The misery index is constructed by
A. adding the inflation rate and the unemployment rate
B. multiplying the inflation rate with the unemployment rate
C. dividing the inflation rate by the unemployment rate
D. adding the sacrifice ratio and the replacement rate
E. combining the sacrifice ratio with Okun's law
The misery index for the United States
A. increased steadily from 1950 to 1990, but has since declined
B. is closely but inversely related to the successes of the incumbent party
C. is closely and positively related to the successes of the incumbent party
D. is only loosely and inversely related to the successes of the incumbent party
E. none of the above
A change in the misery index
A. may indicate a change in the chances of an incumbent to get re-elected
B. may arise from a change in the inflation rate even if unemployment remains constant
C. is likely to occur if the economy experiences a positive supply shock
D. all of the above
E. none of the above
Political business cycles consist of fluctuations caused by
A. misguided foreign policies designed to increase political pressure over our trade partners
B. economic policies designed to help win elections
C. the Fed trying to support every policy proposed by the president
D. our trade partners trying to react to changes in U.S. policies
E. the inability of politicians to agree on the right policy mix
Predictions based on the theory of political business cycles suggest that
A. presidents who succeed in reducing inflation sharply before an election have the best chance to be re-elected even if unemployment increases
B. achieving a low rate of unemployment before an election is less important than achieving a low rate of inflation
C. presidents who want to be re-elected should aim for low inflation early in their terms and then try to achieve strong economic growth before the next election
D. the practice of manipulating the economy before an election seldom pays off since voter behavior is not significantly affected by economic issues
E. none of the above
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