Question :
25.1 The Lucas Critique of Policy Evaluation
1) Whether one views : 1373941
25.1 The Lucas Critique of Policy Evaluation
1) Whether one views the discretionary policies of the 1960s and 1970s as destabilizing or believes the economy would have been less stable without these policies, most economists agree that
A) stabilization policies proved more difficult in practice than many economists had expected.
B) stabilization policies proved not to be inflationary.
C) the nondiscretionary policymakers were right in believing that the private economy is inherently stable.
D) the discrectionary policymakers were right in believing that the private economy is inherently stable.
2) The argument that econometric policy evaluation is likely to be misleading if policymakers assume stable economic relationships is known as
A) the monetarist revolution.
B) the Lucas critique.
C) public choice theory.
D) new Keynesian theory.
3) Lucas argues that when policies change, expectations will change thereby
A) changing the relationships in econometric models.
B) causing the government to abandon its discretionary stance.
C) forcing the Fed to keep its deliberations secret.
D) making it easier to predict the effects of policy changes.
4) The rational expectations hypothesis implies that when macroeconomic policy changes,
A) the economy will become highly unstable.
B) the way expectations are formed will change.
C) people will be slow to catch on to the change.
D) people will make systematic mistakes.
5) The Lucas critique indicates that
A) advocates of discretionary policies’ criticisms of rational expectations models are well-founded.
B) advocates of discretionary policies’ criticisms of rational expectations models are not well-founded.
C) expectations are important in determining the outcome of a discretionary policy.
D) expectations are not important in determining the outcome of a discretionary policy.
6) The Lucas critique is an attack on the usefulness of
A) conventional econometric models as forecasting tools.
B) conventional econometric models as indicators of the potential impacts on the economy of particular policies.
C) rational expectations models of macroeconomic activity.
D) the relationship between the quantity theory of money and aggregate demand.
7) The Lucas critique argues that an econometric model constructed using past data
A) may be appropriate for short-run forecasting, but is inappropriate for policy analysis.
B) may be appropriate for policy analysis, but is inappropriate for short-run forecasting.
C) is appropriate for short-run forecasting and policy analysis.
D) is inappropriate for policy analysis and short-run forecasting.
8) The interest rate thought to have the most important impact on aggregate demand is the
A) short-term interest rate.
B) T-bill rate.
C) rate on 90-day CDs.
D) long-term interest rate.
9) A rise in short-term interest rates that is believed to be only temporary
A) is likely to have a significant effect on long-term interest rates.
B) will have a bigger impact on long-term interest rates than if the rise in short-term rates had been permanent.
C) is likely to have only a small impact on long-term interest rates.
D) cannot possibly affect long-term interest rates.
10) According to the Lucas critique, if past increases in the short-term interest rate have always been temporary, then
A) the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate.
B) the term-structure relationship using past data will show no effect of changes in the short-term interest rate on the long-term rate.
C) one cannot predict the term-structure relationship as it depends on expectations.
D) the term-structure relationship using past data will nevertheless show a strong effect of changes in the short-term interest rate on the long-term rate because of a change in the way expectations are formed.
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