Question 1

If the demand for money depends on the interest rate, velocity is

Accepted Answer

A)  not constant, and the quantity theory of money does hold. 
B)  not constant, and the quantity theory of money does not hold. 
C)  constant, and the quantity theory of money does not hold. 
D)  constant, and the quantity theory of money does hold. 
A)  not constant, and the quantity theory of money does hold. 
B)  not constant, and the quantity theory of money does not hold. 
C)  constant, and the quantity theory of money does not hold. 
D)  constant, and the quantity theory of money does hold.

Question 2

The Lucas supply function, in combination with the assumption that expectations are rational, implies that

Accepted Answer

A)  anticipated policy changes have a significant effect on real output. 
B)  unanticipated policy changes have no effect on real output. 
C)  anticipated policy changes have no effect on real output. 
D)  the effect that policy changes have on real output is the same, regardless of whether those changes are anticipated or not. 
A)  anticipated policy changes have a significant effect on real output. 
B)  unanticipated policy changes have no effect on real output. 
C)  anticipated policy changes have no effect on real output. 
D)  the effect that policy changes have on real output is the same, regardless of whether those changes are anticipated or not.

Question 3

If the equation for the quantity theory of money is looked on as a demand-for-money equation, then the demand for money depends on

Accepted Answer

A)  nominal income but not on the interest rate. 
B)  nominal income and the interest rate. 
C)  real income but not on the interest rate. 
D)  real income and the interest rate. 
A)  nominal income but not on the interest rate. 
B)  nominal income and the interest rate. 
C)  real income but not on the interest rate. 
D)  real income and the interest rate.

Question 4

Refer to the information provided in Figure 32.1 below to answer the question(s) that follow.   Figure 32.1
-Refer to Figure 32.1. The tax rate that will maximize tax revenue is associated with point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 5

Macroeconomic models differ in ways that are hard to standardize.

Accepted Answer

A) True 
 B)False

Question 6

According to the new classical theory, anticipated policies do not affect the economy.

Accepted Answer

A) True 
 B)False

Question 7

Velocity will be constant if the demand for money with respect to the interest rate is

Accepted Answer

A)  unitary elastic. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  elastic, but not perfectly elastic. 
A)  unitary elastic. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  elastic, but not perfectly elastic.

Question 8

If the money supply is measured using ________, fluctuations in velocity are ________.

Accepted Answer

A)  M1 rather than M2; increased 
B)  M1 rather than M2; reduced 
C)  M1 rather than M2; eliminated 
D)  M2 rather than M1; eliminated 
A)  M1 rather than M2; increased 
B)  M1 rather than M2; reduced 
C)  M1 rather than M2; eliminated 
D)  M2 rather than M1; eliminated

Question 9

People are said to have ________ if they use all available information in forming their expectations.

Accepted Answer

A)  rational expectations 
B)  insider information 
C)  unbiased prognostication 
D)  psychic insight 
A)  rational expectations 
B)  insider information 
C)  unbiased prognostication 
D)  psychic insight

Question 10

It is difficult to empirically test alternative macroeconomic models against one another because

Accepted Answer

A)  macroeconomic models do not predict the same outcomes from policies. 
B)  macroeconomic models differ in ways that are hard to standardize for. 
C)  macroeconomic models cannot be expressed in mathematical terms. 
D)  macroeconomic models are always expressed in scientific terms. 
A)  macroeconomic models do not predict the same outcomes from policies. 
B)  macroeconomic models differ in ways that are hard to standardize for. 
C)  macroeconomic models cannot be expressed in mathematical terms. 
D)  macroeconomic models are always expressed in scientific terms.

Question 11

The ________ is the number of times a dollar bill exchanges hands in a year.

Accepted Answer

A)  velocity of money 
B)  exchange rate 
C)  money supply ratio 
D)  government spending multiplier 
A)  velocity of money 
B)  exchange rate 
C)  money supply ratio 
D)  government spending multiplier

Question 12

Which of the following is assumed constant in the quantity theory of money?

Accepted Answer

A)  money supply 
B)  velocity 
C)  the price level 
D)  output 
A)  money supply 
B)  velocity 
C)  the price level 
D)  output

Question 13

The leading spokesperson for monetarism was

Accepted Answer

A)  John Maynard Keynes. 
B)  Milton Friedman. 
C)  Arthur Laffer. 
D)  Ronald Reagan. 
A)  John Maynard Keynes. 
B)  Milton Friedman. 
C)  Arthur Laffer. 
D)  Ronald Reagan.

Question 14

According to the Laffer curve, an increase in the tax rate will decrease tax revenue

Accepted Answer

A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the 0% tax rate point on the curve. 
D)  no matter the location of the economy on the curve. 
A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the 0% tax rate point on the curve. 
D)  no matter the location of the economy on the curve.

Question 15

A rational-expectations theorist argues for increased government involvement in the economy to ensure stable price and employment growth.

Accepted Answer

A) True 
 B)False

Question 16

If income is $30 billion, the price level is 3, and the stock of money is $18 billion, what is the velocity of money?

Accepted Answer

A)  1.4 
B)  1.8 
C)  5 
D)  180 
A)  1.4 
B)  1.8 
C)  5 
D)  180

Question 17

Assume that the demand for money depends on the interest rate. An increase in the money supply will cause the interest rate to ________, the quantity demanded of money to ________, and the velocity of money to ________.

Accepted Answer

A)  decrease; decrease; decrease 
B)  increase; decrease; increase 
C)  decrease; increase; decrease 
D)  decrease; increase; increase 
A)  decrease; decrease; decrease 
B)  increase; decrease; increase 
C)  decrease; increase; decrease 
D)  decrease; increase; increase

Question 18

A monetarist would advocate decreasing the growth rate of money supply during a recession.

Accepted Answer

A) True 
 B)False

Question 19

John Maynard Keynes emphasized the problem that sticky wages may have on the economy.

Accepted Answer

A) True 
 B)False

Question 20

The Lucas supply function states that real output will not change from its fixed level

Accepted Answer

A)  only if there is a positive price surprise. 
B)  only if there is a negative price surprise. 
C)  only if there is no price surprise. 
D)  Both A and B are possible. 
A)  only if there is a positive price surprise. 
B)  only if there is a negative price surprise. 
C)  only if there is no price surprise. 
D)  Both A and B are possible.

Exam 32: Alternative Views in Macroeconomics

If the demand for money depends on the interest rate, velocity is

The Lucas supply function, in combination with the assumption that expectations are rational, implies that

If the equation for the quantity theory of money is looked on as a demand-for-money equation, then the demand for money depends on

Refer to the information provided in Figure 32.1 below to answer the question(s) that follow. Figure 32.1 -Refer to Figure 32.1. The tax rate that will maximize tax revenue is associated with point

Macroeconomic models differ in ways that are hard to standardize.

According to the new classical theory, anticipated policies do not affect the economy.

Velocity will be constant if the demand for money with respect to the interest rate is

If the money supply is measured using ________, fluctuations in velocity are ________.

People are said to have ________ if they use all available information in forming their expectations.

It is difficult to empirically test alternative macroeconomic models against one another because

The ________ is the number of times a dollar bill exchanges hands in a year.

Which of the following is assumed constant in the quantity theory of money?

The leading spokesperson for monetarism was

According to the Laffer curve, an increase in the tax rate will decrease tax revenue

A rational-expectations theorist argues for increased government involvement in the economy to ensure stable price and employment growth.

If income is $30 billion, the price level is 3, and the stock of money is $18 billion, what is the velocity of money?

Assume that the demand for money depends on the interest rate. An increase in the money supply will cause the interest rate to ________, the quantity demanded of money to ________, and the velocity of money to ________.

A monetarist would advocate decreasing the growth rate of money supply during a recession.

John Maynard Keynes emphasized the problem that sticky wages may have on the economy.

The Lucas supply function states that real output will not change from its fixed level

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

If the money supply is measured using , fluctuations in velocity are .

Assume that the demand for money depends on the interest rate. An increase in the money supply will cause the interest rate to , the quantity demanded of money to , and the velocity of money to .