Question 1

During the 1960s in the United States,the inflation-unemployment trade-off occurred within a range of inflation which was,on average,about
A) 1 %.
B) 2%.
C) 3%.
D) 4%.
E) 5%.

Accepted Answer

The inflation-unemployment trade-off occurred within a range of inflation which was, on average, about 3%.

Question 2

According to Oatley,
A) lower inflation during the 1970s did not reduce unemployment relative to the 1960s.
B) higher inflation in the 1980s did not raise unemployment relative to the 1970s.
C) higher inflation in the 1990s did not raise unemployment relative to the 1980s.
D) lower inflation in the 1990s did not raise unemployment relative to the 1980s.
E) higher inflation in the 1990s did raise unemployment relative to the 1980s.

Accepted Answer

Oatley's analysis suggests that lower inflation does not necessarily lead to higher unemployment, as demonstrated by the 1990s where lower inflation did not raise unemployment relative to the 1980s.

Question 3

According to Oatley,granting the central bank independence should lead to
A) short-term lower inflation.
B) short-term lower unemployment.
C) short-term political convenience.
D) long-term higher economic growth.
E) long-term higher unemployment.

Accepted Answer

Oatley argues that granting central bank independence should lead to long-term higher economic growth, as it allows for the central bank to focus on the long-term goals of price stability and growth, rather than responding to short-term political pressures. While short-term changes in inflation or unemployment may occur, the overall benefit should be long-term economic growth. Therefore, choices A, B, and C are incorrect, and choice E is not supported by Oatley's argument.

Question 4

According to Figure 13.5,for 1981-1990 for the six countries listed,if we add the inflation rate to the unemployment rate (lowest is best),the country with the lowest score is
A) the United States.
B) Germany.
C) France.
D) Britain.
E) Japan.

Accepted Answer

Japan typically had lower inflation and unemployment rates during the 1980s compared to the United States, Germany, France, and Britain, making it the country with the lowest combined score of inflation and unemployment rates for that period.

Question 5

According to Oatley's data,the country with the greatest economic growth with the least central bank independence was
A) Japan.
B) Norway.
C) Belgium.
D) Italy.
E) Germany.

Accepted Answer

Oatley's data indicate that Japan experienced significant economic growth despite having a central bank with relatively low independence compared to other countries.

Question 6

According to the data presented in the Oatley book,there is
A) no evidence that countries with higher inflation experienced stronger economic growth or lower unemployment.
B) some evidence that countries with higher inflation experienced stronger economic growth or lower unemployment.
C) no evidence that countries with higher inflation experienced weaker economic growth or lower unemployment.
D) no evidence that countries with lower inflation experienced weaker economic growth or higher unemployment.
E) some evidence that countries with lower inflation experienced weaker economic growth or higher unemployment.

Accepted Answer

The data presented in the Oatley book suggests that there is no evidence of a positive correlation between higher inflation and stronger economic growth or lower unemployment. Therefore, option A is the correct choice.

Question 7

The price stability strategy during the 1980s
A) was a reaffirmation of Keynesian principles.
B) asserts that the only proper objective of monetary policy was to achieve and maintain a very low and stable rate of inflation.
C) asserts that the only proper objective of monetary policy was to achieve and maintain a very high but stable rate of inflation.
D) asserts that the only proper objective of monetary policy was to achieve and maintain a very low even if unstable rate of inflation.
E) occurred first in Switzerland.

Accepted Answer

The price stability strategy during the 1980s asserted that the only proper objective of monetary policy was to achieve and maintain a very low and stable rate of inflation. This was a departure from the Keynesian principles that emphasized the role of government intervention in stabilizing the economy. The goal of price stability was seen as essential for promoting long-term economic growth and improving the overall welfare of society. This approach was adopted by many central banks, including the Federal Reserve in the United States.

Question 8

According to Figure 13.5,for 1964-1970 for the six countries listed,if we add the inflation rate to the unemployment rate (lowest is best),the country with the lowest score is
A) the United States.
B) Germany.
C) France.
D) Britain.
E) Japan.

Accepted Answer

According to Figure 13.5, Germany had the lowest inflation rate and the second-lowest unemployment rate during the 1964-1970 period among the six listed countries. Therefore, when we add these two variables (lowest is best), Germany would have the lowest score.

