Question 1

Credit default swaps

Accepted Answer

A)  are a type of collateralized debt obligation. 
B)  are a type of insurance against defaults. 
C)  were accurately priced before the housing market collapsed. 
D)  made AIG the most profitable company in the United States. 
A)  are a type of collateralized debt obligation. 
B)  are a type of insurance against defaults. 
C)  were accurately priced before the housing market collapsed. 
D)  made AIG the most profitable company in the United States.

Question 2

According to the equation for the Phillips curve, if nominal wages rise by 8% and labor productivity rises by 5%, then we can expect

Accepted Answer

A)  prices to drop by 3%. 
B)  no change in prices. 
C)  prices to rise by 3%. 
D)  prices to drop by 5%. 
A)  prices to drop by 3%. 
B)  no change in prices. 
C)  prices to rise by 3%. 
D)  prices to drop by 5%.

Question 3

The adjustable-rate mortgage was the standard type before the early 2000s.

Accepted Answer

A) True 
 B)False

Question 4

The 2007-2009 recession can be shown as a combination of a decline in aggregate demand and an increase in the short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 5

In the original Phillips curve analysis, stagflation would be impossible.

Accepted Answer

A) True 
 B)False

Question 6

The original Phillips curve showed a _____ relationship between _____ and unemployment rates.

Accepted Answer

A)  negative; inflation rate 
B)  negative; wages 
C)  positive; inflation rate 
D)  positive; wages 
A)  negative; inflation rate 
B)  negative; wages 
C)  positive; inflation rate 
D)  positive; wages

Question 7

At the natural rate of unemployment, inflationary pressures are nonexistent.

Accepted Answer

A) True 
 B)False

Question 8

An efficiency wage is

Accepted Answer

A)  equal to the market-clearing level. 
B)  above the market-clearing level. 
C)  below the market-clearing level. 
D)  equal to marginal productivity of labor. 
A)  equal to the market-clearing level. 
B)  above the market-clearing level. 
C)  below the market-clearing level. 
D)  equal to marginal productivity of labor.

Question 9

Rational expectations theory suggests that the Federal Reserve and other policymakers must fool the public if their policies are to have short-term effects.

Accepted Answer

A) True 
 B)False

Question 10

The long-run Phillips curve

Accepted Answer

A)  shows a tradeoff between inflation and unemployment. 
B)  graphs as an upward sloping curve. 
C)  is a horizontal line at the expected rate of inflation. 
D)  is a vertical line at the natural rate of unemployment. 
A)  shows a tradeoff between inflation and unemployment. 
B)  graphs as an upward sloping curve. 
C)  is a horizontal line at the expected rate of inflation. 
D)  is a vertical line at the natural rate of unemployment.

Question 11

The willingness of people around the world to use and hold U.S. dollars allows the U.S. government to increase the money supply without the immediate risk of inflation.

Accepted Answer

A) True 
 B)False

Question 12

According to the rational expectations theory, if the Federal Reserve announces that it is going to decrease the money supply, output

Accepted Answer

A)  and the price level both will fall in the short run. 
B)  will remain unchanged, but the price level will fall immediately. 
C)  will fall in the short run but return to full employment output at a lower price level in the long run. 
D)  will fall in the short run, but the price level will remain unchanged. 
A)  and the price level both will fall in the short run. 
B)  will remain unchanged, but the price level will fall immediately. 
C)  will fall in the short run but return to full employment output at a lower price level in the long run. 
D)  will fall in the short run, but the price level will remain unchanged.

Question 13

Social Security payments rise according to the rate of inflation.

Accepted Answer

A) True 
 B)False

Question 14

Most economists agree that expansionary fiscal policy is not effective in addressing a jobless recovery.

Accepted Answer

A) True 
 B)False

Question 15

Expansionary monetary policy leads to inflation and is therefore not an appropriate policy for addressing a jobless recovery.

Accepted Answer

A) True 
 B)False

Question 16

Suppose the central bank announces to the public that it will increase the money supply. However, it later changes its mind and decides to do nothing. What will happen to the short-run unemployment rate if people use rational expectations and are initially unaware of the policy reversal? Use a graph to support your response.

