QUESTION 5 Which of the following statements has been proposed as a benefit of p
ID: 1205465 • Letter: Q
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.
1.47 points
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.
1.47 points
QUESTION 9
According to the text, minimum-wage laws cause increases in
employment possibilities.
structural unemployment.
poverty.
productivity.
1.47 points
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
1.47 points
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.
1.47 points
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.