Question 1

Which of the following is NOT an automatic stabilizer?

Accepted Answer

A) the minimum wage 
B) the unemployment compensation system 
C) the federal income tax 
D) the welfare system 
A) the minimum wage 
B) the unemployment compensation system 
C) the federal income tax 
D) the welfare system

Question 2

Use the money market to explain why the aggregate demand curve slopes downward.

Accepted Answer

When the price level falls,people need l

Question 3

Which of the following policies would someone who wants the government to follow an active stabilization policy recommend when the economy is experiencing unemployment above the natural rate?

Accepted Answer

A) decreasing the money supply 
B) increasing government expenditures 
C) increasing taxes 
D) reducing the government deficit 
A) decreasing the money supply 
B) increasing government expenditures 
C) increasing taxes 
D) reducing the government deficit

Question 4

If the multiplier is 4,what is the MPC?

Accepted Answer

A) 0.25 
B) 0.50 
C) 0.75 
D) 1.00 
A) 0.25 
B) 0.50 
C) 0.75 
D) 1.00

Question 5

According to liquidity-preference theory,other things being equal,a higher price level leads households to do which of the following in the short run?

Accepted Answer

A) increase consumption 
B) decrease the amount of cash they want to hold 
C) buy bonds 
D) decrease consumption 
A) increase consumption 
B) decrease the amount of cash they want to hold 
C) buy bonds 
D) decrease consumption

Question 6

How does an increase in the interest rate affect the demand for goods and services?

Accepted Answer

A) It increases the cost of borrowing and people consume more. 
B) It decreases the cost of borrowing and people consume more. 
C) It increases the cost of borrowing and people consume less. 
D) It decreases the cost of borrowing and people consume less. 
A) It increases the cost of borrowing and people consume more. 
B) It decreases the cost of borrowing and people consume more. 
C) It increases the cost of borrowing and people consume less. 
D) It decreases the cost of borrowing and people consume less.

Question 7

According to the theory of liquidity preference,how is the money supply affected by the interest rate?

Accepted Answer

A) positively 
B) negatively 
C) not affected 
D) directly 
A) positively 
B) negatively 
C) not affected 
D) directly

Question 8

Assume that the MPC is 0.8.What is the multiplier?

Accepted Answer

A) .20 
B) .25 
C) 5 
D) 8 
A) .20 
B) .25 
C) 5 
D) 8

Question 9

Suppose that the MPC is 0.5 and there is no investment accelerator or crowding-out effects.If government expenditures increase by $20 billion,what happens to aggregate demand?

Accepted Answer

A) It shifts right by $20 billion. 
B) It shifts left by $20 billion. 
C) It shifts right by $40 billion. 
D) It shifts left by $40 billion. 
A) It shifts right by $20 billion. 
B) It shifts left by $20 billion. 
C) It shifts right by $40 billion. 
D) It shifts left by $40 billion.

Question 10

When does the opportunity cost of holding money decrease or increase,and how does people's desire to hold money change?

Accepted Answer

A) The opportunity cost of holding money decreases when the interest rate increases, so people desire to hold more money. 
B) The opportunity cost of holding money decreases when the interest rate increases, so people desire to hold less money. 
C) The opportunity cost of holding money increases when the interest rate increases, so people desire to hold more money. 
D) The opportunity cost of holding money increases when the interest rate increases, so people desire to hold less money. 
A) The opportunity cost of holding money decreases when the interest rate increases, so people desire to hold more money. 
B) The opportunity cost of holding money decreases when the interest rate increases, so people desire to hold less money. 
C) The opportunity cost of holding money increases when the interest rate increases, so people desire to hold more money. 
D) The opportunity cost of holding money increases when the interest rate increases, so people desire to hold less money.

Question 11

If at some interest rate the quantity of money supplied is greater than the quantity of money demanded,what will people desire to do and what happens to the interest rate?

Accepted Answer

A) People will sell interest-bearing assets, causing the interest rate to decrease. 
B) People will sell interest-bearing assets, causing the interest rate to increase. 
C) People will buy interest-bearing assets, causing the interest rate to decrease. 
D) People will buy interest-bearing assets, causing the interest rate to increase. 
A) People will sell interest-bearing assets, causing the interest rate to decrease. 
B) People will sell interest-bearing assets, causing the interest rate to increase. 
C) People will buy interest-bearing assets, causing the interest rate to decrease. 
D) People will buy interest-bearing assets, causing the interest rate to increase.

Question 12

What do supply-side economists focus more on than other economists?

