If expectations are rational, the difference between the actual inflation rate and the forecast for ...

If expectations are rational, the difference between the actual inflation rate and the forecast for inflation is:
 a. positive when inflation is increasing.
 b. negative when inflation is increasing.
 c. random.
 d. greater, the more accurately people anticipate the effects of government policy.

Question 2

Average growth of per capita GDP of the post-1980 globalizers increased from 1.4 percent per year in the 1960s to _____ percent in the 1990s.
 a. 6.4
  b. 5.0
  c. 3.5
  d. 7.8
  e. 2.9

Question 3

Technology spillovers:
 a. Can be reduced by way of patents.
 b. Can lead to clustering of technology firms near one another.
  c. Are examples of positive externalities.
 d. All of the above are true.

Question 4

If expectations are rational, how can government influence unemployment in a predictable way?
 a. with the normal tools, used in the normal fashion
  b. with fiscal policy; monetary policy will not work
  c. with monetary policy; fiscal policy will not work
  d. with surprise changes in policy only

Question 5

Identify the correct statement.
 a. Between the 1960s and the 1990s, per capita GDPs grew faster in nonglobalizing countries.
  b. Between the 1960s and the 1990s, per capita GDPs grew faster in globalizing countries than in industrialized countries.
  c. Between the 1960s and the 1990s, per capita GDP growth rates in the industrialized world increased.
  d. Between the 1960s and the 1990s, per capita GDP in the industrialized world decreased.
  e. Between the 1960s and the 1990s, per capita GDP in all developing countries increased.

Question 6

Which of the following is (are) true when one firm's research and production can increase another firm's access to technological advances?
 a. It is called a technology spillover.
 b. Other firms will imitate and improve on the new knowledge.
 c. If there is no subsidy, the market equilibrium output level is less than the efficient equilibrium output level.
  d. All of the above.

Question 7

If expectations are rational, can monetary and fiscal policy makers accurately control the effects their policies have on unemployment?
 a. Yes, provided they announce policies in advance.
 b. Yes, both policies are effective in altering unemployment in the desired ways.
 c. No, because these effects depend on whether and to what extent people are fooled by those policies.
  d. No, only fiscal policy can alter unemployment.

Question 8

The Asian tigers have experienced rapid economic growth in recent times. Hence, these countries are sometimes referred to as:
 a. first-world countries.
  b. newly industrialized countries.
  c. the globalization limelight.
  d. second-world countries.
  e. the G-8 nations.

Question 9

Which of these statements is not true of both external cost and external benefit situations?
 a. They both can lead to market failure.
 b. They both cause welfare costs.
 c. They both make it possible for government intervention to lead to more efficient results.
  d. All of the above are true.

Question 10

According to the rational expectation view, does the government have the ability to control the level of real output and unemployment?
 a. Only in the SR and only if it makes unexpected changes in aggregate demand.
 b. Only in the SR and only if it announces plans well in advance, so that expectations are affected.
  c. Only in the LR and only if it shifts AS instead of AD.
 d. Only in the LR and only if it uses monetary policy instead of fiscal policy.

Question 11

What happened to the so-called Asian tigers in the 1960s and 1970s?
 a. They underwent a period in which their economies turned into mild communism.
  b. The literacy rates of these countries declined in this time period (that is, a smaller percentage of the people could read).
  c. They all became part of the First World.
  d. They became the most technologically advanced countries in the world.
  e. They underwent the process of opening their economies and experienced rapid economic growth.

Question 12

The greater the magnitude of the external benefits of production,
 a. The larger is the deadweight loss from overproduction.
 b. The greater would be the optimal tax.
 c. The less the private market solution would deviate from the socially efficient level of output.
  d. All of the above are true.

Question 13

According to the theory of rational expectations, when it comes to expected changes in the inflation rate, the short-run Phillips curve would be:
 a. vertical.
 b. horizontal.
 c. upward sloping.
 d. downward sloping.