Question 1

Fiscal policy aims to influence the overall health of the economy through changes in

Accepted Answer

A)  the money supply. 
B)  government spending and tax rates. 
C)  interest rates. 
D)  international exchange rates. 
E)  All of the above. 
A)  the money supply. 
B)  government spending and tax rates. 
C)  interest rates. 
D)  international exchange rates. 
E)  All of the above. B

Question 2

Monetary policy is primarily exercised by

Accepted Answer

A)  Congress. 
B)  the President. 
C)  the Federal Reserve. 
D)  the Treasury Department. 
A)  Congress. 
B)  the President. 
C)  the Federal Reserve. 
D)  the Treasury Department. C

Question 3

The Federal Reserve chair with the longest tenure is

Accepted Answer

A)  Alan Greenspan. 
B)  Paul Volcker. 
C)  Milton Friedman. 
D)  Arthur Laffer. 
A)  Alan Greenspan. 
B)  Paul Volcker. 
C)  Milton Friedman. 
D)  Arthur Laffer. A

Question 4

Following World War II, the U.S. and most developed countries adopted a system of fixed exchange rates known as

Accepted Answer

A)  the Heller plan. 
B)  the new gold standard. 
C)  the Bretton Woods system. 
D)  the Geneva accord. 
A)  the Heller plan. 
B)  the new gold standard. 
C)  the Bretton Woods system. 
D)  the Geneva accord.

Question 5

The economic boom of the 1990s

Accepted Answer

A)  ended with a recession that lasted from early 2000 to the 2nd quarter of 2002. 
B)  ended with the financial crash of 2001, with unemployment reaching 7.5%. 
C)  ended with the stock market and real investment tumbling, and unmemployment near 9% 
D)  Both a and b are correct. 
E)  None of the above are correct. 
A)  ended with a recession that lasted from early 2000 to the 2nd quarter of 2002. 
B)  ended with the financial crash of 2001, with unemployment reaching 7.5%. 
C)  ended with the stock market and real investment tumbling, and unmemployment near 9% 
D)  Both a and b are correct. 
E)  None of the above are correct.

Question 6

The term "dirty float" is used to describe

Accepted Answer

A)  international agreements about fishing rights that were developed in the 1960s. 
B)  the current system of exchange rates, which relies primarily on market forces with limited government intervention. 
C)  the inflation that followed price controls implemented by the Nixon administration. 
D)  unsound monetary policy. 
A)  international agreements about fishing rights that were developed in the 1960s. 
B)  the current system of exchange rates, which relies primarily on market forces with limited government intervention. 
C)  the inflation that followed price controls implemented by the Nixon administration. 
D)  unsound monetary policy.

Question 7

The Laffer curve expresses a relationship between

Accepted Answer

A)  tax rates and tax revenues. 
B)  inflation and unemployment. 
C)  interest rates and saving. 
D)  money supply and the price level. 
A)  tax rates and tax revenues. 
B)  inflation and unemployment. 
C)  interest rates and saving. 
D)  money supply and the price level.

Question 8

During his tenure as chair, Alan Greenspan has firmly adhered to

Accepted Answer

A)  a policy of steady growth in the money supply at precisely the same rate over time. 
B)  policies designed to promote price stability. 
C)  policies that encouraged large and rapid increases in stock prices. 
D)  a policy of fixed interest rates. 
A)  a policy of steady growth in the money supply at precisely the same rate over time. 
B)  policies designed to promote price stability. 
C)  policies that encouraged large and rapid increases in stock prices. 
D)  a policy of fixed interest rates.

Question 9

Following the lifting of price controls that had been implemented in the early 1970s, inflation skyrocketed.  Economists' explanations for this acceleration in the price level include

Accepted Answer

A)  the increase in the money supply that also occurred during the early 1970s. 
B)  increases in the federal government deficit, especially in 1971 and 1972. 
C)  supply-side shocks in oil and food. 
D)  the release of inflationary pressures that built up during the period of price controls. 
E)  All of the above. 
A)  the increase in the money supply that also occurred during the early 1970s. 
B)  increases in the federal government deficit, especially in 1971 and 1972. 
C)  supply-side shocks in oil and food. 
D)  the release of inflationary pressures that built up during the period of price controls. 
E)  All of the above.

