QUEST IONS FOR REVIEW 1. What are the inside lag and the outside lag? Which has the longer inside lag-monetary or fiscal policy? Which has the longer outside lag? Why? 5. What is meant by the "time inconsistency" of economic policy? Why might policymakers be tempted to renege on an announcement they made earlier? In this situation, what is the advantage of a policy rule? 2. Why would more accurate economic forecasting make it easier for policymakers to stabilize the economy? Describe two ways economists try to forecast developments in the economy. 6. List three policy rules that the Fed might follow. Which of these would you advocate? Why? 3. Describe the Lucas critique. 4. How does a person's interpretation of macro- economic history affect his view of macroeco- nomic policy?

QUEST IONS FOR REVIEW 1. What are the inside lag and the outside lag? Which has the longer inside lag-monetary or fiscal policy? Which has the longer outside lag? Why? 5. What is meant by the "time inconsistency" of economic policy? Why might policymakers be tempted to renege on an announcement they made earlier? In this situation, what is the advantage of a policy rule? 2. Why would more accurate economic forecasting make it easier for policymakers to stabilize the economy? Describe two ways economists try to forecast developments in the economy. 6. List three policy rules that the Fed might follow. Which of these would you advocate? Why? 3. Describe the Lucas critique. 4. How does a person's interpretation of macro- economic history affect his view of macroeco- nomic policy?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

KEY
CONCEPTS
Inside and outside lags
Political business cycle
Monetarists
Automatic stabilizers
Time inconsistency
Inflation targeting
Lucas critique
QUESTIONS FOR
REVIEW
5. What is meant by the "time inconsistency"
of economic policy? Why might policymakers
be tempted to renege on an announcement
they made earlier? In this situation, what is the
advantage of a policy rule?
1. What are the inside lag and the outside lag? Which
has the longer inside lag-monetary or fiscal
policy? Which has the longer outside lag? Why?
2. Why would more accurate economic forecasting
make it easier for policymakers to stabilize the
economy? Describe two ways economists try to
forecast developments in the economy.
6. List three policy rules that the Fed might follow.
Which of these would you advocate? Why?
3. Describe the Lucas critique.
4. How does a person's interpretation of macro-
economic history affect his view of macroeco-
nomic policy?

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