Accepted Answer

A) how fiscal policy affects consumption 
B) the multiplier effect of fiscal policy 
C) how fiscal policy affects aggregate supply 
D) the accelerator and exchange-rate effects 
A) how fiscal policy affects consumption 
B) the multiplier effect of fiscal policy 
C) how fiscal policy affects aggregate supply 
D) the accelerator and exchange-rate effects

Question 13

Which of the following lists of events is consistent with the long-run theories studied?

Accepted Answer

A) In the long run, output responds to the aggregate demand and supply of goods and services; the interest rate adjusts to balance the supply and demand for money; and the price level adjusts to balance the supply and demand for loanable funds. 
B) In the long run, output is determined by the amount of capital, labour, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level adjusts to balance the supply and demand for money. 
C) In the long run, output is determined by the amount of capital, labour, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level is stuck. 
D) In the long run, output responds to the aggregate demand for goods and services; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level adjusts to balance the supply and demand for money. 
A) In the long run, output responds to the aggregate demand and supply of goods and services; the interest rate adjusts to balance the supply and demand for money; and the price level adjusts to balance the supply and demand for loanable funds. 
B) In the long run, output is determined by the amount of capital, labour, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level adjusts to balance the supply and demand for money. 
C) In the long run, output is determined by the amount of capital, labour, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level is stuck. 
D) In the long run, output responds to the aggregate demand for goods and services; the interest rate adjusts to balance the supply and demand for loanable funds; and the price level adjusts to balance the supply and demand for money.

Question 14

Which of the following is the most likely effect of an increase in government spending on goods to build or repair infrastructure?

Accepted Answer

A) It would shift the aggregate-demand curve to the left. 
B) It would shift the long-run aggregate-supply curve to the left. . 
C) It would shift the short-run aggregate-supply curve to the left. 
D) It would shift the long run aggregate-supply curve to the right. 
A) It would shift the aggregate-demand curve to the left. 
B) It would shift the long-run aggregate-supply curve to the left. . 
C) It would shift the short-run aggregate-supply curve to the left. 
D) It would shift the long run aggregate-supply curve to the right.

Question 15

Which of the following illustrates how the investment accelerator works?

Accepted Answer

A) An increase in government expenditures increases the interest rate so that the Sleepwell Hotel chain decides to build fewer new hotels. 
B) An increase in government expenditures increases aggregate spending so that the Sleepwell Hotel chain finds it profitable to build more new hotels. 
C) An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by the Sleepwell Hotel chain rises. 
D) An increase in government expenditures decreases the interest rate so that the Sleepwell Hotel chain decides to build more new hotels. 
A) An increase in government expenditures increases the interest rate so that the Sleepwell Hotel chain decides to build fewer new hotels. 
B) An increase in government expenditures increases aggregate spending so that the Sleepwell Hotel chain finds it profitable to build more new hotels. 
C) An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by the Sleepwell Hotel chain rises. 
D) An increase in government expenditures decreases the interest rate so that the Sleepwell Hotel chain decides to build more new hotels.

Question 16

Which of the following terms refers to the reduction in demand that results when a fiscal expansion raises the interest rate?

Accepted Answer

A) the multiplier effect 
B) the crowding-out effect 
C) the accelerator effect 
D) the Ricardian equivalence effect 
A) the multiplier effect 
B) the crowding-out effect 
C) the accelerator effect 
D) the Ricardian equivalence effect

Question 17

Figure 15-1
  
-Refer to the Figure 15-1.At which of the following interest rates is there an excess money demand?

Accepted Answer

A) 2 percent 
B) 3 percent 
C) 4 percent 
D) 5 percent 
A) 2 percent 
B) 3 percent 
C) 4 percent 
D) 5 percent

Question 18

How do permanent tax cuts shift the AD curve compared with temporary tax results?

Accepted Answer

A) Permanent tax cuts shift the AD curve farther to the right than temporary tax cuts do. 
B) Permanent tax cuts shift the AD curve less to the right than temporary tax cuts do. 
C) Permanent tax cuts shift the AD curve farther to the left than temporary tax cuts do. 
D) Permanent tax cuts shift the AD curve less to the left than temporary tax cuts do. 
A) Permanent tax cuts shift the AD curve farther to the right than temporary tax cuts do. 
B) Permanent tax cuts shift the AD curve less to the right than temporary tax cuts do. 
C) Permanent tax cuts shift the AD curve farther to the left than temporary tax cuts do. 
D) Permanent tax cuts shift the AD curve less to the left than temporary tax cuts do.

