1)The time it takes for policy makers to recognize the existence of an economic boom or slump is called a recognition lag.

A.

True

B.

False

2)When the labor supply increases, this is referred to as an increase in human capital.

A.

False

B.

True

3)An increase in the quality of labor as well as an increase in the quantity of labor will each lead to long-run growth.

A.

False

B.

True

4)Which of the following is true of stabilization policies?

A.

They are very successful during downturns in the economy but are ineffective during expansions.

B.

They can cause instability due to various types of time lags in the response of the economy to the stabilization policies.

C.

They are very successful during expansions in the economy but are ineffective during downturns.

D.

They are always very effective since their only goal is to minimize fluctuations.

5)The goal of stabilization policies related to GDP is to __________.

A.

eliminate all downturns in GDP

B.

smooth out fluctuations in GDP as much as possible

C.

create more variability in GDP over time

D.

maximize the upswings and minimize the downswings in GDP

6)Stabilization policy has the following

objective(s):

Part 2

A.

Reduce inflation to zero.

B.

Sustainable growth, full employment, and stable prices.

C.

Smooth fluctuations in output.

D.

Smooth fluctuations in output, and maintain inflation at a rate consistent with sustainable growth and full employment.