Question 1

Supply-side policy is determined by:

Accepted Answer

A)  The Federal Reserve system. 
B)  Businesses through investment. 
C)  The labor force by deciding to work. 
D)  Congress through spending and regulation. 
A)  The Federal Reserve system. 
B)  Businesses through investment. 
C)  The labor force by deciding to work. 
D)  Congress through spending and regulation.

Question 2

Automatic stabilizers result in substantial design lags due to congressional deliberations about which stabilizer to use in a given situation.

Accepted Answer

A) True 
 B)False

Question 3

Refer to Figure 16.1.  
-Refer to Figure 16.1.If the economy is initially in equilibrium at P1 and Q2,the appropriate policy to move the economy to an equilibrium at P2 and Q3 would be to:

Accepted Answer

A)  Reduce immigration barriers. 
B)  Increase the marginal tax rate. 
C)  Increase government spending. 
D)  Increase interest rates. 
A)  Reduce immigration barriers. 
B)  Increase the marginal tax rate. 
C)  Increase government spending. 
D)  Increase interest rates.

Question 4

Stagflation is caused by a leftward shift of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 5

The multiple by which an initial change in aggregate spending will alter total expenditure after an infinite number of spending cycles is the:

Accepted Answer

A)  Business cycle. 
B)  Multiplier. 
C)  Velocity of money. 
D)  GDP gap. 
A)  Business cycle. 
B)  Multiplier. 
C)  Velocity of money. 
D)  GDP gap.

Question 6

Supply-side policy includes:

Accepted Answer

A)  An increase in the reserve requirement. 
B)  A decrease in spending on education. 
C)  An increase in government-mandated fringe benefits. 
D)  An increase in incentives for business investment. 
A)  An increase in the reserve requirement. 
B)  A decrease in spending on education. 
C)  An increase in government-mandated fringe benefits. 
D)  An increase in incentives for business investment.

Question 7

Adjustments to economic policy designed to counteract small changes in economic outcomes are known as:

Accepted Answer

A)  Automatic stabilizers. 
B)  Rational expectations. 
C)  Fine-tuning. 
D)  The business cycle. 
A)  Automatic stabilizers. 
B)  Rational expectations. 
C)  Fine-tuning. 
D)  The business cycle.

Question 8

Tools for supply-side policy include:

Accepted Answer

A)  Changes in tax incentives. 
B)  Open-market operations. 
C)  Changes in government spending. 
D)  Changes in the discount rate. 
A)  Changes in tax incentives. 
B)  Open-market operations. 
C)  Changes in government spending. 
D)  Changes in the discount rate.

Question 9

Which of the following is likely to cause stagflation,ceteris paribus?

Accepted Answer

A)  A leftward shift of the aggregate supply curve. 
B)  A rightward shift of the aggregate supply curve. 
C)  A leftward shift of the aggregate demand curve. 
D)  A rightward shift of the aggregate demand curve. 
A)  A leftward shift of the aggregate supply curve. 
B)  A rightward shift of the aggregate supply curve. 
C)  A leftward shift of the aggregate demand curve. 
D)  A rightward shift of the aggregate demand curve.

Question 10

Implementation problems can cause economic policies to affect the economy after the underlying problems have changed.

Accepted Answer

A) True 
 B)False

Question 11

According to ______,an appropriate policy action during a recession is to improve production incentives by reducing tax rates and government regulation.

Accepted Answer

A)  Monetarists 
B)  Keynesians 
C)  Classical theorists 
D)  Supply-side economists 
A)  Monetarists 
B)  Keynesians 
C)  Classical theorists 
D)  Supply-side economists

Question 12

In terms of inflation,the U.S.economy performed the best from:

Accepted Answer

A)  1991-1996. 
B)  1978-1982. 
C)  1973-1977. 
D)  1968-1972. 
A)  1991-1996. 
B)  1978-1982. 
C)  1973-1977. 
D)  1968-1972.

Question 13

Which of the following will cause a decrease in the price level and an increase in output,ceteris paribus?

Accepted Answer

A)  A leftward shift of the aggregate supply curve. 
B)  A rightward shift of the aggregate supply curve. 
C)  A leftward shift of the aggregate demand curve. 
D)  A rightward shift of the aggregate demand curve. 
A)  A leftward shift of the aggregate supply curve. 
B)  A rightward shift of the aggregate supply curve. 
C)  A leftward shift of the aggregate demand curve. 
D)  A rightward shift of the aggregate demand curve.

Question 14

All of the following are an example of an automatic stabilizer except for:

Accepted Answer

A)  A decrease in income tax revenue during a recession. 
B)  An increase in unemployment benefits during a recession. 
C)  An increase in interest rates during a period of inflation. 
D)  A decrease in government welfare spending during an economic expansion. 
A)  A decrease in income tax revenue during a recession. 
B)  An increase in unemployment benefits during a recession. 
C)  An increase in interest rates during a period of inflation. 
D)  A decrease in government welfare spending during an economic expansion.

Question 15

Which of the following will reduce inflation by decreasing the growth rate of the money supply?

Accepted Answer

A)  A decrease in government spending. 
B)  An increase in the discount rate. 
C)  The purchase of securities in the open market by the Fed. 
D)  An increase in automatic stabilizers. 
A)  A decrease in government spending. 
B)  An increase in the discount rate. 
C)  The purchase of securities in the open market by the Fed. 
D)  An increase in automatic stabilizers.

