Question 1

The natural rate of unemployment is

Accepted Answer

A)  the rate that produces worker revolutions. 
B)  zero unemployment. 
C)  the rate at which there are no inflationary pressures on the economy. 
D)  the equilibrium to which the economy naturally tends. 
A)  the rate that produces worker revolutions. 
B)  zero unemployment. 
C)  the rate at which there are no inflationary pressures on the economy. 
D)  the equilibrium to which the economy naturally tends.

Question 2

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be

Accepted Answer

A)  an increase in aggregate supply. 
B)  a stable Phillips curve. 
C)  increasing structural unemployment. 
D)  accelerating inflation. 
A)  an increase in aggregate supply. 
B)  a stable Phillips curve. 
C)  increasing structural unemployment. 
D)  accelerating inflation.

Question 3

Which of these was NOT a factor leading to the financial crisis of 2007-2009?

Accepted Answer

A)  Low interest rates encouraged a housing boom. 
B)  Policymakers underestimated the level of risk inherent in the mortgage market. 
C)  The public lacked faith in the ability of the U.S. Treasury to pay government bonds. 
D)  Investors borrowed heavily to purchase securitized mortgages. 
A)  Low interest rates encouraged a housing boom. 
B)  Policymakers underestimated the level of risk inherent in the mortgage market. 
C)  The public lacked faith in the ability of the U.S. Treasury to pay government bonds. 
D)  Investors borrowed heavily to purchase securitized mortgages.

Question 4

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

Accepted Answer

A) True 
 B)False

Question 5

The simultaneous occurrence of rising inflation and rising unemployment is called

Accepted Answer

A)  deflation. 
B)  stagflation. 
C)  disinflation. 
D)  disintermediation. 
A)  deflation. 
B)  stagflation. 
C)  disinflation. 
D)  disintermediation.

Question 6

The cost of financing U.S. government debt would be lower if foreigners decided to hold fewer U.S. dollars.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to

Accepted Answer

A)  increase unemployment. 
B)  shift the Phillips curve to the right. 
C)  reduce tax revenues. 
D)  shift the Phillips curve to the left. 
A)  increase unemployment. 
B)  shift the Phillips curve to the right. 
C)  reduce tax revenues. 
D)  shift the Phillips curve to the left.

Question 8

One implication of the long-run Phillips curve is that

Accepted Answer

A)  economic policies to keep the unemployment rate below its natural rate will lead to accelerating inflation. 
B)  in the long run, the government can accurately estimate the natural rate of unemployment. 
C)  in the long run, the curve becomes upward sloping. 
D)  the natural rate of unemployment must be lowered to zero. 
A)  economic policies to keep the unemployment rate below its natural rate will lead to accelerating inflation. 
B)  in the long run, the government can accurately estimate the natural rate of unemployment. 
C)  in the long run, the curve becomes upward sloping. 
D)  the natural rate of unemployment must be lowered to zero.

Question 9

The Federal Reserve risks aborting a recovery if it halts its quantitative easing programs too soon.

Accepted Answer

A) True 
 B)False

Question 10

In a jobless recovery

Accepted Answer

A)  employment growth begins when output falls. 
B)  output begins to rise but employment growth does not. 
C)  neither output nor employment growth occurs. 
D)  the economy falls back into a recession. 
A)  employment growth begins when output falls. 
B)  output begins to rise but employment growth does not. 
C)  neither output nor employment growth occurs. 
D)  the economy falls back into a recession.

Question 11

(Figure: Understanding Economic Shifts) The graph depicts

Accepted Answer

A)  an expansion. 
B)  decreasing unemployment rates. 
C)  stagflation. 
D)  deflation. 
A)  an expansion. 
B)  decreasing unemployment rates. 
C)  stagflation. 
D)  deflation.

Question 12

Which of these does NOT describe the natural rate of unemployment?

Accepted Answer

A)  the point at which the rates of change in productivity and wages are equal 
B)  the unemployment rate that exerts inflationary pressures 
C)  the unemployment rate at which inflation equals expected inflation, resulting in zero price pressures on the economy 
D)  the point at which the rates of change in productivity and wages are equal and the unemployment rate exerts no inflationary pressures 
A)  the point at which the rates of change in productivity and wages are equal 
B)  the unemployment rate that exerts inflationary pressures 
C)  the unemployment rate at which inflation equals expected inflation, resulting in zero price pressures on the economy 
D)  the point at which the rates of change in productivity and wages are equal and the unemployment rate exerts no inflationary pressures

Question 13

Which statement(s) is/are TRUE regarding the rational expectations theory? I. In general, studies support the policy ineffectiveness proposition.
II) Labor markets often exhibit short-term wage stickiness.
III) It does not make the best use of all publicly available information.

Accepted Answer

A)  I only 
B)  II only 
C)  III only 
D)  I, II, and III only 
A)  I only 
B)  II only 
C)  III only 
D)  I, II, and III only

Question 14

Which of these is NOT a problem for policymakers who want to reduce the national debt?

Accepted Answer

A)  In the near future, more baby boomers will be receiving Medicare payments. 
B)  Rising health care costs will increase the cost of Medicare. 
C)  High interest rates make it more difficult to pay down debt. 
D)  Social Security costs will rise with inflation. 
A)  In the near future, more baby boomers will be receiving Medicare payments. 
B)  Rising health care costs will increase the cost of Medicare. 
C)  High interest rates make it more difficult to pay down debt. 
D)  Social Security costs will rise with inflation.

Question 15

The 2007-2009 recession was not as severe as the previous two recessions, in 1990 and 2001.

Accepted Answer

A) True 
 B)False

Question 16

A credit default swap

Accepted Answer

A)  is essentially the same as an adjustable-rate mortgage. 
B)  is essentially the same as insurance against a default. 
C)  prevents investors from defaulting on a swap. 
D)  allows investors to trade one bad stock for another. 
A)  is essentially the same as an adjustable-rate mortgage. 
B)  is essentially the same as insurance against a default. 
C)  prevents investors from defaulting on a swap. 
D)  allows investors to trade one bad stock for another.

Question 17

One implication of the Phillips curve when it is unable to shift in the short run is that

Accepted Answer

A)  fiscal and monetary policies have no impact on the economy. 
B)  the economy is in a liquidity trap. 
C)  policymakers face a tradeoff between low unemployment and low inflation. 
D)  fiscal policy is more effective than monetary policy. 
A)  fiscal and monetary policies have no impact on the economy. 
B)  the economy is in a liquidity trap. 
C)  policymakers face a tradeoff between low unemployment and low inflation. 
D)  fiscal policy is more effective than monetary policy.

Question 18

Monetizing debt results in the depreciation of the dollar.

Accepted Answer

A) True 
 B)False

Question 19

According to the Phillips curve analysis, the way to solve inflation is to _____ unemployment or _____.

Accepted Answer

A)  increase; increase productivity 
B)  increase; decrease productivity 
C)  decrease; increase the money supply 
D)  increase; increase the money supply 
A)  increase; increase productivity 
B)  increase; decrease productivity 
C)  decrease; increase the money supply 
D)  increase; increase the money supply

Question 20

As inflationary expectations rise, the _____ Phillips curve shifts to the _____.

Accepted Answer

A)  long-run; right 
B)  short-run; right 
C)  long-run; left 
D)  short-run; left 
A)  long-run; right 
B)  short-run; right 
C)  long-run; left 
D)  short-run; left

The natural rate of unemployment is

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be

Which of these was NOT a factor leading to the financial crisis of 2007-2009?

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

The simultaneous occurrence of rising inflation and rising unemployment is called

The cost of financing U.S. government debt would be lower if foreigners decided to hold fewer U.S. dollars.

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to

One implication of the long-run Phillips curve is that

The Federal Reserve risks aborting a recovery if it halts its quantitative easing programs too soon.

In a jobless recovery

(Figure: Understanding Economic Shifts) The graph depicts

Which of these does NOT describe the natural rate of unemployment?

Which statement(s) is/are TRUE regarding the rational expectations theory? I. In general, studies support the policy ineffectiveness proposition. II) Labor markets often exhibit short-term wage stickiness. III) It does not make the best use of all publicly available information.

Which of these is NOT a problem for policymakers who want to reduce the national debt?

The 2007-2009 recession was not as severe as the previous two recessions, in 1990 and 2001.

A credit default swap

One implication of the Phillips curve when it is unable to shift in the short run is that

Monetizing debt results in the depreciation of the dollar.

According to the Phillips curve analysis, the way to solve inflation is to _ unemployment or _.

As inflationary expectations rise, the _ Phillips curve shifts to the _.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

International Trade

Open Economy Macroeconomics

Filters

Exam 14: Macroeconomic Policy: Challenges in a Global Economy

The natural rate of unemployment is

Suppose policymakers want to keep the unemployment rate below its natural rate by increasing demand. A consequence of this policy would be

Which of these was NOT a factor leading to the financial crisis of 2007-2009?

The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

The simultaneous occurrence of rising inflation and rising unemployment is called

The cost of financing U.S. government debt would be lower if foreigners decided to hold fewer U.S. dollars.

Suppose the Federal Reserve announces that its policy will increase the supply of money next year. This announcement can be expected to

One implication of the long-run Phillips curve is that

The Federal Reserve risks aborting a recovery if it halts its quantitative easing programs too soon.

In a jobless recovery

(Figure: Understanding Economic Shifts) The graph depicts

Which of these does NOT describe the natural rate of unemployment?

Which statement(s) is/are TRUE regarding the rational expectations theory? I. In general, studies support the policy ineffectiveness proposition. II) Labor markets often exhibit short-term wage stickiness. III) It does not make the best use of all publicly available information.

Which of these is NOT a problem for policymakers who want to reduce the national debt?

The 2007-2009 recession was not as severe as the previous two recessions, in 1990 and 2001.

A credit default swap

One implication of the Phillips curve when it is unable to shift in the short run is that

Monetizing debt results in the depreciation of the dollar.

According to the Phillips curve analysis, the way to solve inflation is to _____ unemployment or _____.

As inflationary expectations rise, the _____ Phillips curve shifts to the _____.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

International Trade

Open Economy Macroeconomics

Filters

According to the Phillips curve analysis, the way to solve inflation is to _ unemployment or _.

As inflationary expectations rise, the _ Phillips curve shifts to the _.