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Chapter 24: Q. 11 (page 655)

In the United States, many observers have commented in recent years on the 鈥減olitical gridlock in Washington D.C.鈥� and referred to Congress as a 鈥淒o Nothing Congress.鈥� What type of policy lag is this describing?

Short Answer

Expert verified

This is describing implementation policy lag.

Step by step solution

01

Step 1. Introduction

Congress is the government's legislative body in the United States. The Senate and the House of Representatives are its two chambers.

The Senate is one of the two chambers of the United States' federal legislature, Congress.

02

Step 2. Explanation

The prohibition imposed on the legislature and its chamber senate from leaving the phone booth to vote can be viewed as a form of implementation lag, as a new proposal in a political party's policy can take time to be adopted by all of its members.

As a result, implementation policy lag can be a sort of lag that prevents congress and the senate from getting out of their phone booths to vote.

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Most popular questions from this chapter

It can be an interesting exercise to compare the purchasing power of the dollar over different periods in history. Go to https://www.bls.gov/data/inflation_ calculator.htm to find the inflation calculator. Use this calculator to answer the following questions. a. If a new home cost \(125,000 in 2017, what would it have cost in 1950? b. The average annual household income in 2017 was about \)50,000. What would this income have been in 1945? c. An average new car cost about $25,000 in 2017. What would this car have cost in 1945?

d. Using your results from parts (b) and (c), did the purchase of a new car consume more or less of an average household鈥檚 income in 2017 than in 1945?

Because government policymakers do not consider inflation desirable, their policies cannot be the source of inflation.鈥� Is this statement true, false, or uncertain? Explain your answer.

The Problems update with real-time data in MyLab Economics and are available for practice or instructor assignment. 1. On January 19, 2017, the Federal Reserve released its amended statement on longer-run goals and monetary policy strategy. It stated: 鈥淭he Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve鈥檚 statutory mandate鈥� and that 鈥渢he median of FOMC participants鈥� estimates of the longer-run normal rate of unemployment was 4.8 percent.鈥� Assume this statement implies that the natural rate of unemployment is believed to be 4.8%. Go to the St. Louis Federal Reserve FRED database, and find data on the personal consumption expenditure price index (PCECTPI), the unemployment rate (UNRATE), real GDP (GDPC1), and real potential gross domestic product (GDPPOT), an estimate of potential GDP. For the price index, adjust the units setting to 鈥淧ercent Change From Year Ago.鈥� Download the data into a spreadsheet.

  1. For the most recent four quarters of data available, calculate the average inflation gap using the 2% target referenced by the Fed. Calculate this value as the average of the inflation gaps over the four quarters.
  2. For the most recent four quarters of data available, calculate the average output gap using the GDP measure and the potential GDP estimate. Calculate the gap as the percentage deviation of output from the potential level of output. Calculate the average value over the most recent four quarters of data available.
  3. For the most recent 12 months of data available, calculate the average unemployment gap, using 5.6% as the presumed natural rate of unemployment. Based on your answers to parts (a) through (c), does the divine coincidence apply to the current economic situation? Why or why not? What does your answer imply about the sources of shocks that have impacted the current economy? Briefly explain.

If an economy鈥檚 self-correcting mechanism works slowly, should the government necessarily pursue an activist policy to eliminate unemployment? Why or why not?

For each of the following shocks, describe how monetary policymakers would respond (if at all) to stabilize economic activity. Assume the economy starts at a longrun equilibrium.

a. Consumers reduce autonomous consumption.

b. Financial frictions decrease.

c. Government spending increases.

d. Taxes increase.

e. The domestic currency appreciates.
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