Here is the full thing:
Arguments in favor of active economic policy include all of the following except:
(a)failing to use monetary and fiscal policy leads to inefficient fluctuations in output
and employment.
(b)the Great Depression could have been avoided if the Federal Reserve had pursued
a policy of steady money growth.
(c)
fluctuations in real GDP have been less severe following World War II than prior
to World War I.
(d)failure of policymakers to respond to large contractionary shocks to private spend-
ing caused the Great Depression.
Pretty sure this one is B. Would like someone to double check it though.
A time-inconsistency problem in macroeconomic policy can occur when the policy-
maker:
(a)is made to follow a strict and an inflexible rule.
(b)has discretion in the short run but follows a rule in the long run.
(c)has discretion to act as it seems best in each situation, based on his or her own
knowledge and experience.
(d)has no discretion.
Not to sure on this one.
The interest rate at which banks make loans to other banks is called the:
(a)federal funds rate.
(b)prime rate.
(c)Federal Reserve discount rate.
(d)Treasury bill rate.
Pretty sure it's A, would like someone to check me though!
According to the Taylor rule, when real GDP is above its natural level, the nominal
federal funds rate should be_________, and when inflation is below 2 percent, the nominal Federal funds rate should be_______.
(a)raised; raised
(b)raised; lowered
(c)lowered; raised
(d)lowered; lowered
I got it down to A or B, but I'm not really sure what should happen to the Federal funds rate. I would guess B. But not sure