Question 10

Over time, the Phillips curve has

Accepted Answer

A)  remained stable. 
B)  shifted downward. 
C)  shifted upward. 
D)  has become positively sloped. 
A)  remained stable. 
B)  shifted downward. 
C)  shifted upward. 
D)  has become positively sloped.

Question 11

The belief that government spending is necessary to offset sluggish private investment demand is associated with

Accepted Answer

A)  monetarism. 
B)  supply-side economics. 
C)  Keynesianism. 
D)  rational expectations theory. 
A)  monetarism. 
B)  supply-side economics. 
C)  Keynesianism. 
D)  rational expectations theory.

Question 12

Policies adopted by the Truman administration effectively avoided inflation during the Korean War.  These policies included

Accepted Answer

A)  increased personal and corporate tax rates. 
B)  price and wage controls. 
C)  reduced purchases of government debt by the Federal Reserve. 
D)  discontinuance of the practice of "pegging" interest rates. 
E)  All of the above. 
A)  increased personal and corporate tax rates. 
B)  price and wage controls. 
C)  reduced purchases of government debt by the Federal Reserve. 
D)  discontinuance of the practice of "pegging" interest rates. 
E)  All of the above.

Question 13

Stagflation is defined as

Accepted Answer

A)  the simultaneous occurrence of high inflation and high unemployment. 
B)  high inflation accompanied by falling interest rates. 
C)  declining GDP accompanied by a stable price level. 
D)  a persistent decline in the price level that is unresponsive to monetary and fiscal policies. 
A)  the simultaneous occurrence of high inflation and high unemployment. 
B)  high inflation accompanied by falling interest rates. 
C)  declining GDP accompanied by a stable price level. 
D)  a persistent decline in the price level that is unresponsive to monetary and fiscal policies.

Question 14

Which of the following historical events is often cited as an example of the successful implementation of Keynesian theory?

Accepted Answer

A)  the Kennedy-Johnson tax cut of 1964 
B)  the price controls of the Nixon administration 
C)  the anti-inflation policies of the Carter administration 
D)  the series of tax cuts implemented by the Reagan administration during the 1980s 
A)  the Kennedy-Johnson tax cut of 1964 
B)  the price controls of the Nixon administration 
C)  the anti-inflation policies of the Carter administration 
D)  the series of tax cuts implemented by the Reagan administration during the 1980s

Question 15

"Automatic stabilizers" played a part in reducing the length and severity of the recession of 1953-54.  This term refers to

Accepted Answer

A)  deficit spending by the federal government. 
B)  spending on education by local and state governments. 
C)  programs like unemployment insurance and Social Security. 
D)  actions by the Federal Reserve aimed at reducing interest rates. 
A)  deficit spending by the federal government. 
B)  spending on education by local and state governments. 
C)  programs like unemployment insurance and Social Security. 
D)  actions by the Federal Reserve aimed at reducing interest rates.

Question 16

Under the leadership of Federal Reserve Chairman _______________, the double-digit inflation of the 1970s and early 1980s was finally reduced using policies advocated by monetarists.

Accepted Answer

A)  Milton Friedman 
B)  Alan Greenspan 
C)  Paul Volcker 
D)  Alfred Kahn 
A)  Milton Friedman 
B)  Alan Greenspan 
C)  Paul Volcker 
D)  Alfred Kahn

Question 17

The Bretton Woods system

Accepted Answer

A)  allowed for market-determined exchange rates. 
B)  ended the use of the gold standard in all participating countries. 
C)  led to a dramatic increase in the U.S. balance of payments deficit. 
D)  resulted in the rapid increase of the U.S. gold supply in the 1960s. 
E)  All of the above. 
A)  allowed for market-determined exchange rates. 
B)  ended the use of the gold standard in all participating countries. 
C)  led to a dramatic increase in the U.S. balance of payments deficit. 
D)  resulted in the rapid increase of the U.S. gold supply in the 1960s. 
E)  All of the above.

