Question 1

Modern Phillips curve analysis indicates that if people

Accepted Answer

A)  underestimate inflation, actual unemployment will be below the natural rate. 
B)  overestimate inflation, actual unemployment will be below the natural rate. 
C)  accurately estimate inflation, actual unemployment will be less than the natural rate. 
D)  accurately estimate inflation, actual unemployment will be below the natural rate. 
A)  underestimate inflation, actual unemployment will be below the natural rate. 
B)  overestimate inflation, actual unemployment will be below the natural rate. 
C)  accurately estimate inflation, actual unemployment will be less than the natural rate. 
D)  accurately estimate inflation, actual unemployment will be below the natural rate.

Question 2

The Phillips curve illustrates the relationship between

Accepted Answer

A)  change in the money supply and change in unemployment. 
B)  tax rates and tax revenues. 
C)  the equilibrium level of income and the employment rate. 
D)  inflation and unemployment. 
A)  change in the money supply and change in unemployment. 
B)  tax rates and tax revenues. 
C)  the equilibrium level of income and the employment rate. 
D)  inflation and unemployment.

Question 3

If decision makers adjust fully to demand stimulus policies, persistent expansionary macro-policy will lead to

Accepted Answer

A)  inflation with no lasting reductions in unemployment. 
B)  a permanent reduction in unemployment. 
C)  lower interest rates. 
D)  more rapid economic growth. 
A)  inflation with no lasting reductions in unemployment. 
B)  a permanent reduction in unemployment. 
C)  lower interest rates. 
D)  more rapid economic growth.

Question 4

(I)   In the 1960s and 1970s, most economists believed that there was a permanent trade-off between inflation and unemployment.
(II)  Today, most economists believe there is no permanent trade-off between inflation and unemployment.

Accepted Answer

A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true. 
A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true.

Question 5

The U.S. Treasury both pays and receives almost all of the interest on that portion of the national debt that is held by

Accepted Answer

A)  domestic investors. 
B)  foreign investors. 
C)  government agencies and the Federal Reserve system. 
D)  commercial banks. 
A)  domestic investors. 
B)  foreign investors. 
C)  government agencies and the Federal Reserve system. 
D)  commercial banks.

Question 6

An unanticipated shift to a more expansionary monetary policy that permanently increases the rate of inflation from 2 to 6 percent will

Accepted Answer

A)  reduce unemployment in the short run, but unemployment will return to the natural rate in the long run. 
B)  reduce unemployment in the short run, but unemployment will exceed the natural rate in the long run. 
C)  increase unemployment in the short run, but unemployment will return to the natural rate in the long run. 
D)  exert an unpredictable impact on unemployment in the short run, but unemployment will return to the natural rate in the long run. 
A)  reduce unemployment in the short run, but unemployment will return to the natural rate in the long run. 
B)  reduce unemployment in the short run, but unemployment will exceed the natural rate in the long run. 
C)  increase unemployment in the short run, but unemployment will return to the natural rate in the long run. 
D)  exert an unpredictable impact on unemployment in the short run, but unemployment will return to the natural rate in the long run.

Question 7

Widespread acceptance of the Keynesian theory of fiscal policy

Accepted Answer

A)  caused most economists to reject the public choice view of budget deficits. 
B)  relaxed the political pressure to balance the budget and, hence, paved the way for the persistent budget deficits of the last five decades. 
C)  was based on the view that continual budget deficits would help stabilize the economy. 
D)  increased the pressure for a constitutional amendment mandating that the federal government balance its budget. 
A)  caused most economists to reject the public choice view of budget deficits. 
B)  relaxed the political pressure to balance the budget and, hence, paved the way for the persistent budget deficits of the last five decades. 
C)  was based on the view that continual budget deficits would help stabilize the economy. 
D)  increased the pressure for a constitutional amendment mandating that the federal government balance its budget.

Question 8

Between 1983 and 2015, the U.S. economy experienced  ___________ recessions and the economy was in recession  ___________ of the time.  (Fill in the blanks)

Accepted Answer

A)  no; 0 percent 
B)  1; 2 percent 
C)  3; 9 percent 
D)  5; 22 percent 
A)  no; 0 percent 
B)  1; 2 percent 
C)  3; 9 percent 
D)  5; 22 percent

Question 9

Which of the following portions of the national debt impose a net interest burden on the federal government?

Accepted Answer

A)  Treasury bonds held by government agencies. 
B)  Treasury bonds held by private investors. 
C)  Treasury bonds held by the Federal Reserve system. 
D)  Treasury bonds held in the Social Security Trust Fund. 
A)  Treasury bonds held by government agencies. 
B)  Treasury bonds held by private investors. 
C)  Treasury bonds held by the Federal Reserve system. 
D)  Treasury bonds held in the Social Security Trust Fund.

