a.
To find:Whether the given statement is true or false or uncertain and the reason for such.
a.
Answer to Problem 1QAP
The statement is false.
Explanation of Solution
Stating that there iscertainty about the effects of
b.
To find:Whether the given statement is true or false or uncertain and the reason for such.
b.
Answer to Problem 1QAP
The statement is true.
Explanation of Solution
If a model is used for a specific duration like one year, even a one percentage point reduction in the rate of interest can cause increase in the output growth. This also happens even when interest rate is reduced by little as 0.1 percentage points.
c.
To find:Whether the given statement is true or false or uncertain and the reason for such.
c.
Answer to Problem 1QAP
The statement is true.
Explanation of Solution
If a model is used for a specific duration like one year, even a one percentage point reduction in the rate of interest can cause increase in the output growth. This also happens even when interest rate is reduced by 2.1 percentage points.
d.
To find:Whether the given statement is true or false or uncertain and the reason for such.
d.
Answer to Problem 1QAP
The statement is true.
Explanation of Solution
If people want
e.
To find:Whether the given statement is true or false or uncertain and the reason for such.
e.
Answer to Problem 1QAP
The statement is false.
Explanation of Solution
There is not more evidence of political business cycles in the United States. The evidence of low unemployment during elections and high unemployment during the rest of time is not found.
f.
To find:Whether the given statement is true or false or uncertain and the reason for such.
f.
Answer to Problem 1QAP
The statement is uncertain.
Explanation of Solution
The fiscal spending rules are considered ineffective, but they are not as ineffective as it is understood by people. In long run, these rules become ineffective as policy makers break them.
g.
To find:Whether the given statement is true or false or uncertain and the reason for such.
g.
Answer to Problem 1QAP
The statement is false.
Explanation of Solution
The balanced budget rules in Europe have not been effective in constraining budget deficits. No penalties have been imposed by European Union for breaking the budget rules. In many countries, in situation of recession country has suffered deficits even in excess of 3% of GDP.
h.
To find:Whether the given statement is true or false or uncertain and the reason for such.
h.
Answer to Problem 1QAP
The statement is true.
Explanation of Solution
When the government announces policy that it would not negotiate with the hostage takers, hostage takers minimize the number of hostages. This also shows the credibility of government.
i.
To find:Whether the given statement is true or false or uncertain and the reason for such.
i.
Answer to Problem 1QAP
The statement is false.
Explanation of Solution
In case the government has announced a policy of no negotiation and hostages are taken, it is considered better not to negotiate with the hostage takers. Even if negotiating can save the hostages, it is a short-run policy but not a long-run policy. This can encourage hostage takers to pick more hostages in future.
j.
To find:Whether the given statement is true or false or uncertain and the reason for such.
j.
Answer to Problem 1QAP
The statement is true.
Explanation of Solution
This is found that countries that have a greater number of central banks working independently, have lower inflation. It can be seen in the OECD countries which have higher degree of independence to central banks, that they have lower rate of inflation.
k.
To find:Whether the given statement is true or false or uncertain and the reason for such.
k.
Answer to Problem 1QAP
The statement is false.
Explanation of Solution
The policy called as “starve the beast” policy, does not cut spending before tax deductions. This policy rather cuts taxes to create deficit that can further limit the government spending.
Want to see more full solutions like this?
Chapter 21 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
- Graphically portray the Keynesian transmission mechanism under the following conditions: a. A decrease in the money supply b. No liquidity trap c. Downward-sloping investment demandarrow_forwardHello, I would like help with this assignment. I sent the other day and the number one and two were solved, and I was told to send the rest. Thank you Monetary Policy If the economy is at full employment level of output where Y=Y*, demonstrate the state of the economy graphically and explain. If the monetary authority anticipates that growth will increase in the next 6-12 months, assume the Federal Reserve was correct, and Aggregate Demand increases. Demonstrate this on your graph, label this part b. What policy should they implement? What choices or options do they have to implement this policy? Demonstrate and explain the effects of this policy and explain fully. If the US government thought the economy was in a recessionary state, how would this policy response impact the monetary policy from part b and c. Explain fully.arrow_forwardWhich of the following is NOT an example of monetary policy to restrict aggregate demand? a)Raising interest rates b)Reducing money supply c)Rationing credit d)Increasing income taxarrow_forward
- Show graphically that the less responsive is investment to interest rates, the less effective is monetary policy as a stabilization tool.arrow_forwardSuppose that you are employed as an advisor to the central bank. Select the proper policy recommendation or economic prediction for each of the following scenarios. Which policy is appropriate when a rising aggregate price level is a concern but GDP is growing at an acceptable rate? contractionary or restrictive monetary policy (tight money policy) It is unclear which type of monetary policy is appropriate. expansionary monetary policy (easy money policy) Which policy is appropriate when a rising aggregate price level is a concern and GDP is not growing at an acceptable rate? It is unclear which type of monetary policy is appropriate. contractionary or restrictive monetary policy (tight money policy) expansionary monetary policy (easy money policy) Contractionary or restrictive monetary policy (tight money policy) will cause interest rates to increase sometimes and decrease sometimes. decrease. increase.arrow_forwardIn the simple monetary policy rule considered in Chapter 13, what role does the parameter m_bar (letter “m” with a short bar above it) play? It stands for the rate of inflation It tells us how unemployment changes when output changes It governs how aggressively monetary policy responds to inflation None of the above (i.e., something else)arrow_forward
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
