Question 1

An expansionary monetary policy that successfully counteracts a recession has the side effect of

Accepted Answer

A)  lower investment spending than if no action had been taken. 
B)  a larger government deficit than if no action had been taken. 
C)  a higher price level than if no action had been taken. 
D)  lower output than if no action had been taken. 
A)  lower investment spending than if no action had been taken. 
B)  a larger government deficit than if no action had been taken. 
C)  a higher price level than if no action had been taken. 
D)  lower output than if no action had been taken.

Question 2

Which of the following statements concerning stabilization policy is correct?

Accepted Answer

A)  Increasing government spending during an economic boom would be an example of a stabilization policy. 
B)  Increasing taxes during a recession would be an example of a stabilization policy. 
C)  New Keynesian economists are skeptical of the value of stabilization policies. 
D)  Increasing the money supply during a recession is an example of a stabilization policy. 
A)  Increasing government spending during an economic boom would be an example of a stabilization policy. 
B)  Increasing taxes during a recession would be an example of a stabilization policy. 
C)  New Keynesian economists are skeptical of the value of stabilization policies. 
D)  Increasing the money supply during a recession is an example of a stabilization policy.

Question 3

Which of the following is NOT an example of a supply shock?

Accepted Answer

A)  a drought in the Midwest 
B)  a decline in natural gas prices following discovery of new fields 
C)  the introduction of a new line of computer-controlled machine tools in manufacturing 
D)  a substantial increase in federal government spending on Medicare 
A)  a drought in the Midwest 
B)  a decline in natural gas prices following discovery of new fields 
C)  the introduction of a new line of computer-controlled machine tools in manufacturing 
D)  a substantial increase in federal government spending on Medicare

Question 4

If the economy experiences simultaneous negative aggregate demand and aggregate supply shocks,and the Fed decides NOT to intervene with expansionary policy.Short-run aggregate supply will eventually shift back to the right,which will eventually bring the economy

Accepted Answer

A)  back to potential GDP at a lower price level. 
B)  back to potential GDP at a higher price level. 
C)  back to the original equilibrium price at a lower level of aggregate output. 
D)  back to the original equilibrium price at a higher level of aggregate output. 
A)  back to potential GDP at a lower price level. 
B)  back to potential GDP at a higher price level. 
C)  back to the original equilibrium price at a lower level of aggregate output. 
D)  back to the original equilibrium price at a higher level of aggregate output.

Question 5

The Federal Reserve pursued an expansionary monetary policy during 1964 in order to

Accepted Answer

A)  pull the United States out of a deep recession. 
B)  counteract the effects of a deep cut in federal income taxes. 
C)  keep interest rates from rising. 
D)  bring down the inflation rate. 
A)  pull the United States out of a deep recession. 
B)  counteract the effects of a deep cut in federal income taxes. 
C)  keep interest rates from rising. 
D)  bring down the inflation rate.

Question 6

The aggregate demand curve illustrates the relationship between

Accepted Answer

A)  the aggregate expenditure for goods and services, and the real interest rate. 
B)  the aggregate expenditure for goods and services, and the level of current output. 
C)  the level of current output and the real interest rate. 
D)  the aggregate expenditure for goods and services, and the price level. 
A)  the aggregate expenditure for goods and services, and the real interest rate. 
B)  the aggregate expenditure for goods and services, and the level of current output. 
C)  the level of current output and the real interest rate. 
D)  the aggregate expenditure for goods and services, and the price level.

Question 7

According to new Keynesians,why can firms increase output in the short run in response to higher prices?

Accepted Answer

In the new Keynesian view,in the short r

Question 8

Monetary neutrality refers to the fact that changes in the money supply

Accepted Answer

A)  affect output more in the long run than in the short run. 
B)  have no effect on output in the long run. 
C)  affect only output in the long run. 
D)  have a greater effect on prices in the short run than in the long run. 
A)  affect output more in the long run than in the short run. 
B)  have no effect on output in the long run. 
C)  affect only output in the long run. 
D)  have a greater effect on prices in the short run than in the long run.

Question 9

Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news,but at least prices starting to go up means that output must be starting to go up as well."

Accepted Answer

If the increase in the price level is du

Question 10

According to AD-AS model,the primary long-run effect of increases in the money supply is

Accepted Answer

A)  a higher price level. 
B)  higher GDP. 
C)  a lower price level. 
D)  lower GDP. 
A)  a higher price level. 
B)  higher GDP. 
C)  a lower price level. 
D)  lower GDP.

Question 11

An increase in the expected price level

Accepted Answer

A)  shifts the short-run aggregate supply curve up and to the left. 
B)  shifts the short-run aggregate supply curve down and to the right. 
C)  has no effect on the short-run aggregate supply curve. 
D)  results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve. 
A)  shifts the short-run aggregate supply curve up and to the left. 
B)  shifts the short-run aggregate supply curve down and to the right. 
C)  has no effect on the short-run aggregate supply curve. 
D)  results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve.

Question 12

The new classical explanation of aggregate supply in the short run builds on research by

Accepted Answer

A)  Irving Fisher. 
B)  John Maynard Keynes. 
C)  Robert Lucas. 
D)  Robert Solow. 
A)  Irving Fisher. 
B)  John Maynard Keynes. 
C)  Robert Lucas. 
D)  Robert Solow.

Question 13

Which of the following is NOT included in aggregate demand?

Accepted Answer

A)  demand for goods and services for consumption 
B)  investment in business plant and equipment 
C)  net exports 
D)  investment in Treasury bonds 
A)  demand for goods and services for consumption 
B)  investment in business plant and equipment 
C)  net exports 
D)  investment in Treasury bonds

Question 14

An increase in all of the following will increase aggregate demand EXCEPT

Accepted Answer

A)  investment. 
B)  savings. 
C)  exports. 
D)  government spending. 
A)  investment. 
B)  savings. 
C)  exports. 
D)  government spending.