Question 10

Which of the following is true of the national debt?

Accepted Answer

A)  A budget deficit will reduce the national debt. 
B)  A budget deficit will increase the national debt. 
C)  A balanced budget will increase the national debt. 
D)  A budget surplus will increase the national debt. 
A)  A budget deficit will reduce the national debt. 
B)  A budget deficit will increase the national debt. 
C)  A balanced budget will increase the national debt. 
D)  A budget surplus will increase the national debt.

Question 11

What will actual unemployment be (in relation to the natural rate) in each of the following cases? Use a graph of the modern Phillips curve in your answer.
a.Decision makers underestimate inflation.
b.Decision makers overestimate inflation.
c.Decision makers correctly forecast inflation.

Accepted Answer

a.Actual unemployment will fal

Question 12

(I)  Rational expectations adherents believe that decision makers base their future expectations on actual outcomes observed during recent periods.
(II)  The adaptive expectations hypothesis states that decision makers weigh all available evidence when forming expectations about future economic events.

Accepted Answer

A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are true. 
D)  Both I and II are false. 
A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are true. 
D)  Both I and II are false.

Question 13

When it comes to macro-policy, most economists now agree that

Accepted Answer

A)  policy should be constantly changing in response to business cycle conditions. 
B)  policy changes should exert stimulus during inflationary booms and restraint during downturns. 
C)  given our ability to forecast economic conditions, policy changes easily can be implemented in a timely manner. 
D)  policy changes are difficult to time correctly, and therefore constant shifts in policy are likely to be a source of economic instability. 
A)  policy should be constantly changing in response to business cycle conditions. 
B)  policy changes should exert stimulus during inflationary booms and restraint during downturns. 
C)  given our ability to forecast economic conditions, policy changes easily can be implemented in a timely manner. 
D)  policy changes are difficult to time correctly, and therefore constant shifts in policy are likely to be a source of economic instability.

Question 14

Regarding the issue of economic stability, nonactivists believe that

Accepted Answer

A)  consumption is highly unstable over the business cycle. 
B)  the highest possible level of investment must be maintained over all phases of the business cycle. 
C)  minor economic disturbances often feed on themselves, leading to severe swings in the business cycle. 
D)  the self-correcting properties of a market economy work reasonably well. 
A)  consumption is highly unstable over the business cycle. 
B)  the highest possible level of investment must be maintained over all phases of the business cycle. 
C)  minor economic disturbances often feed on themselves, leading to severe swings in the business cycle. 
D)  the self-correcting properties of a market economy work reasonably well.

Question 15

Suppose the annual rate of inflation has been 3 percent and the annual growth rate of the money supply has been 5 percent during the last few years. In the last twelve months, however, the monetary authorities have increased the money supply at a 12 percent annual rate. The expected inflation rate for the next period will be:

Accepted Answer

A)  lower than 3 percent under both the adaptive and rational expectations hypotheses. 
B)  3 percent under the adaptive expectations hypothesis. 
C)  3 percent under the rational expectations hypothesis. 
D)  higher than 3 percent under both the adaptive and rational expectations hypotheses. 
A)  lower than 3 percent under both the adaptive and rational expectations hypotheses. 
B)  3 percent under the adaptive expectations hypothesis. 
C)  3 percent under the rational expectations hypothesis. 
D)  higher than 3 percent under both the adaptive and rational expectations hypotheses.

Question 16

After an extended period of steady inflation at a constant rate,

Accepted Answer

A)  people will anticipate inflation. 
B)  actual unemployment will approximate the natural rate of unemployment. 
C)  actual unemployment will be less than the natural rate of unemployment. 
D)  both a and b are true. 
A)  people will anticipate inflation. 
B)  actual unemployment will approximate the natural rate of unemployment. 
C)  actual unemployment will be less than the natural rate of unemployment. 
D)  both a and b are true.

Question 17

Incorporation of expectations into economic decision making and the economic experience of recent decades indicate that in the long run

Accepted Answer

A)  inflation relates directly to unemployment. 
B)  inflation is inversely related to unemployment. 
C)  there is no trade-off between inflation and unemployment. 
D)  high unemployment is a primary cause of inflation. 
A)  inflation relates directly to unemployment. 
B)  inflation is inversely related to unemployment. 
C)  there is no trade-off between inflation and unemployment. 
D)  high unemployment is a primary cause of inflation.

Question 18

According to the rational expectations theory, expansionary monetary policy is fully effective only if

Accepted Answer

A)  the policy is anticipated by workers and firms. 
B)  aggregate supply shifts to the left. 
C)  the economy is operating at or above its potential output level. 
D)  policy makers follow through on their previously announced plans. 
E)  the effects of the policy are unexpected. 
A)  the policy is anticipated by workers and firms. 
B)  aggregate supply shifts to the left. 
C)  the economy is operating at or above its potential output level. 
D)  policy makers follow through on their previously announced plans. 
E)  the effects of the policy are unexpected.