Question 16

Table 16.1 - Obstacles to the success of economic policy   
-When faced with rising prices,the Republicans and the Democrats disagree about how consumers will respond to a tax increase.(Choose from Table 16.1)

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 17

The News Wire article titled "Tough Calls in Economic Forecasting" suggests that:

Accepted Answer

A)  It is difficult for models to predict economic outcomes. 
B)  Economists have accurately predicted most changes in the business cycle. 
C)  It is difficult to design economic policy to address different goals. 
D)  Economists typically agree on policy priorities. 
A)  It is difficult for models to predict economic outcomes. 
B)  Economists have accurately predicted most changes in the business cycle. 
C)  It is difficult to design economic policy to address different goals. 
D)  Economists typically agree on policy priorities.

Question 18

Monetary policy is determined by:

Accepted Answer

A)  Voters. 
B)  The Federal Reserve's Board of Governors. 
C)  Congress. 
D)  Businesses through investment. 
A)  Voters. 
B)  The Federal Reserve's Board of Governors. 
C)  Congress. 
D)  Businesses through investment.

Question 19

Which of the following groups would advocate increasing government spending specifically on infrastructure development during a recession?

Accepted Answer

A)  Supply-siders. 
B)  Monetarists. 
C)  New classical economists. 
D)  Classical economists. 
A)  Supply-siders. 
B)  Monetarists. 
C)  New classical economists. 
D)  Classical economists.

Question 20

Those who advocate the use of monetary policy believe that an increase in the money supply will shift the aggregate:

Accepted Answer

A)  Supply curve to the left. 
B)  Supply curve to the right. 
C)  Demand curve to the left. 
D)  Demand curve to the right. 
A)  Supply curve to the left. 
B)  Supply curve to the right. 
C)  Demand curve to the left. 
D)  Demand curve to the right.

Supply-side policy is determined by:

Automatic stabilizers result in substantial design lags due to congressional deliberations about which stabilizer to use in a given situation.

Refer to Figure 16.1. -Refer to Figure 16.1.If the economy is initially in equilibrium at P₁ and Q₂,the appropriate policy to move the economy to an equilibrium at P₂ and Q₃ would be to:

Stagflation is caused by a leftward shift of the aggregate supply curve.

The multiple by which an initial change in aggregate spending will alter total expenditure after an infinite number of spending cycles is the:

Supply-side policy includes:

Adjustments to economic policy designed to counteract small changes in economic outcomes are known as:

Tools for supply-side policy include:

Which of the following is likely to cause stagflation,ceteris paribus?

Implementation problems can cause economic policies to affect the economy after the underlying problems have changed.

According to ______,an appropriate policy action during a recession is to improve production incentives by reducing tax rates and government regulation.

In terms of inflation,the U.S.economy performed the best from:

Which of the following will cause a decrease in the price level and an increase in output,ceteris paribus?

All of the following are an example of an automatic stabilizer except for:

Which of the following will reduce inflation by decreasing the growth rate of the money supply?

Table 16.1 - Obstacles to the success of economic policy -When faced with rising prices,the Republicans and the Democrats disagree about how consumers will respond to a tax increase.(Choose from Table 16.1)

The News Wire article titled "Tough Calls in Economic Forecasting" suggests that:

Monetary policy is determined by:

Which of the following groups would advocate increasing government spending specifically on infrastructure development during a recession?

Those who advocate the use of monetary policy believe that an increase in the money supply will shift the aggregate:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

International Trade

Filters

Exam 16: Theory and Reality

Supply-side policy is determined by:

Automatic stabilizers result in substantial design lags due to congressional deliberations about which stabilizer to use in a given situation.

Refer to Figure 16.1. -Refer to Figure 16.1.If the economy is initially in equilibrium at P1 and Q2,the appropriate policy to move the economy to an equilibrium at P2 and Q3 would be to:

Stagflation is caused by a leftward shift of the aggregate supply curve.

The multiple by which an initial change in aggregate spending will alter total expenditure after an infinite number of spending cycles is the:

Supply-side policy includes:

Adjustments to economic policy designed to counteract small changes in economic outcomes are known as:

Tools for supply-side policy include:

Which of the following is likely to cause stagflation,ceteris paribus?

Implementation problems can cause economic policies to affect the economy after the underlying problems have changed.

According to ______,an appropriate policy action during a recession is to improve production incentives by reducing tax rates and government regulation.

In terms of inflation,the U.S.economy performed the best from:

Which of the following will cause a decrease in the price level and an increase in output,ceteris paribus?

All of the following are an example of an automatic stabilizer except for:

Which of the following will reduce inflation by decreasing the growth rate of the money supply?

Table 16.1 - Obstacles to the success of economic policy -When faced with rising prices,the Republicans and the Democrats disagree about how consumers will respond to a tax increase.(Choose from Table 16.1)

The News Wire article titled "Tough Calls in Economic Forecasting" suggests that:

Monetary policy is determined by:

Which of the following groups would advocate increasing government spending specifically on infrastructure development during a recession?

Those who advocate the use of monetary policy believe that an increase in the money supply will shift the aggregate:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

International Trade

Filters

Refer to Figure 16.1. -Refer to Figure 16.1.If the economy is initially in equilibrium at P₁ and Q₂,the appropriate policy to move the economy to an equilibrium at P₂ and Q₃ would be to: