Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Chapter 16, Problem 3QQ
To determine
Explain the Lucas critique.
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How does a person’s interpretation of macroeconomic history affect his view of macroeconomic policy?
Assume the following macroeconomic conditions in the United States and that US policy makers desire to achieve their three macro-policy goals defined in the usual way.
A. Output has fallen below potential output, creating a large negative output gap.
B. The employment rate has fallen, creating an unemployment rate of 10%.
C. The inflation rate has fallen to 1% per year.
Which statement is CORRECT?
Output is too high; the unemployment rate is too low; and inflation rate is too high.
Output is too low; the unemployment rate is too high; and the inflation rate is too low.
Output is too high; the employment rate is too high; and the inflation rate is too high.
Output is too high; the employment rate is too low; and the inflation rate is too low.
Output is too low; the unemployment rate is too high; and the inflation rate is too high.
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Question 7 of 14
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Assume the following macroeconomic conditions in the United States and that US policy makers desire to achieve their three macro-policy goals defined in the usual way.
A. Output has fallen below potential output, creating a large negative output gap.
B. The employment rate has fallen, creating an unemployment rate of 8%.
C. The inflation rate has risen to 10% per year.
Which statement is CORRECT?
Output is too low; the employment rate is too high; and the inflation rate is too high.
Output is too high; the employment rate is too low; and the inflation rate is too low.
Output is too high; the unemployment rate is too high; and inflation rate is too high.
Output is too low; the unemployment rate is too low; and the inflation rate is too high.
Output is too low; the unemployment rate is too high; and the inflation rate is too high.
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- a. Define “time inconsistency” of economic policy? b. i) Examine why policy makers might be tempted to renege on an announcement they madeearlier? ii) In this situation, what is the advantage of a policyrule?arrow_forwardWhich of the following is not related to Macroeconomics? a. Determining individual consumer decisions b. Preventing the economy from experiencing inflation c. Preventing the economy from experiencing unemployment d. Keeping living standards high for people to live decent, meaningful livesarrow_forwardPlease help me solve this macroeconomics problem. Thanks!arrow_forward
- Can someone please answer both questions asap?In a basic Keynesian macroeconomic model, if Effective demand is greater than the output then A. ED > Y(I > S) - V (decrease) Y (increase) B. ED > Y(I > S) - V (increase) Y (decrease) C. ED < Y(I < S) - V (decrease) Y (increase) D. ED < Y(I < S) - V (increase) Y (decrease) Question 2 What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income? A. The supply of and demand for loanable funds would shift right. B. The supply of and demand for loanable funds would shift left. C. The supply of loanable funds would shift right and the demand for loanable funds would shift left. D. None of the above is correct.arrow_forwardTrue or false question: Although there is no specific founder of macroeconomics, John Maynard Keynes is usually cited as such.arrow_forwardNeed help with review multiple choice macroeconomic questions!arrow_forward
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