Question 1

What actions would a supply-side economist advocate to cure an inflationary situation?

Accepted Answer

A supply-side economist would advocate s

Question 2

Which of the following does not explain why the U.S.economy has been more stable after 1946 than before?

Accepted Answer

A) A large government sector. 
B) A shift from manufacturing to services. 
C) Automatic stabilizers. 
D) A laissez faire approach. 
A) A large government sector. 
B) A shift from manufacturing to services. 
C) Automatic stabilizers. 
D) A laissez faire approach.

Question 3

Efforts to fine-tune the economy have been used for several decades,and since then

Accepted Answer

A) We have successfully achieved our major economic goals at all times. 
B) We still experience periods of recession,high unemployment,and inflation. 
C) Employment goals have been met,but price stability has not been attained. 
D) Price stability goals have been met,but full employment has not been attained. 
A) We have successfully achieved our major economic goals at all times. 
B) We still experience periods of recession,high unemployment,and inflation. 
C) Employment goals have been met,but price stability has not been attained. 
D) Price stability goals have been met,but full employment has not been attained.

Question 4

Keynesians believe that budgetary restraint should be used to cool an overheated economy.

Accepted Answer

A) True 
 B)False

Question 5

Politicians might hesitate to increase income and in-kind transfers to the poor because this could cause

Accepted Answer

A) A decrease in the budget deficit. 
B) Private sector spending to overpower public sector spending. 
C) Excessive demand for goods and services. 
D) An increase in unemployment. 
A) A decrease in the budget deficit. 
B) Private sector spending to overpower public sector spending. 
C) Excessive demand for goods and services. 
D) An increase in unemployment.

Question 6

Which of the following policy obstacles could occur because it is difficult to know how market participants will respond to specific prices?

Accepted Answer

A) Implementation problems. 
B) Design problems. 
C) Velocity problems. 
D) Goal conflicts. 
A) Implementation problems. 
B) Design problems. 
C) Velocity problems. 
D) Goal conflicts.

Question 7

Which of the following groups believe that lower tax rates will increase the incentives to work,invest,and produce?

Accepted Answer

A) Keynesians. 
B) New classical economists. 
C) Monetarists. 
D) Supply-siders. 
A) Keynesians. 
B) New classical economists. 
C) Monetarists. 
D) Supply-siders.

Question 8

Which of the following is not a leading indicator for economic activity?

Accepted Answer

A) Orders for new equipment. 
B) The level of inventories. 
C) Natural disasters. 
D) Building permits. 
A) Orders for new equipment. 
B) The level of inventories. 
C) Natural disasters. 
D) Building permits.

Question 9

Which group believes the government should react to inflation by tightening the money supply?

Accepted Answer

A) Modern Keynesians and supply-siders. 
B) Monetarists and modern Keynesians. 
C) New classical economists and monetarists. 
D) Supply-siders and monetarists. 
A) Modern Keynesians and supply-siders. 
B) Monetarists and modern Keynesians. 
C) New classical economists and monetarists. 
D) Supply-siders and monetarists.

Question 10

The fact that the president must ask Congress for the authority to cut taxes is an example of

Accepted Answer

A) An implementation problem. 
B) A goal conflict. 
C) A rational expectations problem. 
D) A measurement problem. 
A) An implementation problem. 
B) A goal conflict. 
C) A rational expectations problem. 
D) A measurement problem.

Question 11

Monetarists believe that an increase in the money supply shifts the aggregate

Accepted Answer

A) Supply curve to the left. 
B) Supply curve to the right. 
C) Demand curve to the left. 
D) Demand curve to the right. 
A) Supply curve to the left. 
B) Supply curve to the right. 
C) Demand curve to the left. 
D) Demand curve to the right.

Question 12

Monetary policy to cure inflation might include

Accepted Answer

A) A decrease in discretionary spending. 
B) The purchase of securities in the open market by the Fed. 
C) An increase in automatic stabilizers. 
D) An increase in the discount rate. 
A) A decrease in discretionary spending. 
B) The purchase of securities in the open market by the Fed. 
C) An increase in automatic stabilizers. 
D) An increase in the discount rate.

Question 13

Monetary policy tools include:

Accepted Answer

A) Income taxes and the discount rate. 
B) Open market operations and government spending. 
C) The reserve ratio and the discount rate. 
D) Open market operations and deregulation. 
A) Income taxes and the discount rate. 
B) Open market operations and government spending. 
C) The reserve ratio and the discount rate. 
D) Open market operations and deregulation.

