Question 1

According to classical economists, the aggregate supply curve is _____, but according to Keynes, it is _____.

Accepted Answer

A)  vertical in the short run; upward sloping in the short run 
B)  upward sloping in the short run; vertical in the short run 
C)  upward sloping in the short run; horizontal in the short run 
D)  downward sloping in the long run; always vertical 
A)  vertical in the short run; upward sloping in the short run 
B)  upward sloping in the short run; vertical in the short run 
C)  upward sloping in the short run; horizontal in the short run 
D)  downward sloping in the long run; always vertical A

Question 2

The predominant economic thinking up to the 1930s was:

Accepted Answer

A)  monetarism. 
B)  classical economics. 
C)  Keynesian economics. 
D)  rational expectations theory. 
A)  monetarism. 
B)  classical economics. 
C)  Keynesian economics. 
D)  rational expectations theory. B

Question 3

The _____ has the official role of declaring the beginnings of recessions and expansions.

Accepted Answer

A)  Federal Reserve 
B)  U.S. Congress 
C)  National Bureau of Economic Research 
D)  U.S. president 
A)  Federal Reserve 
B)  U.S. Congress 
C)  National Bureau of Economic Research 
D)  U.S. president C

Question 4

Pablo believed that short-run changes in aggregate demand affected aggregate output as well as the price level. He believed that there was a role for monetary policy in managing the economy, but he advocated a simple monetary rule that would increase the money supply at a constant rate to grow the economy. Pablo was BEST described as a:

Accepted Answer

A)  Keynesian. 
B)  new classical economist. 
C)  supply-sider. 
D)  monetarist. 
A)  Keynesian. 
B)  new classical economist. 
C)  supply-sider. 
D)  monetarist.

Question 5

Proponents of rational expectations believe that:

Accepted Answer

A)  changes in AD cause business cycles. 
B)  people will not be surprised by systematic monetary and fiscal policies. 
C)  the economy will have to undergo long periods of unemployment during recessions. 
D)  the velocity of money does not exist. 
A)  changes in AD cause business cycles. 
B)  people will not be surprised by systematic monetary and fiscal policies. 
C)  the economy will have to undergo long periods of unemployment during recessions. 
D)  the velocity of money does not exist.

Question 6

The Great Moderation consensus is the school of thought that monetary policy should be the main tool of stabilization policy and is skeptical about the use of fiscal policy.

Accepted Answer

A) True 
 B)False

Question 7

Nearly all economists agree that central banks should:

Accepted Answer

A)  be subject to political control. 
B)  be elected by voters. 
C)  be independent. 
D)  play a minor role in the economy. 
A)  be subject to political control. 
B)  be elected by voters. 
C)  be independent. 
D)  play a minor role in the economy.

Question 8

According to the Great Moderation consensus, fiscal policy should be the main stabilization tool.

Accepted Answer

A) True 
 B)False

Question 9

The theory of rational expectations is consistent with which statement?

Accepted Answer

A)  It takes into account only current information about inflation. 
B)  It takes into account only past information about inflation. 
C)  It takes into account past rates of inflation and available information about monetary and fiscal policy. 
D)  A government attempt to trade off higher inflation for lower unemployment would work in the short run but would eventually fail because higher inflation would get built into expectations. 
A)  It takes into account only current information about inflation. 
B)  It takes into account only past information about inflation. 
C)  It takes into account past rates of inflation and available information about monetary and fiscal policy. 
D)  A government attempt to trade off higher inflation for lower unemployment would work in the short run but would eventually fail because higher inflation would get built into expectations.

Question 10

Many economists argued against using discretionary fiscal policy during the Great Recession because interest rates were very low and fiscal policy is ineffective when interest rates are near zero.

Accepted Answer

A) True 
 B)False

Question 11

If a contraction in aggregate demand causes a recession, the Great Moderation consensus on macroeconomics suggests that:

Accepted Answer

A)  fiscal discipline with a balanced budget eventually stimulates aggregate demand. 
B)  fiscal policy should take the leading role in economic stabilization. 
C)  the use of discretionary fiscal policy is counterproductive except in special circumstances. 
D)  monetary discipline with a reduction in the money supply eventually stimulates aggregate demand. 
A)  fiscal discipline with a balanced budget eventually stimulates aggregate demand. 
B)  fiscal policy should take the leading role in economic stabilization. 
C)  the use of discretionary fiscal policy is counterproductive except in special circumstances. 
D)  monetary discipline with a reduction in the money supply eventually stimulates aggregate demand.

Question 12

Nearly all economists agree that decreases in money supply can _____ aggregate _____.

Accepted Answer

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

Question 13

Monetarists believe that:

Accepted Answer

A)  full employment is the norm. 
B)  countercyclical policies do not affect the economy. 
C)  a fixed increase in the rate of growth of the money supply is better than discretionary policies. 
D)  discretionary monetary policy is better than a fixed growth rate of the money supply. 
A)  full employment is the norm. 
B)  countercyclical policies do not affect the economy. 
C)  a fixed increase in the rate of growth of the money supply is better than discretionary policies. 
D)  discretionary monetary policy is better than a fixed growth rate of the money supply.

