Chapter 25 Self-test questions

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When an economy is facing a slump, the government risks __________ if it overreacts with its correction

A rise in inflation beyond the central bank's target correct incorrect

International rebuke correct incorrect

A depression correct incorrect

A negative GDP gap correct incorrect

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Discretionary fiscal policies are ________

Often better than monetary policy correct incorrect

Deliberately implemented by the government to stabilise the economy correct incorrect

Those government expenditure programmes which have no effect on the economy correct incorrect

The items mentioned only in the national budget correct incorrect

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Automatic stabilizers ________

Set in to work to correct instability in the economy without being deliberately triggered by the government correct incorrect

Must be initiated by the government correct incorrect

Are often triggered by public consensus correct incorrect

None of the above correct incorrect

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An important weakness of discretionary fiscal policies is the problem of __________

inflation correct incorrect

lags correct incorrect

Political debates correct incorrect

Balance of payment problems correct incorrect

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The kind of lag that exists when the government identifies a positive/negative gap and when it implements a fiscal policy to correct it is called ________.

Execution lag correct incorrect

Decision lag correct incorrect

Information lag correct incorrect

Correction lag correct incorrect

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When fiscal policy is used to correct large and sustained GDP gaps, the government is engaging in _______

Provision of stimulus packages correct incorrect

Wasteful expenditure correct incorrect

Gross tuning correct incorrect

Quantitative easing correct incorrect

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A major shortcoming of the use of monetary supply as the primary tool of monetary policy is __________

Exchange rate overshooting correct incorrect

Central banks cannot control broad money correct incorrect

The presence of lags correct incorrect

Credibility issues correct incorrect

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The monetary policy committee of the Bank of England is tasked with __________

Forecasting growth rates correct incorrect

Calculating inflation rate correct incorrect

Setting interest rates correct incorrect

Setting inflation targets correct incorrect

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Whilst the MPC sets the interest rates, it's the government that determines __________

Inflation target correct incorrect

Money supply correct incorrect

Exchange rate correct incorrect

Price level correct incorrect

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The MPC has __________ independence but not __________ independence

Monetary; financial correct incorrect

Goal; independence correct incorrect

Instrument; goal correct incorrect

None of the above correct incorrect