Question 18

When it was introduced in 1958, the Phillips curve presented policymakers with a "menu" from which they could choose the appropriate

Accepted Answer

A)  combination of monetary and fiscal policy. 
B)  combination of inflation and unemployment. 
C)  level of aggregate money supply. 
D)  income tax rate. 
A)  combination of monetary and fiscal policy. 
B)  combination of inflation and unemployment. 
C)  level of aggregate money supply. 
D)  income tax rate.

Question 19

The economic boom of the 1990s was caused in part by

Accepted Answer

A)  America "getting wired." 
B)  low interest rates. 
C)  an investment boom as the use of personal computers and the Internet became ubiquitous. 
D)  All of the above are correct. 
E)  Only a and c are correct. 
A)  America "getting wired." 
B)  low interest rates. 
C)  an investment boom as the use of personal computers and the Internet became ubiquitous. 
D)  All of the above are correct. 
E)  Only a and c are correct.

Question 20

Robert Lucas and his followers have argued that the Philips curve appears to be

Accepted Answer

A)  a vertical line. 
B)  a horizontal line. 
C)  a negatively-sloped curve. 
D)  a positively-sloped curve. 
A)  a vertical line. 
B)  a horizontal line. 
C)  a negatively-sloped curve. 
D)  a positively-sloped curve.

Exam 28: Monetary Policy, Fiscal Policy, and the Business Cycle After World War Ii

Fiscal policy aims to influence the overall health of the economy through changes in

Monetary policy is primarily exercised by

The Federal Reserve chair with the longest tenure is

Following World War II, the U.S. and most developed countries adopted a system of fixed exchange rates known as

The economic boom of the 1990s

The term "dirty float" is used to describe

The Laffer curve expresses a relationship between

During his tenure as chair, Alan Greenspan has firmly adhered to

Following the lifting of price controls that had been implemented in the early 1970s, inflation skyrocketed. Economists' explanations for this acceleration in the price level include

Over time, the Phillips curve has

The belief that government spending is necessary to offset sluggish private investment demand is associated with

Policies adopted by the Truman administration effectively avoided inflation during the Korean War. These policies included

Stagflation is defined as

Which of the following historical events is often cited as an example of the successful implementation of Keynesian theory?

"Automatic stabilizers" played a part in reducing the length and severity of the recession of 1953-54. This term refers to

Under the leadership of Federal Reserve Chairman _______________, the double-digit inflation of the 1970s and early 1980s was finally reduced using policies advocated by monetarists.

The Bretton Woods system

When it was introduced in 1958, the Phillips curve presented policymakers with a "menu" from which they could choose the appropriate

The economic boom of the 1990s was caused in part by

Robert Lucas and his followers have argued that the Philips curve appears to be

Growth, Welfare, and the American Economy

Founding the Colonies

Colonial Economic Activities

The Economic Relations of the Colonies

Economic Progress and Wealth

Three Crises and Revolt

Hard Realities for a New Nation

Land and the Early Westward Movements

Transportation and Market Growth

Market Expansion and Industry in First Transition

Labor During the Early Industrial Period

Money and Banking in the Developing Economy

The Entrenchment of Slavery and Regional Conflict

War, Recovery, and Regional Divergence

Agricultures Western Advance

Railroads and Economic Change

Industrial Expansion and Concentration

The Emergence of Americas Labor Consciousness

Money, Prices, and Finance in the Postbellum Era

Commerce at Home and Abroad

World War I, 1914-1918

The Roaring Twenties

The Great Depression

The New Deal

World War Ii

The Changing Role of the Federal Government

The Changing Role of the Federal Government: Consumer Safety, Agriculture, the Environment, and Housing

Manufacturing, Productivity, and Labor

Achievements of the Past, Challenges for the Future

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