Question 1

Neutralizing demand shocks is easier in theory than in practice.Why?

Accepted Answer

To neutralize demand shocks, monetary po

Question 2

According to the NBER, a severe decline in economic activity that lasted less than two quarters:

Accepted Answer

A) could not be considered a recession. 
B) could still be considered a recession. 
C) would not be called a recession until more than two years had passed. 
D) would immediately be called a recession. 
A) could not be considered a recession. 
B) could still be considered a recession. 
C) would not be called a recession until more than two years had passed. 
D) would immediately be called a recession.

Question 3

What explanations have been offered to account for the Great Moderation?

Accepted Answer

Three possible explanations have been of

Question 4

During the Vietnam War, monetary policy officials reacted to the increases in aggregate demand resulting from military expenditures by:

Accepted Answer

A) not shifting the monetary policy reaction function. 
B) dramatically slowing money growth. 
C) shifting the monetary policy reaction curve to the left. 
D) keeping the same inflation target and raising the real interest rates. 
A) not shifting the monetary policy reaction function. 
B) dramatically slowing money growth. 
C) shifting the monetary policy reaction curve to the left. 
D) keeping the same inflation target and raising the real interest rates.

Question 5

Which of the following statements is most correct?

Accepted Answer

A) A recession is officially defined as two consecutive quarters where the real growth rate is negative. 
B) A recession officially begins when unemployment exceeds 5.0 percent. 
C) There is no hard and fast definition of a recession. 
D) The official date of a recession is determined by the Federal Reserve Board, but usually with at least a three-month delay. 
A) A recession is officially defined as two consecutive quarters where the real growth rate is negative. 
B) A recession officially begins when unemployment exceeds 5.0 percent. 
C) There is no hard and fast definition of a recession. 
D) The official date of a recession is determined by the Federal Reserve Board, but usually with at least a three-month delay.

Question 6

Use the long-run model presented in Chapter 22 to answer this question.If there is a decrease in aggregate demand, and monetary policymakers counter the decrease in aggregate demand, what will be the impact on output and inflation? Explain.

Accepted Answer

If monetary policymakers count

Question 7

Why would most economists default usually first to monetary policy for stabilization before using fiscal policy?

Accepted Answer

Monetary policy offers a lot of advantag

Question 8

Since 1950, the U.S.economy has likely experienced:

Accepted Answer

A) more periods of deflation than disinflation. 
B) more periods of disinflation than deflation. 
C) an equal number of periods of deflation and disinflation since they are synonymous. 
D) none of the answers provided is correct. 
A) more periods of deflation than disinflation. 
B) more periods of disinflation than deflation. 
C) an equal number of periods of deflation and disinflation since they are synonymous. 
D) none of the answers provided is correct.

Question 9

If the monetary policy reaction curve has a relatively steep slope, the dynamic aggregate demand curve is likely to have a:

Accepted Answer

A) relatively steep slope. 
B) relatively flat slope. 
C) positive slope. 
D) zero slope. 
A) relatively steep slope. 
B) relatively flat slope. 
C) positive slope. 
D) zero slope.

Question 10

Unemployment insurance and the proportional nature of the tax system are examples of:

Accepted Answer

A) discretionary fiscal policy. 
B) automatic fiscal policy. 
C) both discretionary and automatic fiscal policy. 
D) expansionary fiscal policy. 
A) discretionary fiscal policy. 
B) automatic fiscal policy. 
C) both discretionary and automatic fiscal policy. 
D) expansionary fiscal policy.

Question 11

Higher potential output levels:

Accepted Answer

A) put upward pressure on real interest rates. 
B) put downward pressure on real interest rates and upward pressure on inflation rates. 
C) put upward pressure on real interest rates and downward pressure on inflation rates. 
D) none of the answers given is correct. 
A) put upward pressure on real interest rates. 
B) put downward pressure on real interest rates and upward pressure on inflation rates. 
C) put upward pressure on real interest rates and downward pressure on inflation rates. 
D) none of the answers given is correct.

Question 12

Most economists attribute the Great Moderation experienced in the United States during the 1990s mainly to:

Accepted Answer

A) good fortune. 
B) slowing productivity growth. 
C) aggressive fiscal policy. 
D) better understanding and use of monetary policy. 
A) good fortune. 
B) slowing productivity growth. 
C) aggressive fiscal policy. 
D) better understanding and use of monetary policy.

Question 13

Which of the following would be classified as a negative supply shock?

