Question 1

The Economic Recovery Tax Act of 1981 allowed firms to depreciate their capital at a very rapid rate for tax purposes. This

Accepted Answer

A)  increased the tax liability of firms and discouraged them from investing. 
B)  decreased tax liability and encouraged investment. 
C)  increased the tax liability of firms and encouraged them to invest. 
D)  decreased tax liability and discouraged investment. 
A)  increased the tax liability of firms and discouraged them from investing. 
B)  decreased tax liability and encouraged investment. 
C)  increased the tax liability of firms and encouraged them to invest. 
D)  decreased tax liability and discouraged investment.

Question 2

The quantity theory of money assumes the velocity of money is constant.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the information provided in Figure 32.3 below to answer the question(s) that follow.   Figure 32.3
-Refer to Figure 32.3. Suppose the economy is at Point C. According to the new classical theory, an anticipated decrease in aggregate demand

Accepted Answer

A)  moves the economy to Point A. 
B)  moves the economy to Point B. 
C)  leaves the economy at Point C. 
D)  moves the economy to Point D. 
A)  moves the economy to Point A. 
B)  moves the economy to Point B. 
C)  leaves the economy at Point C. 
D)  moves the economy to Point D.

Question 4

The Lucas supply function, in combination with the assumption that expectations are rational, implies that an announced monetary policy change will lead to

Accepted Answer

A)  a positive price surprise. 
B)  no price surprise. 
C)  a negative price surprise. 
D)  a positive price surprise for expansionary monetary policy and a negative price surprise for contractionary monetary policy. 
A)  a positive price surprise. 
B)  no price surprise. 
C)  a negative price surprise. 
D)  a positive price surprise for expansionary monetary policy and a negative price surprise for contractionary monetary policy.

Question 5

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 Keynes, a(n) ________ will shift AD1 to the right.

Accepted Answer

A)  increase in taxes 
B)  decrease in the money supply 
C)  increase in government spending 
D)  all of the above 
A)  increase in taxes 
B)  decrease in the money supply 
C)  increase in government spending 
D)  all of the above

Question 6

According to the Lucas supply function, if a firm mistakenly perceives that all prices are going ________ because its own output price is going ________, it will ________ its production level.

Accepted Answer

A)  up; up; increase 
B)  down; down; reduce 
C)  up; up; hold constant 
D)  up; down; increase 
A)  up; up; increase 
B)  down; down; reduce 
C)  up; up; hold constant 
D)  up; down; increase

Question 7

It is difficult in economics to perform controlled experiments.

Accepted Answer

A) True 
 B)False

Question 8

In the fourth quarter of 2014, the value of the velocity of money in the United States was approximately

Accepted Answer

A)  0.3. 
B)  5.3. 
C)  9.8. 
D)  13.0. 
A)  0.3. 
B)  5.3. 
C)  9.8. 
D)  13.0.

Question 9

If the stock of money is $200 billion, velocity is 5, and the price level is 5, what is income?

Accepted Answer

A)  $8 billion 
B)  $40 billion 
C)  $200 billion 
D)  $5,000 billion 
A)  $8 billion 
B)  $40 billion 
C)  $200 billion 
D)  $5,000 billion

Question 10

If real output is $10 billion, the price level is 3, and velocity is 6, what is the stock of money?

Accepted Answer

A)  $1.8 billion 
B)  $5 billion 
C)  $19 billion 
D)  $180 billion 
A)  $1.8 billion 
B)  $5 billion 
C)  $19 billion 
D)  $180 billion

Question 11

According to the Lucas supply function, if the expected price level is larger than the actual price level

Accepted Answer

A)  real output increases. 
B)  real output decreases. 
C)  nominal output increases. 
D)  nominal output decreases. 
A)  real output increases. 
B)  real output decreases. 
C)  nominal output increases. 
D)  nominal output decreases.

Question 12

If the stock of money is $60 billion, velocity is 5, and real output is $100 billion, what is the price level?

Accepted Answer

A)  0.12 
B)  1.4 
C)  3 
D)  6 
A)  0.12 
B)  1.4 
C)  3 
D)  6

Question 13

It is difficult to test whether the velocity of money is constant over time because

Accepted Answer

A)  there has been very little variation in the money supply over time. 
B)  there may be a time lag between a change in the money supply and its effects on nominal GDP. 
C)  there is only one definition of the money supply. 
D)  it is difficult to measure the value of nominal GDP over time. 
A)  there has been very little variation in the money supply over time. 
B)  there may be a time lag between a change in the money supply and its effects on nominal GDP. 
C)  there is only one definition of the money supply. 
D)  it is difficult to measure the value of nominal GDP over time.

Question 14

If the equation for the ________ is looked on as a demand-for-money equation, then the demand for money depends on nominal income but not the interest rate.