Question 14

During a severe recession,appropriate economic policy might include

Accepted Answer

A) An open market purchase by the Fed,a decrease in the discount rate,or a decrease in government regulation. 
B) An open market sale by the Fed,a decrease in the discount rate,or an increase in the budget deficit. 
C) A decrease in government spending,a decrease in the discount rate,or a decrease in government regulation. 
D) An open market purchase by the Fed,a decrease in the tax rates,or a decrease in the budget deficit. 
A) An open market purchase by the Fed,a decrease in the discount rate,or a decrease in government regulation. 
B) An open market sale by the Fed,a decrease in the discount rate,or an increase in the budget deficit. 
C) A decrease in government spending,a decrease in the discount rate,or a decrease in government regulation. 
D) An open market purchase by the Fed,a decrease in the tax rates,or a decrease in the budget deficit.

Question 15

The potential conflict of economic policy with political objectives can be used to explain

Accepted Answer

A) The ups and downs in overall business activity. 
B) The election of the Federal Reserve's Board of Governors. 
C) Why politicians stimulate the economy before an election and restrict it afterward. 
D) Illegal behavior on the part of politicians and economists. 
A) The ups and downs in overall business activity. 
B) The election of the Federal Reserve's Board of Governors. 
C) Why politicians stimulate the economy before an election and restrict it afterward. 
D) Illegal behavior on the part of politicians and economists.

Question 16

A supply-side policy to cure inflation would include

Accepted Answer

A) A minimum wage increase. 
B) Tax increases. 
C) Deregulation. 
D) A reserve requirement decrease. 
A) A minimum wage increase. 
B) Tax increases. 
C) Deregulation. 
D) A reserve requirement decrease.

Question 17

Business cycles in the United States

Accepted Answer

A) Are remarkably similar in length but vary greatly in intensity. 
B) Vary greatly in length,frequency,and intensity. 
C) Are similar in frequency and intensity. 
D) Are similar in length,frequency,and intensity. 
A) Are remarkably similar in length but vary greatly in intensity. 
B) Vary greatly in length,frequency,and intensity. 
C) Are similar in frequency and intensity. 
D) Are similar in length,frequency,and intensity.

Question 18

Which of the following is a responsibility of Congress?

Accepted Answer

A) Monetary policy. 
B) Fiscal policy and supply-side policy. 
C) Monetary and fiscal policy. 
D) Monetary,fiscal,and supply-side policy. 
A) Monetary policy. 
B) Fiscal policy and supply-side policy. 
C) Monetary and fiscal policy. 
D) Monetary,fiscal,and supply-side policy.

Question 19

Assume the economy is in a recession and has a budget deficit.Ceteris paribus,if the economy starts expanding,automatic stabilizers will cause

Accepted Answer

A) A decrease in tax revenues. 
B) An increase in government spending. 
C) A decrease in the budget deficit. 
D) A decrease in inflation. 
A) A decrease in tax revenues. 
B) An increase in government spending. 
C) A decrease in the budget deficit. 
D) A decrease in inflation.

Question 20

Which of the following is a monetary policy action?

Accepted Answer

A) Open market operations. 
B) Changes in transfer payments. 
C) Changes in government spending. 
D) Deregulation. 
A) Open market operations. 
B) Changes in transfer payments. 
C) Changes in government spending. 
D) Deregulation.

Exam 18: Theory Versus Reality

What actions would a supply-side economist advocate to cure an inflationary situation?

Which of the following does not explain why the U.S.economy has been more stable after 1946 than before?

Efforts to fine-tune the economy have been used for several decades,and since then

Keynesians believe that budgetary restraint should be used to cool an overheated economy.

Politicians might hesitate to increase income and in-kind transfers to the poor because this could cause

Which of the following policy obstacles could occur because it is difficult to know how market participants will respond to specific prices?

Which of the following groups believe that lower tax rates will increase the incentives to work,invest,and produce?

Which of the following is not a leading indicator for economic activity?

Which group believes the government should react to inflation by tightening the money supply?

The fact that the president must ask Congress for the authority to cut taxes is an example of

Monetarists believe that an increase in the money supply shifts the aggregate

Monetary policy to cure inflation might include

Monetary policy tools include:

During a severe recession,appropriate economic policy might include

The potential conflict of economic policy with political objectives can be used to explain

A supply-side policy to cure inflation would include

Business cycles in the United States

Which of the following is a responsibility of Congress?

Assume the economy is in a recession and has a budget deficit.Ceteris paribus,if the economy starts expanding,automatic stabilizers will cause

Which of the following is a monetary policy action?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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