e. aggregate demand to shift to the right as wages increase.
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