Question 1

Computer forecasting models are most accurate at predicting the economy when

Accepted Answer

A)  inflation is accelerating. 
B)  there is a turn in the business cycle. 
C)  economic conditions are relatively stable. 
D)  supply shocks impact the economy. 
A)  inflation is accelerating. 
B)  there is a turn in the business cycle. 
C)  economic conditions are relatively stable. 
D)  supply shocks impact the economy.

Question 2

The time between implementation of a macro-policy change and when the change exerts its primary influence is called the

Accepted Answer

A)  impact lag. 
B)  recognition lag. 
C)  administrative lag. 
D)  tax reform lag. 
A)  impact lag. 
B)  recognition lag. 
C)  administrative lag. 
D)  tax reform lag.

Question 3

Use the figure below to answer the following question(s). Figure 15-2
  According to the modern expectational Phillips curve illustrated in Figure 15-2, unemployment will temporarily rise above the natural rate of unemployment when

Accepted Answer

A)  inflation turns out to be lower than what people expected. 
B)  inflation turns out to be higher than what people expected. 
C)  inflation turns out to be equal to what people expected. 
D)  all of the above are true. 
A)  inflation turns out to be lower than what people expected. 
B)  inflation turns out to be higher than what people expected. 
C)  inflation turns out to be equal to what people expected. 
D)  all of the above are true.

Question 4

Which of the following is true regarding economic fluctuations in the United States?

Accepted Answer

A)  Prior to World War II, economic ups and downs were more moderate than after the war. 
B)  Prior to World War II, annual increases in real GDP of more than 5 percent were unheard of. 
C)  Real GDP grew rapidly during the 1930s. 
D)  The 1930s was a period of prolonged economic stagnation and high unemployment. 
A)  Prior to World War II, economic ups and downs were more moderate than after the war. 
B)  Prior to World War II, annual increases in real GDP of more than 5 percent were unheard of. 
C)  Real GDP grew rapidly during the 1930s. 
D)  The 1930s was a period of prolonged economic stagnation and high unemployment.

Question 5

When persons underestimate inflation (when actual inflation exceeds the expected rate), actual unemployment will

Accepted Answer

A)  exceed the natural rate of unemployment. 
B)  equal the natural rate of unemployment. 
C)  fall below the natural rate of unemployment. 
D)  increase if the government is running a budget deficit and decrease if a budget surplus is present. 
A)  exceed the natural rate of unemployment. 
B)  equal the natural rate of unemployment. 
C)  fall below the natural rate of unemployment. 
D)  increase if the government is running a budget deficit and decrease if a budget surplus is present.

Question 6

The national debt is the

Accepted Answer

A)  difference between a nation's exports and imports of goods and services. 
B)  sum of the personal debt of all citizens in the United States. 
C)  indebtedness of the federal government in the form of outstanding interest-earning bonds. 
D)  sum of the net personal debts of Americans to foreigners. 
A)  difference between a nation's exports and imports of goods and services. 
B)  sum of the personal debt of all citizens in the United States. 
C)  indebtedness of the federal government in the form of outstanding interest-earning bonds. 
D)  sum of the net personal debts of Americans to foreigners.

Question 7

External debt is that portion of the national debt

Accepted Answer

A)  held by private investors. 
B)  held by the Federal Reserve. 
C)  that the United States does not intend to repay. 
D)  held by foreigners. 
A)  held by private investors. 
B)  held by the Federal Reserve. 
C)  that the United States does not intend to repay. 
D)  held by foreigners.

Question 8

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve system because

Accepted Answer

A)  the government will not have to repay the privately held debt. 
B)  only the privately held debt creates a net interest liability for the federal government. 
C)  the privately held debt does not create a net interest liability for the federal government. 
D)  taxes will have to be raised in order to pay the interest on the debt held by the Federal Reserve system. 
A)  the government will not have to repay the privately held debt. 
B)  only the privately held debt creates a net interest liability for the federal government. 
C)  the privately held debt does not create a net interest liability for the federal government. 
D)  taxes will have to be raised in order to pay the interest on the debt held by the Federal Reserve system.

Question 9

Suppose the inflation rate of a country falls from 8 percent during 2002-2004 to 6 percent in 2005-2007, under the adaptive expectations hypothesis what will the expected rate of inflation at the beginning of 2008?

Accepted Answer

A)  2 percent 
B)  4 percent 
C)  6 percent 
D)  8 percent 
A)  2 percent 
B)  4 percent 
C)  6 percent 
D)  8 percent

Question 10

If the government accelerates money supply growth and enlarges the budget deficit to stimulate aggregate demand, the rational expectations hypothesis indicates that decision makers will

Accepted Answer

A)  ignore the policy until it exerts an observable impact on prices, output, and employment. 
B)  quickly take steps to adjust their decision making in light of the more expansionary policies. 
C)  be fooled at the outset but eventually adjust their decision making in accordance with the change in policy. 
D)  be unaware that this policy change has been implemented until a higher rate of inflation is observed. 
A)  ignore the policy until it exerts an observable impact on prices, output, and employment. 
B)  quickly take steps to adjust their decision making in light of the more expansionary policies. 
C)  be fooled at the outset but eventually adjust their decision making in accordance with the change in policy. 
D)  be unaware that this policy change has been implemented until a higher rate of inflation is observed.