Accepted Answer

The increased costs of production transl

Question 17

The Phillips curve of the 1960s for the United States

Accepted Answer

A)  showed stagflation in the U.S. economy. 
B)  suggested to policymakers that they could keep unemployment low by accepting moderate inflation. 
C)  indicated that to keep unemployment low, policymakers had to accept double-digit rates of inflation. 
D)  was nearly a vertical line. 
A)  showed stagflation in the U.S. economy. 
B)  suggested to policymakers that they could keep unemployment low by accepting moderate inflation. 
C)  indicated that to keep unemployment low, policymakers had to accept double-digit rates of inflation. 
D)  was nearly a vertical line.

Question 18

If policymakers attempt to keep unemployment below its natural level, the unemployment rate will likely increase.

Accepted Answer

A) True 
 B)False

Question 19

Explain why reducing the deficit and reducing unemployment are incompatible fiscal policy goals.

Accepted Answer

To fight unemployment, Congress must inc

Question 20

The long-run Phillips curve is vertical.

Accepted Answer

A) True 
 B)False

Credit default swaps

According to the equation for the Phillips curve, if nominal wages rise by 8% and labor productivity rises by 5%, then we can expect

The adjustable-rate mortgage was the standard type before the early 2000s.

The 2007-2009 recession can be shown as a combination of a decline in aggregate demand and an increase in the short-run aggregate supply.

In the original Phillips curve analysis, stagflation would be impossible.

The original Phillips curve showed a _ relationship between _ and unemployment rates.

At the natural rate of unemployment, inflationary pressures are nonexistent.

An efficiency wage is

Rational expectations theory suggests that the Federal Reserve and other policymakers must fool the public if their policies are to have short-term effects.

The long-run Phillips curve

The willingness of people around the world to use and hold U.S. dollars allows the U.S. government to increase the money supply without the immediate risk of inflation.

According to the rational expectations theory, if the Federal Reserve announces that it is going to decrease the money supply, output

Social Security payments rise according to the rate of inflation.

Most economists agree that expansionary fiscal policy is not effective in addressing a jobless recovery.

Expansionary monetary policy leads to inflation and is therefore not an appropriate policy for addressing a jobless recovery.

The Phillips curve of the 1960s for the United States

If policymakers attempt to keep unemployment below its natural level, the unemployment rate will likely increase.

Explain why reducing the deficit and reducing unemployment are incompatible fiscal policy goals.

The long-run Phillips curve is vertical.

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

Credit default swaps

According to the equation for the Phillips curve, if nominal wages rise by 8% and labor productivity rises by 5%, then we can expect

The adjustable-rate mortgage was the standard type before the early 2000s.

The 2007-2009 recession can be shown as a combination of a decline in aggregate demand and an increase in the short-run aggregate supply.

In the original Phillips curve analysis, stagflation would be impossible.

The original Phillips curve showed a _____ relationship between _____ and unemployment rates.

At the natural rate of unemployment, inflationary pressures are nonexistent.

An efficiency wage is

Rational expectations theory suggests that the Federal Reserve and other policymakers must fool the public if their policies are to have short-term effects.

The long-run Phillips curve

The willingness of people around the world to use and hold U.S. dollars allows the U.S. government to increase the money supply without the immediate risk of inflation.

According to the rational expectations theory, if the Federal Reserve announces that it is going to decrease the money supply, output

Social Security payments rise according to the rate of inflation.

Most economists agree that expansionary fiscal policy is not effective in addressing a jobless recovery.

Expansionary monetary policy leads to inflation and is therefore not an appropriate policy for addressing a jobless recovery.

The Phillips curve of the 1960s for the United States

If policymakers attempt to keep unemployment below its natural level, the unemployment rate will likely increase.

Explain why reducing the deficit and reducing unemployment are incompatible fiscal policy goals.

The long-run Phillips curve is vertical.

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

The original Phillips curve showed a _ relationship between _ and unemployment rates.