Oxford University Press | Online Resource Centre

Choose your answers from a-d by clicking the radio button next to each choice and then press 'Submit' to get your score.

Question 01

Modern Keynesian and neoclassic views differ essentially about what?

a) Whether expectations of the future have an impact on economic choices and behaviour in the present.

b) The importance of intertemporal budget constraints for households, firms, governments and nations.

c) The usefulness of a concept of equilibrium unemployment to characterize labour markets in the long-run.

d) The relative size of the output gap and the speed of adjustment for the macroeconomy to eliminate output gaps in the absence of macroeconomic policy intervention.

Question 02

"Macroeconomic policy is plagued by recognition, decision, implementation and effectiveness lags." Neoclassic macroeconomists conclude from this that:

a) governments require better information than other economic actors.

b) aggressive use of macroeconomic policy will work to further destabilize the economy.

c) the macroeconomy is essentially unstable.

d) core inflation only shifts slowly.

Question 03

The hypothesis that households and firms incorporate perceptions of the policy regime in their behaviour; as a result, shifts in the policy regime can have fundamental effects on behaviour is called:

a) Friedman's Rule.

b) the Phelps' Doctrine.

c) the Lucas Critique.

d) the Taylor Rule.

Question 04

The basic problem with any macroeconomic policy that is time inconsistent is that such a policy:

a) fails to satisfy the government's intertemporal budget constraint.

b) is based upon the element of surprise alone.

c) is not credible.

d) all of the above.

Question 05

The possibility of a fiscal consolidation by a government resulting in an expansionary impulse for an economy is called:

a) money illusion.

b) a non-Keynesian effect.

c) time inconsistency.

d) Sargent's Paradox.

Question 06

The economic logic behind granting central banks independence from government in the conduct of monetary policy is:

a) to eliminate seigniorage.

b) to allow open market operations.

c) to enhance the credibility of monetary policy.

d) none of the above.

Question 07

To stop a raging hyperinflation, it is necessary:

a) to introduce fiscal austerity.

b) to begin a lasting, credible reduction in money growth.

c) to introduce binding limits on lending to the government by the central bank.

d) all of the above.

Question 08

A weakness of the original formulation of the Stability and Growth Pact was:

a) to strictly peg the value of the euro to the U.S. dollar.

b) that strict enforcement of the fiscal rules would have blocked the automatic stabilizer mechanism.

c) it was not ratified by the central banks.

d) the ECB's independence was weakened.

Oxford University Press, Online Resource Centre, Chapter 16.

Chapter 16

Instructions