QUESTION 5 Which of the following statements has been proposed as a benefit of p

Question

QUESTION 5

Which of the following statements has been proposed as a benefit of passive policy making?

Passive policy making utilizes the rational expectations hypothesis.

Passive policy making allows for making immediate changes in response to an anticipated change in economic performance.

When using passive policy making there is no tradeoff between price stability and unemployment.

Passive policy making does not wait for the time lag between recognition of a problem and policy action before engaging in economic policies to stabilize the economy.

1.47 points   

QUESTION 6

The idea of policy making taking place in response to a predetermined set of rules is referred to as

discretionary policy making.

passive policy making.

Keynesianism.

active policy making.

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QUESTION 7

What types of unemployment will still exist when the economy is at the natural rate of unemployment?

frictional and cyclical unemployment only

frictional, structural, and cyclical unemployment

frictional and structural unemployment only

structural and cyclical unemployment only

1.47 points   

QUESTION 8

The natural rate of unemployment is

the unemployment rate that exists in long-run equilibrium, after adjustments to all changes have occurred.

the unemployment rate when there is no structural unemployment.

the unemployment rate when there is no structural or cyclical unemployment.

zero.

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QUESTION 9

According to the text, minimum-wage laws cause increases in

employment possibilities.

structural unemployment.

poverty.

productivity.

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QUESTION 10

During a recession, the overall unemployment rate

exceeds the natural rate of unemployment.

falls below the natural rate of unemployment.

falls rapidly.

equals the inflation rate.

1.47 points   

QUESTION 11

Cyclical unemployment is

the unemployment due to the unemployment benefits and welfare programs of the government.

the unemployment due to union activities and government-imposed restrictions to entry into specific occupations.

the difference between the actual unemployment rate and the natural rate of unemployment.

the difference between the unemployment rate when the economy is in a recession and the unemployment rate when the economy is at the peak of an expansion.

1.47 points   

QUESTION 12

Which of the following unemployment rates can be negative?

the natural unemployment rate

the seasonal unemployment rate

the official unemployment rate reported by the Bureau of Labor Statistics

the cyclical unemployment rate

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QUESTION 13

An unexpected increase in aggregate demand typically causes

the price level to increase but has no effect on the unemployment rate.

frictional unemployment to increase but structural unemployment to decrease.

the price level to increase and the unemployment rate to fall.

the price level to increase and the unemployment rate to increase.

1.47 points   

QUESTION 14

The rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall is known as the

non-accelerating-inflation rate of unemployment (NAIRU).

contrary rate of unemployment.

Phillips rate of unemployment.

menu cost rate of unemployment.

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QUESTION 15

Based on the work of economist A.W. Phillips, economists concluded that

high inflation rates are associated with low unemployment rates.

higher rates of inflation are associated with higher rates of unemployment.

there is no trade-off between inflation and unemployment.

unemployment can be effectively combated by raising wages.

Passive policy making utilizes the rational expectations hypothesis.

Passive policy making allows for making immediate changes in response to an anticipated change in economic performance.

When using passive policy making there is no tradeoff between price stability and unemployment.

Passive policy making does not wait for the time lag between recognition of a problem and policy action before engaging in economic policies to stabilize the economy.

Explanation / Answer

Answer 5:

Option D as it is based on pre defined rules and there is no discretion.

Answer 6:

Passive policy making. The macro economic policy is conducted according to the preset series of rules.

Answer 7:

At the Natural rate of unemployment, structural and frictional unemployment still exists. Natural rate of unemployment is around 4 - 5 per cent. Frictional unemployment is voluntary unemployment as it takes time to search for new jobs. Structural unemployment is due to the mismatch between the type of the workers available in an economy and the type of the workers required. It exists in a growing economy.

Answer 8:

Option A. In the long run, the Phillips curve becomes vertical at the level of natural rate of unemployment as the economy reaches full employment level in the long run after all the adjustments have been made.

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