(solution) Policy makers cannot achieve both price stability and economic

(solution) Policy makers cannot achieve both price stability and economic

Will you look over these questions? All multiple choice, and I’ve found some online before already answered. I thought there would be another assignment before the final but this is it.

Policy makers cannot achieve both price stability and economic activity stability when facing
A) temporary supply shocks.
B) permanent supply shocks.
C) demand shocks.
D) all of the above.
2.
When the economy is hit by a negative demand shock and the central bank pursues policies to increase
aggregate demand to its initial level, then
A) inflation will be lower.
B) output will be at its potential.
C) output will be lower.
D) inflation will be unchanged.
E) both B and D.
3.
If the economy suffers a permanent negative supply shock because there is an increase in regulations that
permanently reduce the level of potential output, then
A) potential output falls.
B) the long-run aggregate supply curve shifts leftward.
C) the short-run aggregate supply curve shifts upward.
D) all of the above.
4.
When the economy suffers a permanent negative supply shock and the central bank does not respond by
changing the autonomous component of monetary policy, then
A) inflation will be higher.
B) output will be at its potential.
C) output will be unchanged.
D) inflation will be unchanged.
E) both A and B.
5.
When the economy suffers a permanent negative supply shock and the central bank responds by changing the
autonomous component of monetary policy to keep inflation at the target inflation rate, then A) aggregate demand curve shifts leftward.
B) aggregate demand curve shifts rightward.
C) output will be unchanged.
D) both A and C. 6.
When the economy is hit by a temporary negative supply shock and the central bank does not respond by
changing the autonomous component of monetary policy, then in the long run
A) inflation will be lower.
B) output will be at its potential.
C) output will be lower.
D) inflation will be unchanged.
E) both B and D.
7.
Which of the following statements is correct?
A) If most shocks to the economy are aggregate demand shocks or permanent aggregate supply shocks,
then policy that stabilizes inflation will also stabilize economic activity, even in the short run.
B) If temporary supply shocks are more common, then a central bank must choose between stabilizing
inflation and stabilizing output in the short run.
C) In the long run, there is no conflict between stabilizing inflation and economic activity in response to
shocks.
D) all of the above.
8.
Nonactivists of the policies believe that
A) wages and prices are very flexible.
B) the self-correcting mechanism is very rapid.
C) government action is unnecessary.
D) all of the above.
9. If aggregate output is below the natural rate level, nonactivists of policies would recommend that the
government
A) do nothing.
B) try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right.
C) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right.
D) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left.
10.
Activists of the policies believe that
A) the self-correcting mechanism through wage and price adjustment is very slow.
B) wages and prices are sticky.
C) the government needs to pursue active policy to eliminate high unemployment when it develops.
D) all of the above. 11.
The existence of lags prevents the instantaneous adjustment of the economy to policies changing aggregate
demand, thereby strengthening the case for
A) supply-side policy.
B) nonactivists.
C) activists.
D) demand-management policy.
12.
The recognition lag is
A) the time it takes for policy makers to obtain data indicating what is happening in the economy.
B) the time it takes for policy makers to be sure of what the data are signaling about the future course of
the economy.
C) the time it takes to pass legislation to implement a particular policy.
D) the time it takes for policy makers to change policy instruments once they have decided on the new
policy.
E) the time it takes for the policy actually to have an impact on the economy.
13. The implementation lag is
A) the time it takes for policy makers to obtain data indicating what is happening in the economy.
B) the time it takes for policy makers to be sure of what the data are signaling about the future course of
the economy.
C) the time it takes to pass legislation to implement a particular policy.
D) the time it takes for policy makers to change policy instruments once they have decided on the new
policy.
E) the time it takes for the policy actually to have an impact on the economy.
14.
The time it takes for the policy actually to have an impact on the economy is called
A) the data lag.
B) the recognition lag.
C) the legislative lag.
D) the implementation lag.
E) the effectiveness lag.
15.
The combination of a successful wage push by workers and the government's commitment to high employment
leads to
A) demand-pull inflation.
B) supply-side inflation.
C) supply-shock inflation.
D) cost-push inflation. 16.
If workers do not believe that policymakers are serious about fighting inflation, they are most likely to push for
higher wages, which will ________ aggregate ________ and lead to unemployment or inflation or both,
everything else held constant.
A) decrease; demand
B) increase; demand
C) decrease; supply
D) increase; supply
17. If policymakers set a target for unemployment that is too low because it is less than the natural rate of
unemployment, this can set the stage for a higher rate of money growth and
A) cost-push inflation.
B) demand-pull inflation.
C) cost-pull inflation.
D) demand-push inflation.
18.
Theoretically, one can distinguish a demand-pull inflation from a cost-push inflation by comparing
A) how fast prices rise relative to wages.
B) the unemployment rate with its natural rate level.
C) when prices rise relative to wages.
D) government debt to real GDP.
19.
Evidence from the time period 1960-1980 indicates that inflation in the United States resulted from
A) an employment target that was set too high.
B) the government's inability to sell bonds to the Fed.
C) an expansion in the money supply to finance federal government expenditures.
D) the excessive sale of government bonds to the public.
20.
Because policies in the United States were too expansionary from 1965 through 1973, the U.S. suffered
A) demand-pull inflation.
B) cost-push inflation, as workers sought higher wages in order to keep up with inflation.
C) both demand-pull and cost-push inflation.
D) neither demand-pull nor cost-push inflation.