Question 14

The recommendation to use monetary policy to stabilize the economy and use fiscal policy only when monetary policy is ineffective is consistent with _____ macroeconomics.

Accepted Answer

A)  classical 
B)  Keynesian 
C)  monetarist 
D)  Great Moderation consensus 
A)  classical 
B)  Keynesian 
C)  monetarist 
D)  Great Moderation consensus

Question 15

The macroeconomic theory stating that because workers and firms take all information into account, only unexpected changes in the money supply affect aggregate output is called _____ theory.

Accepted Answer

A)  real business cycle 
B)  rational expectations 
C)  new classical 
D)  supply-side 
A)  real business cycle 
B)  rational expectations 
C)  new classical 
D)  supply-side

Question 16

Purchases and sales of short-term Treasury bills by the Fed is called quantitative easing.

Accepted Answer

A) True 
 B)False

Question 17

Keynesian economics was mostly concerned with the short run.

Accepted Answer

A) True 
 B)False

Question 18

According to the real business cycle theory, fluctuations in output are caused by:

Accepted Answer

A)  fluctuations in the growth rate of total factor productivity. 
B)  changes in aggregate demand. 
C)  changes in the money supply. 
D)  discretionary fiscal policy. 
A)  fluctuations in the growth rate of total factor productivity. 
B)  changes in aggregate demand. 
C)  changes in the money supply. 
D)  discretionary fiscal policy.

Question 19

The natural rate hypothesis suggests there are limits to what macroeconomic policy can achieve.

Accepted Answer

A) True 
 B)False

Question 20

Keynesian economics stresses the role of:

Accepted Answer

A)  aggregate demand. 
B)  aggregate supply. 
C)  the long run. 
D)  both aggregate demand and the long run. 
A)  aggregate demand. 
B)  aggregate supply. 
C)  the long run. 
D)  both aggregate demand and the long run.

According to classical economists, the aggregate supply curve is _, but according to Keynes, it is _.

The predominant economic thinking up to the 1930s was:

The _____ has the official role of declaring the beginnings of recessions and expansions.

Proponents of rational expectations believe that:

The Great Moderation consensus is the school of thought that monetary policy should be the main tool of stabilization policy and is skeptical about the use of fiscal policy.

Nearly all economists agree that central banks should:

According to the Great Moderation consensus, fiscal policy should be the main stabilization tool.

The theory of rational expectations is consistent with which statement?

Many economists argued against using discretionary fiscal policy during the Great Recession because interest rates were very low and fiscal policy is ineffective when interest rates are near zero.

If a contraction in aggregate demand causes a recession, the Great Moderation consensus on macroeconomics suggests that:

Nearly all economists agree that decreases in money supply can _ aggregate _.

Monetarists believe that:

The recommendation to use monetary policy to stabilize the economy and use fiscal policy only when monetary policy is ineffective is consistent with _____ macroeconomics.

The macroeconomic theory stating that because workers and firms take all information into account, only unexpected changes in the money supply affect aggregate output is called _____ theory.

Purchases and sales of short-term Treasury bills by the Fed is called quantitative easing.

Keynesian economics was mostly concerned with the short run.

According to the real business cycle theory, fluctuations in output are caused by:

The natural rate hypothesis suggests there are limits to what macroeconomic policy can achieve.

Keynesian economics stresses the role of:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Filters

Exam 17: Macroeconomics: Events and Ideas

According to classical economists, the aggregate supply curve is _____, but according to Keynes, it is _____.

The predominant economic thinking up to the 1930s was:

The _____ has the official role of declaring the beginnings of recessions and expansions.

Proponents of rational expectations believe that:

The Great Moderation consensus is the school of thought that monetary policy should be the main tool of stabilization policy and is skeptical about the use of fiscal policy.

Nearly all economists agree that central banks should:

According to the Great Moderation consensus, fiscal policy should be the main stabilization tool.

The theory of rational expectations is consistent with which statement?

Many economists argued against using discretionary fiscal policy during the Great Recession because interest rates were very low and fiscal policy is ineffective when interest rates are near zero.

If a contraction in aggregate demand causes a recession, the Great Moderation consensus on macroeconomics suggests that:

Nearly all economists agree that decreases in money supply can _____ aggregate _____.

Monetarists believe that:

The recommendation to use monetary policy to stabilize the economy and use fiscal policy only when monetary policy is ineffective is consistent with _____ macroeconomics.

The macroeconomic theory stating that because workers and firms take all information into account, only unexpected changes in the money supply affect aggregate output is called _____ theory.

Purchases and sales of short-term Treasury bills by the Fed is called quantitative easing.

Keynesian economics was mostly concerned with the short run.

According to the real business cycle theory, fluctuations in output are caused by:

The natural rate hypothesis suggests there are limits to what macroeconomic policy can achieve.

Keynesian economics stresses the role of:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Filters

According to classical economists, the aggregate supply curve is _, but according to Keynes, it is _.

Nearly all economists agree that decreases in money supply can _ aggregate _.