Question 11

Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to a more expansionary monetary policy?

Accepted Answer

A)  higher prices and no change in real output 
B)  higher prices and expansion in real output 
C)  no change in prices but an expansion in real output 
D)  no change in either prices or real output 
A)  higher prices and no change in real output 
B)  higher prices and expansion in real output 
C)  no change in prices but an expansion in real output 
D)  no change in either prices or real output

Question 12

The modern view of the Phillips curve indicates that in the long run there

Accepted Answer

A)  is no trade-off between inflation and unemployment. 
B)  is a definite trade-off between unemployment and inflation. 
C)  will be a trade-off if the rational expectations hypothesis is correct. 
D)  may be a long-run trade-off between unemployment and inflation, but there is no such trade-off in the short run. 
A)  is no trade-off between inflation and unemployment. 
B)  is a definite trade-off between unemployment and inflation. 
C)  will be a trade-off if the rational expectations hypothesis is correct. 
D)  may be a long-run trade-off between unemployment and inflation, but there is no such trade-off in the short run.

Question 13

Which of the following is an area of substantial agreement among macroeconomists?

Accepted Answer

A)  Expansionary policies that lead to inflation can keep the actual rate of unemployment below the natural rate. 
B)  It is relatively easy to time shifts in monetary policy in a manner that will promote economic stability. 
C)  Price stability is a proper goal of monetary policy. 
D)  It is relatively easy to time shifts in fiscal policy in a manner that will promote economic stability. 
A)  Expansionary policies that lead to inflation can keep the actual rate of unemployment below the natural rate. 
B)  It is relatively easy to time shifts in monetary policy in a manner that will promote economic stability. 
C)  Price stability is a proper goal of monetary policy. 
D)  It is relatively easy to time shifts in fiscal policy in a manner that will promote economic stability.

Question 14

According to the rational expectations theory, which of the following will affect the levels of output and employment?

Accepted Answer

A)  expansionary monetary policy that is fully anticipated 
B)  contractionary monetary policy that is fully anticipated 
C)  changes in monetary policy that are unanticipated 
D)  changes in fiscal policy that are anticipated 
A)  expansionary monetary policy that is fully anticipated 
B)  contractionary monetary policy that is fully anticipated 
C)  changes in monetary policy that are unanticipated 
D)  changes in fiscal policy that are anticipated

Question 15

As the outstanding debt of a nation becomes very large relative to the size of the economy,

Accepted Answer

A)  the borrowing cost of the government will decline. 
B)  lenders will have no choice but to hold the outstanding bonds and  to buy the new ones as they are offered. 
C)  a country like the United States will have no choice but to default on the payments to bond holders. 
D)  if the country has a central bank, it will almost certainly resort to money creation to service the debt rather than directly default. 
A)  the borrowing cost of the government will decline. 
B)  lenders will have no choice but to hold the outstanding bonds and  to buy the new ones as they are offered. 
C)  a country like the United States will have no choice but to default on the payments to bond holders. 
D)  if the country has a central bank, it will almost certainly resort to money creation to service the debt rather than directly default.

Question 16

Which of the following has been the most stable period (i.e., least amount of time spent in recession) in American history?

Accepted Answer

A)  1910-1932 
B)  1930-1945 
C)  1960-1982 
D)  1983-2015 
A)  1910-1932 
B)  1930-1945 
C)  1960-1982 
D)  1983-2015

Question 17

Which combination of signals would be a strong indication that Fed policy is too expansionary and that a shift to a more restrictive policy is in order?

Accepted Answer

A)  commodity prices are falling and the dollar is appreciating. 
B)  commodity prices are rising and the dollar is depreciating. 
C)  commodity prices are rising and the dollar is appreciating. 
D)  commodity prices are falling and the dollar is depreciating. 
A)  commodity prices are falling and the dollar is appreciating. 
B)  commodity prices are rising and the dollar is depreciating. 
C)  commodity prices are rising and the dollar is appreciating. 
D)  commodity prices are falling and the dollar is depreciating.

Question 18

The rational expectations hypothesis assumes that individuals will

Accepted Answer

A)  never make forecasting errors. 
B)  be as likely to overestimate as to underestimate the future rate of inflation. 
C)  continually make systematic forecasting errors. 
D)  ignore past forecasting errors when formulating predictions. 
A)  never make forecasting errors. 
B)  be as likely to overestimate as to underestimate the future rate of inflation. 
C)  continually make systematic forecasting errors. 
D)  ignore past forecasting errors when formulating predictions.