Accepted Answer

A)  real business cycle theory 
B)  quantity theory of money 
C)  Keynesian income-expenditure model 
D)  unanticipated inflation rate 
A)  real business cycle theory 
B)  quantity theory of money 
C)  Keynesian income-expenditure model 
D)  unanticipated inflation rate

Question 15

According to the Lucas supply function, the amount of output produced is not related to the price level if

Accepted Answer

A)  people's expectations of the price level are higher than the actual price level. 
B)  people's expectations of the price level are on target. 
C)  people's expectations of the price level are lower than the actual price level. 
D)  people's expectations of the price level are either higher or lower than the actual price level. 
A)  people's expectations of the price level are higher than the actual price level. 
B)  people's expectations of the price level are on target. 
C)  people's expectations of the price level are lower than the actual price level. 
D)  people's expectations of the price level are either higher or lower than the actual price level.

Question 16

Which of the following schools of economic thought is decidedly opposed to government intervention in the macroeconomy?

Accepted Answer

A)  new classical 
B)  monetarism 
C)  Keynesian 
D)  both A and B 
A)  new classical 
B)  monetarism 
C)  Keynesian 
D)  both A and B

Question 17

Supporters of supply-side economics claim that ________ tax policies were quite successful in stimulating the economy because throughout most of the 1980s, federal receipts continued to rise even though tax rates had been cut.

Accepted Answer

A)  Jimmy Carter's 
B)  Gerald Ford's 
C)  Ronald Reagan's 
D)  Richard Nixon's 
A)  Jimmy Carter's 
B)  Gerald Ford's 
C)  Ronald Reagan's 
D)  Richard Nixon's

Question 18

The Lucas supply function, in combination with the assumption that expectations are rational, implies that an announced monetary policy change will

Accepted Answer

A)  not change output. 
B)  decrease output, but never increase output. 
C)  either increase or decrease output, depending on the type of monetary policy change. 
D)  increase output, but never decrease output. 
A)  not change output. 
B)  decrease output, but never increase output. 
C)  either increase or decrease output, depending on the type of monetary policy change. 
D)  increase output, but never decrease output.

Question 19

Increases in government spending are consistent with supply-side economic policies.

Accepted Answer

A) True 
 B)False

Question 20

If the demand for money depends on the ________ and the velocity is not constant, then the quantity theory of money ________.

Accepted Answer

A)  level of GDP; does not hold 
B)  interest rate; does not hold 
C)  interest rate; still holds 
D)  level of GDP; still holds 
A)  level of GDP; does not hold 
B)  interest rate; does not hold 
C)  interest rate; still holds 
D)  level of GDP; still holds

Exam 32: Alternative Views in Macroeconomics

The Economic Recovery Tax Act of 1981 allowed firms to depreciate their capital at a very rapid rate for tax purposes. This

The quantity theory of money assumes the velocity of money is constant.

Refer to the information provided in Figure 32.3 below to answer the question(s) that follow. Figure 32.3 -Refer to Figure 32.3. Suppose the economy is at Point C. According to the new classical theory, an anticipated decrease in aggregate demand

The Lucas supply function, in combination with the assumption that expectations are rational, implies that an announced monetary policy change will lead to

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 Keynes, a(n) ________ will shift AD1 to the right.

According to the Lucas supply function, if a firm mistakenly perceives that all prices are going ________ because its own output price is going ________, it will ________ its production level.

It is difficult in economics to perform controlled experiments.

In the fourth quarter of 2014, the value of the velocity of money in the United States was approximately

If the stock of money is $200 billion, velocity is 5, and the price level is 5, what is income?

If real output is $10 billion, the price level is 3, and velocity is 6, what is the stock of money?

According to the Lucas supply function, if the expected price level is larger than the actual price level

If the stock of money is $60 billion, velocity is 5, and real output is $100 billion, what is the price level?

It is difficult to test whether the velocity of money is constant over time because

If the equation for the ________ is looked on as a demand-for-money equation, then the demand for money depends on nominal income but not the interest rate.

According to the Lucas supply function, the amount of output produced is not related to the price level if

Which of the following schools of economic thought is decidedly opposed to government intervention in the macroeconomy?

Supporters of supply-side economics claim that ________ tax policies were quite successful in stimulating the economy because throughout most of the 1980s, federal receipts continued to rise even though tax rates had been cut.

The Lucas supply function, in combination with the assumption that expectations are rational, implies that an announced monetary policy change will

Increases in government spending are consistent with supply-side economic policies.

If the demand for money depends on the ________ and the velocity is not constant, then the quantity theory of money ________.

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

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 Keynes, a(n) ________ will shift AD₁ to the right.

According to the Lucas supply function, if a firm mistakenly perceives that all prices are going because its own output price is going , it will its production level.

If the demand for money depends on the and the velocity is not constant, then the quantity theory of money .