Question 19

The variables in the index of leading indicators are included in the index because

Accepted Answer

A)  they turn down prior to a deflation and turn up prior to an inflation. 
B)  they generally lag behind turns in the business cycle. 
C)  they turn down prior to a recession and turn up before the beginning of a business expansion. 
D)  they provide a comprehensive measure of the current state of the economy. 
A)  they turn down prior to a deflation and turn up prior to an inflation. 
B)  they generally lag behind turns in the business cycle. 
C)  they turn down prior to a recession and turn up before the beginning of a business expansion. 
D)  they provide a comprehensive measure of the current state of the economy.

Question 20

Most economists agree that

Accepted Answer

A)  fiscal policy is a more effective stabilization tool than monetary policy. 
B)  it is difficult to time discretionary changes in macro-policy in a manner that will promote stability. 
C)  monetary policy should focus on reducing unemployment, while fiscal policy should focus on the control of inflation. 
D)  discretionary macro-policy can easily be instituted in a manner that will promote economic stability. 
A)  fiscal policy is a more effective stabilization tool than monetary policy. 
B)  it is difficult to time discretionary changes in macro-policy in a manner that will promote stability. 
C)  monetary policy should focus on reducing unemployment, while fiscal policy should focus on the control of inflation. 
D)  discretionary macro-policy can easily be instituted in a manner that will promote economic stability.

Modern Phillips curve analysis indicates that if people

The Phillips curve illustrates the relationship between

If decision makers adjust fully to demand stimulus policies, persistent expansionary macro-policy will lead to

(I) In the 1960s and 1970s, most economists believed that there was a permanent trade-off between inflation and unemployment. (II) Today, most economists believe there is no permanent trade-off between inflation and unemployment.

The U.S. Treasury both pays and receives almost all of the interest on that portion of the national debt that is held by

An unanticipated shift to a more expansionary monetary policy that permanently increases the rate of inflation from 2 to 6 percent will

Widespread acceptance of the Keynesian theory of fiscal policy

Between 1983 and 2015, the U.S. economy experienced _ recessions and the economy was in recession _ of the time. (Fill in the blanks)

Which of the following portions of the national debt impose a net interest burden on the federal government?

Which of the following is true of the national debt?

What will actual unemployment be (in relation to the natural rate) in each of the following cases? Use a graph of the modern Phillips curve in your answer. a.Decision makers underestimate inflation. b.Decision makers overestimate inflation. c.Decision makers correctly forecast inflation.

When it comes to macro-policy, most economists now agree that

Regarding the issue of economic stability, nonactivists believe that

After an extended period of steady inflation at a constant rate,

Incorporation of expectations into economic decision making and the economic experience of recent decades indicate that in the long run

According to the rational expectations theory, expansionary monetary policy is fully effective only if

The variables in the index of leading indicators are included in the index because

Most economists agree that

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

Modern Phillips curve analysis indicates that if people

The Phillips curve illustrates the relationship between

If decision makers adjust fully to demand stimulus policies, persistent expansionary macro-policy will lead to

(I) In the 1960s and 1970s, most economists believed that there was a permanent trade-off between inflation and unemployment. (II) Today, most economists believe there is no permanent trade-off between inflation and unemployment.

The U.S. Treasury both pays and receives almost all of the interest on that portion of the national debt that is held by

An unanticipated shift to a more expansionary monetary policy that permanently increases the rate of inflation from 2 to 6 percent will

Widespread acceptance of the Keynesian theory of fiscal policy

Between 1983 and 2015, the U.S. economy experienced ___________ recessions and the economy was in recession ___________ of the time. (Fill in the blanks)

Which of the following portions of the national debt impose a net interest burden on the federal government?

Which of the following is true of the national debt?

What will actual unemployment be (in relation to the natural rate) in each of the following cases? Use a graph of the modern Phillips curve in your answer. a.Decision makers underestimate inflation. b.Decision makers overestimate inflation. c.Decision makers correctly forecast inflation.

When it comes to macro-policy, most economists now agree that

Regarding the issue of economic stability, nonactivists believe that

After an extended period of steady inflation at a constant rate,

Incorporation of expectations into economic decision making and the economic experience of recent decades indicate that in the long run

According to the rational expectations theory, expansionary monetary policy is fully effective only if

The variables in the index of leading indicators are included in the index because

Most economists agree that

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

Between 1983 and 2015, the U.S. economy experienced _ recessions and the economy was in recession _ of the time. (Fill in the blanks)