Accepted Answer

A) An increase in the legal minimum wage 
B) A decrease in the price of oil 
C) An increase in government purchases 
D) An increase in demand for exports 
A) An increase in the legal minimum wage 
B) A decrease in the price of oil 
C) An increase in government purchases 
D) An increase in demand for exports

Question 14

Describe the immediate short-run effect to the economy from an increase in government purchases, as well as the self-correcting mechanism that will restore long-run equilibrium.

Accepted Answer

The increase in government purchases wil

Question 15

"Official" recessions in the United States are declared by:

Accepted Answer

A) the Federal Reserve. 
B) the U.S.department of the Treasury. 
C) the National Bureau of Economic Research. 
D) Congress. 
A) the Federal Reserve. 
B) the U.S.department of the Treasury. 
C) the National Bureau of Economic Research. 
D) Congress.

Question 16

The 2008 and 2009 tax cuts and the increase in government spending that occurred at the same time did not have the same inflationary impact as the similar policy in the 1960s because:

Accepted Answer

A) the fiscal stimulus came at a time when the economy was weakening due to other factors. 
B) monetary policymakers, having perceived the inflation risk, responded appropriately. 
C) aggregate demand was far below potential output. 
D) all of the answers provided are correct. 
A) the fiscal stimulus came at a time when the economy was weakening due to other factors. 
B) monetary policymakers, having perceived the inflation risk, responded appropriately. 
C) aggregate demand was far below potential output. 
D) all of the answers provided are correct.

Question 17

Policymakers could neutralize all of the following except:

Accepted Answer

A) an increase in federal government spending on defense. 
B) an increase in the price of oil. 
C) a trade deficit. 
D) a decrease in business confidence. 
A) an increase in federal government spending on defense. 
B) an increase in the price of oil. 
C) a trade deficit. 
D) a decrease in business confidence.

Question 18

Without a change in target inflation, anything that shifts the aggregate demand curve to the right will cause:

Accepted Answer

A) a temporary increase in output. 
B) a permanent reduction in inflation. 
C) a temporary decrease in inflation. 
D) an increase in output in the long run. 
A) a temporary increase in output. 
B) a permanent reduction in inflation. 
C) a temporary decrease in inflation. 
D) an increase in output in the long run.

Question 19

If inflation increases, this could be illustrated as a:

Accepted Answer

A) rightward shift of the long-run aggregate supply curve. 
B) leftward shift of the long-run aggregate supply curve. 
C) rightward shift of the short-run aggregate supply curve. 
D) movement down along the short-run aggregate supply curve. 
A) rightward shift of the long-run aggregate supply curve. 
B) leftward shift of the long-run aggregate supply curve. 
C) rightward shift of the short-run aggregate supply curve. 
D) movement down along the short-run aggregate supply curve.

Question 20

Stagflation is a term that usually describes an economy experiencing:

Accepted Answer

A) low inflation. 
B) low inflation coupled with low growth. 
C) high inflation with a recessionary gap. 
D) low unemployment rates and low inflation rates. 
A) low inflation. 
B) low inflation coupled with low growth. 
C) high inflation with a recessionary gap. 
D) low unemployment rates and low inflation rates.

Exam 22: Understanding Business Cycle Fluctuations

Neutralizing demand shocks is easier in theory than in practice.Why?

According to the NBER, a severe decline in economic activity that lasted less than two quarters:

What explanations have been offered to account for the Great Moderation?

During the Vietnam War, monetary policy officials reacted to the increases in aggregate demand resulting from military expenditures by:

Which of the following statements is most correct?

Use the long-run model presented in Chapter 22 to answer this question.If there is a decrease in aggregate demand, and monetary policymakers counter the decrease in aggregate demand, what will be the impact on output and inflation? Explain.

Why would most economists default usually first to monetary policy for stabilization before using fiscal policy?

Since 1950, the U.S.economy has likely experienced:

If the monetary policy reaction curve has a relatively steep slope, the dynamic aggregate demand curve is likely to have a:

Unemployment insurance and the proportional nature of the tax system are examples of:

Higher potential output levels:

Most economists attribute the Great Moderation experienced in the United States during the 1990s mainly to:

Which of the following would be classified as a negative supply shock?

Describe the immediate short-run effect to the economy from an increase in government purchases, as well as the self-correcting mechanism that will restore long-run equilibrium.

"Official" recessions in the United States are declared by:

The 2008 and 2009 tax cuts and the increase in government spending that occurred at the same time did not have the same inflationary impact as the similar policy in the 1960s because:

Policymakers could neutralize all of the following except:

Without a change in target inflation, anything that shifts the aggregate demand curve to the right will cause:

If inflation increases, this could be illustrated as a:

Stagflation is a term that usually describes an economy experiencing:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Modern Monetary Policy and the Challenges Facing Central Bankers

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