Question 9

According to Oatley,a good example of a highly independent central bank (1969-1995)is
A) the Reserve Bank of Australia.
B) the Bank of France.
C) the Swiss National Bank.
D) the Bank of Japan.
E) the Bank of Britain.

Accepted Answer

The Swiss National Bank is known for its high level of independence, particularly during the period from 1969 to 1995. This independence is crucial for a central bank to effectively manage monetary policy without direct political interference, allowing it to focus on long-term economic stability and control of inflation.

Question 10

Which of the following statements is not a function of central bank independence?
A) The central bank can set monetary policy free from the interference by the government.
B) The central bank is free to decide what economic objective to pursue.
C) The central bank is free to decide how to set monetary policy in pursuit of the objective.
D) Central bank decisions can be reversed by other branches of the government.
E) Central bank decisions cannot be reversed by other branches of the government.

Accepted Answer

The statement "Central bank decisions can be reversed by other branches of the government" is not a function of central bank independence. In fact, central bank independence means that the central bank's decisions cannot be easily reversed by other branches of the government, as this could undermine the effectiveness of its policies.

Question 11

According to Figure 13.6,which plots data for 1969-1995,the two countries with the lowest unemployment with the least central bank independence were
A) Italy and Belgium.
B) Norway and Japan.
C) Japan and Sweden.
D) Austria and Germany.
E) Italy and Canada.

Accepted Answer

According to Figure 13.6, Norway and Japan had the lowest unemployment rate among the countries mentioned, and they also had the least central bank independence. Therefore, option B is the correct answer. The other countries listed in the options either had higher unemployment rates or higher levels of central bank independence.

Question 12

The natural rate of unemployment is the rate of unemployment
A) to which an economy will return after a recession or a boom.
B) which is determined by the country's minimum wage.
C) which could be zero.
D) which cannot be raised by labor market institutions.
E) which is determined by the rate of inflation.

Accepted Answer

The natural rate of unemployment is the rate to which an economy will return after a recession or a boom. It is the rate of unemployment that exists when the labor market is in equilibrium and there is no cyclical unemployment. It is also known as the non-accelerating inflation rate of unemployment (NAIRU).

Question 13

According to Oatley,a factor that reduces the inconsistency between democracy and independent central banks is that
A) legislatures cannot withdraw the independence of central banks.
B) central bankers are typically appointed by elected officials for limited terms of office.
C) they are not the only political institutions that are granted independence from electoral politics in democracies.
D) monetary policy is a rather minor policy instrument at a government's disposal.
E) the economic benefit is overwhelming more important than the political inconvenience.

Accepted Answer

The answer of According to Oatley,a factor that reduces the...

Question 14

A time-consistency problem arises when
A) the best course of action at a particular moment in time differs from the best course of action in general.
B) the best course of action at the beginning is usually the best course of action in general.
C) the best course of action at the end is usually the best course of action in general.
D) there is no way of knowing what the best course of action is in general.
E) the best course of action at a particular moment in time is the same as the best course of action in general.

Accepted Answer

A time-consistency problem arises when the best course of action at a particular moment in time differs from the best course of action in general. This means that a decision made at one point in time may not be the best decision in the long-term, leading to a contradiction or inconsistency in the decision-making process. This could happen in various contexts, such as economic policy, personal decision-making, or strategic planning.

Question 15

According to Figure 13.5,for 1971-1980 for the six countries listed,if we add the inflation rate to the unemployment rate (highest is worst),the United States had an overall score that was
A) highest.
B) second highest.
C) third highest.
D) third lowest.
E) second lowest.

Accepted Answer

The answer of According to Figure 13.5,for 1971-1980 for the...

Question 16

The shift from Keynesian strategies to the pursuit of price stability occurred first in
A) the United States.
B) Germany.
C) Britain.
D) France.
E) Japan.

Accepted Answer

The shift from Keynesian strategies to the pursuit of price stability occurred first in Britain, following the election of Margaret Thatcher in 1979. She implemented a policy of monetarism, which emphasized controlling the money supply and reducing inflation, rather than stimulating demand through government spending. This approach was later adopted by other countries, including the United States under President Reagan and Germany under Chancellor Kohl.

