Which of the following is an important advantage of discretionary monetary policy?
a. Influencing the political business cycle
b. Flexibility to deal with changing economic conditions
c. Limiting the opportunities for abuse of power by policymakers
d. Avoiding the time inconsistency of policy problem
Ans: b. Flexibility to deal with changing economic conditions
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Tariffs ________ the domestic price of the good and import quotas ________ the domestic price of the good
A) lower; lower B) lower; raise C) raise; lower D) raise; raise
Which of the following is an appropriate policy for a central bank to follow if the economy is plagued with deflation?
A) using contractionary monetary policy to drive up interest rates B) gradually raising the required reserve rate C) increasing the target interest rate on overnight loans D) consistently pursuing policy to promote the credibility of the central bank
If 2008 is the base year and the price index in 2009 is 109, prices in 2009 are _____ than prices in 2008
a. 1 percent higher b. 8 percent higher c. 9 percent higher d. 0.9 percent higher e. 12 percent higher
The estimate of potential GDP would decrease if
a. the rate of capital depreciation increased. b. the labor force decreased. c. the price level grew. d. All of the above would increase potential GDP.