Question 19

The proponents of rational expectations believe that

Accepted Answer

A)  there will be a substantial time lag before people anticipate the eventual effects of a shift to a more expansionary macro-policy. 
B)  macro-policies that stimulate demand and place upward pressure on the general level of prices will temporarily increase output and employment. 
C)  the inflationary side effects of expansionary policies will be anticipated quickly, and therefore, even their short-run effects on real output and employment will be minimal. 
D)  discretionary changes in macro-policy can be made in a manner that will reduce the economic ups and downs of a market economy. 
A)  there will be a substantial time lag before people anticipate the eventual effects of a shift to a more expansionary macro-policy. 
B)  macro-policies that stimulate demand and place upward pressure on the general level of prices will temporarily increase output and employment. 
C)  the inflationary side effects of expansionary policies will be anticipated quickly, and therefore, even their short-run effects on real output and employment will be minimal. 
D)  discretionary changes in macro-policy can be made in a manner that will reduce the economic ups and downs of a market economy.

Question 20

During the 1900-1950 period,

Accepted Answer

A)  the growth of real GDP was more stable than has been the case since 1950. 
B)  unemployment seldom exceeded 4 percent of the labor force. 
C)  double-digit swings in real GDP during a single year were not uncommon. 
D)  the money supply was increased at a constant annual rate of between 4 percent and 6 percent throughout the period. 
A)  the growth of real GDP was more stable than has been the case since 1950. 
B)  unemployment seldom exceeded 4 percent of the labor force. 
C)  double-digit swings in real GDP during a single year were not uncommon. 
D)  the money supply was increased at a constant annual rate of between 4 percent and 6 percent throughout the period.

Computer forecasting models are most accurate at predicting the economy when

The time between implementation of a macro-policy change and when the change exerts its primary influence is called the

Use the figure below to answer the following question(s). Figure 15-2 According to the modern expectational Phillips curve illustrated in Figure 15-2, unemployment will temporarily rise above the natural rate of unemployment when

Which of the following is true regarding economic fluctuations in the United States?

When persons underestimate inflation (when actual inflation exceeds the expected rate), actual unemployment will

The national debt is the

External debt is that portion of the national debt

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve system because

Suppose the inflation rate of a country falls from 8 percent during 2002-2004 to 6 percent in 2005-2007, under the adaptive expectations hypothesis what will the expected rate of inflation at the beginning of 2008?

If the government accelerates money supply growth and enlarges the budget deficit to stimulate aggregate demand, the rational expectations hypothesis indicates that decision makers will

Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to a more expansionary monetary policy?

The modern view of the Phillips curve indicates that in the long run there

Which of the following is an area of substantial agreement among macroeconomists?

According to the rational expectations theory, which of the following will affect the levels of output and employment?

As the outstanding debt of a nation becomes very large relative to the size of the economy,

Which of the following has been the most stable period (i.e., least amount of time spent in recession) in American history?

Which combination of signals would be a strong indication that Fed policy is too expansionary and that a shift to a more restrictive policy is in order?

The rational expectations hypothesis assumes that individuals will

The proponents of rational expectations believe that

During the 1900-1950 period,

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 15: Stabilization Policy, Output, and Employment

Computer forecasting models are most accurate at predicting the economy when

The time between implementation of a macro-policy change and when the change exerts its primary influence is called the

Use the figure below to answer the following question(s). Figure 15-2 According to the modern expectational Phillips curve illustrated in Figure 15-2, unemployment will temporarily rise above the natural rate of unemployment when

Which of the following is true regarding economic fluctuations in the United States?

When persons underestimate inflation (when actual inflation exceeds the expected rate), actual unemployment will

The national debt is the

External debt is that portion of the national debt

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve system because

Suppose the inflation rate of a country falls from 8 percent during 2002-2004 to 6 percent in 2005-2007, under the adaptive expectations hypothesis what will the expected rate of inflation at the beginning of 2008?

If the government accelerates money supply growth and enlarges the budget deficit to stimulate aggregate demand, the rational expectations hypothesis indicates that decision makers will

Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to a more expansionary monetary policy?

The modern view of the Phillips curve indicates that in the long run there

Which of the following is an area of substantial agreement among macroeconomists?

According to the rational expectations theory, which of the following will affect the levels of output and employment?

As the outstanding debt of a nation becomes very large relative to the size of the economy,

Which of the following has been the most stable period (i.e., least amount of time spent in recession) in American history?

Which combination of signals would be a strong indication that Fed policy is too expansionary and that a shift to a more restrictive policy is in order?

The rational expectations hypothesis assumes that individuals will

The proponents of rational expectations believe that

During the 1900-1950 period,

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters