Question 1

Competing macroeconomic models may be hard to test because people may change how they react when economic policies are changed.

Accepted Answer

A) True 
 B)False

Question 2

The state of the economy during the 1970s and 1980s reinforced the ideas of Keynesian economic policies and their ability to successfully manage the macroeconomy.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the information provided in Figure 32.2 below to answer the question(s) that follow.   Figure 32.2
-Refer to Figure 32.2. According to ________, a(n) ________ fiscal policy in the long run and after all the adjustments have been made increases price level above P1, but does not change equilibrium output.

Accepted Answer

A)  Keynes; contractionary 
B)  Keynes; expansionary 
C)  monetarists; expansionary 
D)  the new classicals; contractionary 
A)  Keynes; contractionary 
B)  Keynes; expansionary 
C)  monetarists; expansionary 
D)  the new classicals; contractionary

Question 4

Increasing government spending is a contractionary Keynesian economic policy.

Accepted Answer

A) True 
 B)False

Question 5

The Lucas supply function states that real output is a function of the price surprise.

Accepted Answer

A) True 
 B)False

Question 6

New classical macroeconomics developed from the

Accepted Answer

A)  theoretical and empirical critiques of traditional economics. 
B)  discrepancies between classical theory and the Great Depression. 
C)  global transition from agrarian to industrial economies. 
D)  conversion form closed to open economies. 
A)  theoretical and empirical critiques of traditional economics. 
B)  discrepancies between classical theory and the Great Depression. 
C)  global transition from agrarian to industrial economies. 
D)  conversion form closed to open economies.

Question 7

According to the Lucas supply function, workers who experience a positive price surprise will work fewer hours when

Accepted Answer

A)  there is no substitution effect from a positive price surprise. 
B)  there is no income effect from a positive price surprise. 
C)  the substitution effect dominates the income effect. 
D)  the income effect dominates the substitution effect. 
A)  there is no substitution effect from a positive price surprise. 
B)  there is no income effect from a positive price surprise. 
C)  the substitution effect dominates the income effect. 
D)  the income effect dominates the substitution effect.

Question 8

If the stock of money is $100 billion, velocity is 4, and the price level is 5, what is income?

Accepted Answer

A)  $5 billion 
B)  $80 billion 
C)  $125 billion 
D)  $2,000 billion 
A)  $5 billion 
B)  $80 billion 
C)  $125 billion 
D)  $2,000 billion

Question 9

MV = PY represents the

Accepted Answer

A)  quantity theory of money. 
B)  Keynesian equation of equality. 
C)  banking equilibrium. 
D)  federal funds equation. 
A)  quantity theory of money. 
B)  Keynesian equation of equality. 
C)  banking equilibrium. 
D)  federal funds equation.

Question 10

According to the Lucas supply function, the amount of output produced is ________ to the price level if people's expectations of the price level are on target.

Accepted Answer

A)  directly related 
B)  inversely related 
C)  negatively related 
D)  not related 
A)  directly related 
B)  inversely related 
C)  negatively related 
D)  not related

Question 11

John Maynard Keynes believed that the government should play a role in fighting both unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 12

The ________ hypothesis suggests that errors in forecasting future inflation rates are due to random, unpredictable events.

Accepted Answer

A)  rational-expectations 
B)  stagflation 
C)  chaos-theory 
D)  Friedman 
A)  rational-expectations 
B)  stagflation 
C)  chaos-theory 
D)  Friedman

Question 13

A monetarist would advocate increasing the growth rate of money during an inflation.

Accepted Answer

A) True 
 B)False

Question 14

With the Lucas supply function, a price surprise means

Accepted Answer

A)  actual price is greater than expected price. 
B)  actual price is less than expected price. 
C)  actual price equals expected price. 
D)  actual price is either greater than or lower than expected price. 
A)  actual price is greater than expected price. 
B)  actual price is less than expected price. 
C)  actual price equals expected price. 
D)  actual price is either greater than or lower than expected price.

Question 15

The leading spokesman for monetarism over the last few decades was

Accepted Answer

A)  John Kenneth Galbraith. 
B)  Milton Friedman. 
C)  Robert E. Lucas. 
D)  Paul Samuelson. 
A)  John Kenneth Galbraith. 
B)  Milton Friedman. 
C)  Robert E. Lucas. 
D)  Paul Samuelson.

Question 16

Which of the following would be considered a supply-side policy?

Accepted Answer

A)  decreasing taxes to increase the incentive to work 
B)  an increase in government spending that would lead to increased aggregate demand 
C)  increasing the amount of Social Security contributions paid by businesses to help fund the Social Security program 
D)  an increase in government regulations that require businesses to internalize pollution costs. 
A)  decreasing taxes to increase the incentive to work 
B)  an increase in government spending that would lead to increased aggregate demand 
C)  increasing the amount of Social Security contributions paid by businesses to help fund the Social Security program 
D)  an increase in government regulations that require businesses to internalize pollution costs.

Question 17

If income is $60 billion, the price level is 6, and the stock of money is $36 billion, what is the velocity of money?

Accepted Answer

A)  2.4 
B)  3.6 
C)  10 
D)  36 
A)  2.4 
B)  3.6 
C)  10 
D)  36

Question 18

If income is $40 billion, the price level is 10, and the stock of money is $20 billion, what is the velocity of money?

Accepted Answer

A)  0.8 
B)  5 
C)  8 
D)  20 
A)  0.8 
B)  5 
C)  8 
D)  20

Question 19

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. At Point ________, any change in tax rates will decrease tax revenue.

Accepted Answer

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

Question 20

According to the Laffer curve, a decrease in the tax rate may decrease tax revenues.

Accepted Answer

A) True 
 B)False

Exam 32: Alternative Views in Macroeconomics

Competing macroeconomic models may be hard to test because people may change how they react when economic policies are changed.

The state of the economy during the 1970s and 1980s reinforced the ideas of Keynesian economic policies and their ability to successfully manage the macroeconomy.

Increasing government spending is a contractionary Keynesian economic policy.

The Lucas supply function states that real output is a function of the price surprise.

New classical macroeconomics developed from the

According to the Lucas supply function, workers who experience a positive price surprise will work fewer hours when

If the stock of money is $100 billion, velocity is 4, and the price level is 5, what is income?

MV = PY represents the

According to the Lucas supply function, the amount of output produced is ________ to the price level if people's expectations of the price level are on target.

John Maynard Keynes believed that the government should play a role in fighting both unemployment and inflation.

The ________ hypothesis suggests that errors in forecasting future inflation rates are due to random, unpredictable events.

A monetarist would advocate increasing the growth rate of money during an inflation.

With the Lucas supply function, a price surprise means

The leading spokesman for monetarism over the last few decades was

Which of the following would be considered a supply-side policy?

If income is $60 billion, the price level is 6, and the stock of money is $36 billion, what is the velocity of money?

If income is $40 billion, the price level is 10, and the stock of money is $20 billion, what is the velocity of money?

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. At Point ________, any change in tax rates will decrease tax revenue.

According to the Laffer curve, a decrease in the tax rate may decrease tax revenues.

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

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