Question Details

In this context a policy-induced recession is best described as a recession 


1. "On the other hand, there was a singular economic success in the past decade: A rampant inflation was curbed, albeit at the cost of __________, and Federal Reserve actions to keep the flow of money into the economy at moderate levels have kept the lid on since." The blank is best filled with 
a) high taxes b) big budget deficits 
c) high unemployment d) low real interest rates 90 
2. "As well, the chairman of the Fed had come to represent what many liberals regard as a policy-induced recession." In this context a policy-induced recession is best described as a recession 
a) caused in error by policy b) created to influence policy 
c) caused deliberately by policy 
d) caused as an unexpected side-effect of a policy directed to achieving some other end 
3. "By tying the pay of the governor of the central bank to his success in keeping inflation below two percent, New Zealand has succeeded in keeping inflation low. Now there are calls to tie the pay of the minister of employment to his success in keeping unemployment below two percent." This proposal is a 
a) good idea because there is no excuse for unemployment ever to be above two percent 
b) good idea because it will provide an incentive for the government to keep unemployment below two percent 
c) bad idea because governments should be allowed to undertake policy at their discretion 
d) bad idea because two percent unemployment is probably an unrealistically-low target 
4. "The Bank of Canada's battle to cut inflation to 2.0 percent from 5.0 percent cost the Canadian economy $105 billion in lost production, says a new study." 
If Canada's full employment level of output is $700 billion, what is its sacrifice ratio? 
a) 5 or less b) more than 5 but not more than 10 
c) more than 10 but not more than 15 d) more than 15 
5. Suppose the short-run Phillips curve is such that a two percentage point increase in inflation decreases unemployment by one percentage point. Suppose the economy is in equilibrium with a real growth rate of 2 percent and an unemployment rate of 7 percent and the central bank increases the rate of growth of the money supply from 5 percent to 8 percent. When the economy has reached its new equilibrium, the levels of inflation and unemployment will be 
a) 6% and 7% b) 6% and 5.5% c) 3% and 7% d) 3% and 5.5%



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