Question 19

For the Canadian economy,which of the following is the LEAST important reason for the downward slope of the aggregate-demand curve?

Accepted Answer

A) the wealth effect 
B) the interest-rate effect 
C) the exchange-rate effect 
D) the real-wage effect 
A) the wealth effect 
B) the interest-rate effect 
C) the exchange-rate effect 
D) the real-wage effect

Question 20

Which of the following statements do opponents of active stabilization policy believe?

Accepted Answer

A) A monetary policy designed to offset changes in the unemployment rate is effective. 
B) Fiscal policy is unable to change aggregate demand or aggregate supply. 
C) The political process creates lags in the implementation of fiscal policy. 
D) Fluctuations would not exist in the absence of fiscal policies. 
A) A monetary policy designed to offset changes in the unemployment rate is effective. 
B) Fiscal policy is unable to change aggregate demand or aggregate supply. 
C) The political process creates lags in the implementation of fiscal policy. 
D) Fluctuations would not exist in the absence of fiscal policies.

Which of the following is NOT an automatic stabilizer?

Use the money market to explain why the aggregate demand curve slopes downward.

Which of the following policies would someone who wants the government to follow an active stabilization policy recommend when the economy is experiencing unemployment above the natural rate?

If the multiplier is 4,what is the MPC?

According to liquidity-preference theory,other things being equal,a higher price level leads households to do which of the following in the short run?

How does an increase in the interest rate affect the demand for goods and services?

According to the theory of liquidity preference,how is the money supply affected by the interest rate?

Assume that the MPC is 0.8.What is the multiplier?

Suppose that the MPC is 0.5 and there is no investment accelerator or crowding-out effects.If government expenditures increase by $20 billion,what happens to aggregate demand?

When does the opportunity cost of holding money decrease or increase,and how does people's desire to hold money change?

If at some interest rate the quantity of money supplied is greater than the quantity of money demanded,what will people desire to do and what happens to the interest rate?

What do supply-side economists focus more on than other economists?

Which of the following lists of events is consistent with the long-run theories studied?

Which of the following is the most likely effect of an increase in government spending on goods to build or repair infrastructure?

Which of the following illustrates how the investment accelerator works?

Which of the following terms refers to the reduction in demand that results when a fiscal expansion raises the interest rate?

Figure 15-1 -Refer to the Figure 15-1.At which of the following interest rates is there an excess money demand?

How do permanent tax cuts shift the AD curve compared with temporary tax results?

For the Canadian economy,which of the following is the LEAST important reason for the downward slope of the aggregate-demand curve?

Which of the following statements do opponents of active stabilization policy believe?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Short-Run Tradeoff between Inflation and Unemployment

Five Debates over Macroeconomic Policy

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Exam 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Which of the following is NOT an automatic stabilizer?

Use the money market to explain why the aggregate demand curve slopes downward.

Which of the following policies would someone who wants the government to follow an active stabilization policy recommend when the economy is experiencing unemployment above the natural rate?

If the multiplier is 4,what is the MPC?

According to liquidity-preference theory,other things being equal,a higher price level leads households to do which of the following in the short run?

How does an increase in the interest rate affect the demand for goods and services?

According to the theory of liquidity preference,how is the money supply affected by the interest rate?

Assume that the MPC is 0.8.What is the multiplier?

Suppose that the MPC is 0.5 and there is no investment accelerator or crowding-out effects.If government expenditures increase by $20 billion,what happens to aggregate demand?

When does the opportunity cost of holding money decrease or increase,and how does people's desire to hold money change?

If at some interest rate the quantity of money supplied is greater than the quantity of money demanded,what will people desire to do and what happens to the interest rate?

What do supply-side economists focus more on than other economists?

Which of the following lists of events is consistent with the long-run theories studied?

Which of the following is the most likely effect of an increase in government spending on goods to build or repair infrastructure?

Which of the following illustrates how the investment accelerator works?

Which of the following terms refers to the reduction in demand that results when a fiscal expansion raises the interest rate?

Figure 15-1 -Refer to the Figure 15-1.At which of the following interest rates is there an excess money demand?

How do permanent tax cuts shift the AD curve compared with temporary tax results?

For the Canadian economy,which of the following is the LEAST important reason for the downward slope of the aggregate-demand curve?

Which of the following statements do opponents of active stabilization policy believe?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Short-Run Tradeoff between Inflation and Unemployment

Five Debates over Macroeconomic Policy

Filters