Question 15

Why are many economists skeptical of the Fed's ability to fine tune the economy?

Accepted Answer

A)  Monetary policy only affects output in the long run. 
B)  Lags in policy make it difficult to properly time policy. 
C)  Fiscal policy can be implemented more quickly than monetary policy. 
D)  Monetary policy does not have any effect on output. 
A)  Monetary policy only affects output in the long run. 
B)  Lags in policy make it difficult to properly time policy. 
C)  Fiscal policy can be implemented more quickly than monetary policy. 
D)  Monetary policy does not have any effect on output.

Question 16

In the long run,the key reason that money is neutral is that

Accepted Answer

A)  the federal budget is balanced. 
B)  prices are flexible. 
C)  business cycles have become much milder. 
D)  the nominal interest rate must equal the real interest rate. 
A)  the federal budget is balanced. 
B)  prices are flexible. 
C)  business cycles have become much milder. 
D)  the nominal interest rate must equal the real interest rate.

Question 17

If there is a decrease in the expected future profitability of capital

Accepted Answer

A)  the aggregate demand curve will shift right. 
B)  the aggregate demand curve will shift left. 
C)  the aggregate demand curve will become steeper. 
D)  the aggregate demand curve will be unaffected. 
A)  the aggregate demand curve will shift right. 
B)  the aggregate demand curve will shift left. 
C)  the aggregate demand curve will become steeper. 
D)  the aggregate demand curve will be unaffected.

Question 18

Explain what happens to the short-run aggregate supply curve when output exceeds its potential.

Accepted Answer

When output exceeds potential GDP,the hi

Question 19

How does an increase in the short-term interest rate affect peoples' desire to hold real money balances?

Accepted Answer

A)  People will hold more money to compensate for the higher interest rate. 
B)  People will hold more money in anticipation of higher inflation. 
C)  People will hold less money since they would be sacrificing more interest by holding money. 
D)  People will hold less money since it is not worth as much. 
A)  People will hold more money to compensate for the higher interest rate. 
B)  People will hold more money in anticipation of higher inflation. 
C)  People will hold less money since they would be sacrificing more interest by holding money. 
D)  People will hold less money since it is not worth as much.

Question 20

Which of the following is the correct expression for short-run aggregate supply in the new classical view?

Accepted Answer

A)  YP = Y + a(P - Pe) 
B)  Y = YP + a(P - Pe) 
C)  YP = Y + a(P + Pe) 
D)  Y = YP + a(P + Pe) 
A)  YP = Y + a(P - Pe) 
B)  Y = YP + a(P - Pe) 
C)  YP = Y + a(P + Pe) 
D)  Y = YP + a(P + Pe)

An expansionary monetary policy that successfully counteracts a recession has the side effect of

Which of the following statements concerning stabilization policy is correct?

Which of the following is NOT an example of a supply shock?

If the economy experiences simultaneous negative aggregate demand and aggregate supply shocks,and the Fed decides NOT to intervene with expansionary policy.Short-run aggregate supply will eventually shift back to the right,which will eventually bring the economy

The Federal Reserve pursued an expansionary monetary policy during 1964 in order to

The aggregate demand curve illustrates the relationship between

According to new Keynesians,why can firms increase output in the short run in response to higher prices?

Monetary neutrality refers to the fact that changes in the money supply

Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news,but at least prices starting to go up means that output must be starting to go up as well."

According to AD-AS model,the primary long-run effect of increases in the money supply is

An increase in the expected price level

The new classical explanation of aggregate supply in the short run builds on research by

Which of the following is NOT included in aggregate demand?

An increase in all of the following will increase aggregate demand EXCEPT

Why are many economists skeptical of the Fed's ability to fine tune the economy?

In the long run,the key reason that money is neutral is that

If there is a decrease in the expected future profitability of capital

Explain what happens to the short-run aggregate supply curve when output exceeds its potential.

How does an increase in the short-term interest rate affect peoples' desire to hold real money balances?

Which of the following is the correct expression for short-run aggregate supply in the new classical view?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 17: Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

An expansionary monetary policy that successfully counteracts a recession has the side effect of

Which of the following statements concerning stabilization policy is correct?

Which of the following is NOT an example of a supply shock?

If the economy experiences simultaneous negative aggregate demand and aggregate supply shocks,and the Fed decides NOT to intervene with expansionary policy.Short-run aggregate supply will eventually shift back to the right,which will eventually bring the economy

The Federal Reserve pursued an expansionary monetary policy during 1964 in order to

The aggregate demand curve illustrates the relationship between

According to new Keynesians,why can firms increase output in the short run in response to higher prices?

Monetary neutrality refers to the fact that changes in the money supply

Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news,but at least prices starting to go up means that output must be starting to go up as well."

According to AD-AS model,the primary long-run effect of increases in the money supply is

An increase in the expected price level

The new classical explanation of aggregate supply in the short run builds on research by

Which of the following is NOT included in aggregate demand?

An increase in all of the following will increase aggregate demand EXCEPT

Why are many economists skeptical of the Fed's ability to fine tune the economy?

In the long run,the key reason that money is neutral is that

If there is a decrease in the expected future profitability of capital

Explain what happens to the short-run aggregate supply curve when output exceeds its potential.

How does an increase in the short-term interest rate affect peoples' desire to hold real money balances?

Which of the following is the correct expression for short-run aggregate supply in the new classical view?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory Ii: the Is-Mp Model

Filters