Question Question:Question 1: According to advocates of rational expectations, traditional estimates of the sacrifice ratio are unreliable because they:

Question:Question 1: According to advocates of rational expectations, traditional estimates of the sacrifice ratio are unreliable because they:

A) ignore inside lags.

B) overestimate outside lags.

C) are based on adaptive expectations.

D) are time inconsistent.

Question 2) According to the traditional view of government debt (as in the Mundell-Fleming model), if taxes are cut without cutting government spending, then the short-run effects are a(n) ______ of the dollar and a(n) ______ in net exports.

A) appreciation; increase

B) appreciation; decrease

C) depreciation; increase

D) depreciation; decrease

Question 3) The government making loans that are secured by collateral of dubious value to prop up the financial system is an example of:

A) a giveaway of public funds.

B) risky lending.

C) a capital injection.

D) conventional monetary policy.

Question 4) Governments can reduce the problem of moral hazard by:

A) requiring licenses be obtained before starting a business.

B) prosecuting fraud and malfeasance.

C) keeping interest rates low.

D) reducing corporate income tax rates.

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