Question 17

According to the data presented in the Oatley book,during the period 1964-1990
A) countries with relatively low inflation rates have experienced no economic growth.
B) countries with relatively low inflation rates have experienced lower economic growth.
C) countries with relatively high inflation rates have experienced higher economic growth.
D) if we exclude Germany, the negative relationship between inflation and economic growth disappears.
E) if we exclude Japan, the negative relationship between inflation and economic growth disappears.

Accepted Answer

The answer of According to the data presented in the...

Question 18

According to Figure 13.5,for 1964-1990 for the six countries listed,if we add the inflation rate to the unemployment rate (highest is worst),the country with the highest score for the whole period was
A) the United States.
B) Germany.
C) France.
D) Britain.
E) Japan.

Accepted Answer

By adding the inflation rate to the unemployment rate for each year and averaging it for the entire period of 1964-1990, Britain had the highest score out of the six countries listed. Therefore, the correct answer is D) Britain.

Question 19

The accelerationist principle stipulates that a government determined to use monetary policy to keep
A) employment below the natural rate for any lengthy period will have to continually increase the rate of inflation to do so.
B) unemployment below the natural rate for any lengthy period will have to continually increase the rate of inflation to do so.
C) unemployment below the natural rate for a short period will have to continually increase the rate of inflation to do so.
D) unemployment below the natural rate for any short period will have to continually decrease the rate of inflation to do so.
E) unemployment above the natural rate for any lengthy period will have to continually increase the rate of inflation to do so.

Accepted Answer

The accelerationist principle states that if a government wants to keep unemployment below the natural rate for a lengthy period, it will have to continually increase the rate of inflation. This principle suggests that there is a trade-off between inflation and unemployment. The government can reduce unemployment temporarily by increasing demand through expansionary monetary policy, but this will lead to higher inflation over time. Therefore, the government must decide which trade-off it is willing to make between unemployment and inflation.

Question 20

According to Oatley's data in chapter 13,which plots data for 1969-1995,the countries with the highest and lowest inflation rates respectively were
A) Norway and Japan.
B) Italy and Germany.
C) Britain and Austria.
D) France and Canada.
E) Japan and Germany.

Accepted Answer

Italy had the highest inflation rate, while Germany had the lowest inflation rate during the period 1969-1995 according to Oatley's data.

Quiz 13: A State-Centered Approach to Monetary and Exchange-Rate Policies

During the 1960s in the United States,the inflation-unemployment trade-off occurred within a range of inflation which was,on average,about

According to Oatley,

According to Oatley,granting the central bank independence should lead to

According to Figure 13.5,for 1981-1990 for the six countries listed,if we add the inflation rate to the unemployment rate (lowest is best) ,the country with the lowest score is

According to Oatley's data,the country with the greatest economic growth with the least central bank independence was

According to the data presented in the Oatley book,there is

The price stability strategy during the 1980s

According to Figure 13.5,for 1964-1970 for the six countries listed,if we add the inflation rate to the unemployment rate (lowest is best) ,the country with the lowest score is

According to Oatley,a good example of a highly independent central bank (1969-1995) is

Which of the following statements is not a function of central bank independence?

According to Figure 13.6,which plots data for 1969-1995,the two countries with the lowest unemployment with the least central bank independence were

The natural rate of unemployment is the rate of unemployment

According to Oatley,a factor that reduces the inconsistency between democracy and independent central banks is that

A time-consistency problem arises when

According to Figure 13.5,for 1971-1980 for the six countries listed,if we add the inflation rate to the unemployment rate (highest is worst) ,the United States had an overall score that was

The shift from Keynesian strategies to the pursuit of price stability occurred first in

According to the data presented in the Oatley book,during the period 1964-1990

According to Figure 13.5,for 1964-1990 for the six countries listed,if we add the inflation rate to the unemployment rate (highest is worst) ,the country with the highest score for the whole period was

The accelerationist principle stipulates that a government determined to use monetary policy to keep

According to Oatley's data in chapter 13,which plots data for 1969-1995,the countries with the highest and lowest inflation rates respectively were