Question 1

What is the result of contractionary fiscal and monetary policies if an economy is suffering stagflation?

Accepted Answer

A) Unemployment may be cured but at the cost of higher inflation. 
B) Inflation may be cured but at the cost of higher unemployment. 
C) It will increase the levels of both unemployment and inflation. 
D) It will decrease the levels of both unemployment and inflation. 
A) Unemployment may be cured but at the cost of higher inflation. 
B) Inflation may be cured but at the cost of higher unemployment. 
C) It will increase the levels of both unemployment and inflation. 
D) It will decrease the levels of both unemployment and inflation.

Question 2

What is the most serious criticism of anti-inflationary monetary policy?

Accepted Answer

A) Monetary policy is probably ineffective in fighting inflation. 
B) Overemphasis on controlling inflation comes at the expense of the equally valid goals of low unemployment and economic growth. 
C) Maintaining internal price stability means losing control of the exchange rate. 
D) It leads to interest rates being far too low. 
A) Monetary policy is probably ineffective in fighting inflation. 
B) Overemphasis on controlling inflation comes at the expense of the equally valid goals of low unemployment and economic growth. 
C) Maintaining internal price stability means losing control of the exchange rate. 
D) It leads to interest rates being far too low.

Question 3

What is the result of expansionary fiscal and monetary policies if an economy is suffering stagflation?

Accepted Answer

A) Unemployment may be cured but at the cost of higher inflation. 
B) Inflation may be cured but at the cost of higher unemployment. 
C) It will increase the levels of both unemployment and inflation. 
D) It will decrease the levels of both unemployment and inflation. 
A) Unemployment may be cured but at the cost of higher inflation. 
B) Inflation may be cured but at the cost of higher unemployment. 
C) It will increase the levels of both unemployment and inflation. 
D) It will decrease the levels of both unemployment and inflation.

Question 4

All of the following statements about deflation,except one,are true.Which is the exception?

Accepted Answer

A) It is characterized by interest rates at zero or near zero. 
B) Apart from one year,it has not occurred in Canada since the Great Depression. 
C) It means that a return on idle money is possible. 
D) It encourages consumers to postpone major purchases. 
E) It encourages large-scale investment in the economy. 
A) It is characterized by interest rates at zero or near zero. 
B) Apart from one year,it has not occurred in Canada since the Great Depression. 
C) It means that a return on idle money is possible. 
D) It encourages consumers to postpone major purchases. 
E) It encourages large-scale investment in the economy.

Question 5

Stagflation is the simultaneous occurrence of both:

Accepted Answer

A) A recession and deflation. 
B) A recession and inflation. 
C) Inflation and rapid growth in GDP. 
D) Recession and rapid growth in GDP. 
A) A recession and deflation. 
B) A recession and inflation. 
C) Inflation and rapid growth in GDP. 
D) Recession and rapid growth in GDP.

Question 6

An increase in government spending can result in crowding-out.Which of the following is a correct statement of the process?

Accepted Answer

A) It leads to a decrease in savings,which leads to a decrease in investment spending. 
B) It leads to an increase in money supply,which pushes interest rates up and causes a decrease in investment spending. 
C) It causes bond prices to increase,which pushes interest rates up and leads to a decrease in investment spending. 
D) It increases the price level and the demand for money,which causes interest rates to increase and investment spending to decrease. 
E) It leads to an increase in GDP and in savings,which increases investment spending 
A) It leads to a decrease in savings,which leads to a decrease in investment spending. 
B) It leads to an increase in money supply,which pushes interest rates up and causes a decrease in investment spending. 
C) It causes bond prices to increase,which pushes interest rates up and leads to a decrease in investment spending. 
D) It increases the price level and the demand for money,which causes interest rates to increase and investment spending to decrease. 
E) It leads to an increase in GDP and in savings,which increases investment spending

Question 7

Select the answer that correctly completes this sentence: "The Phillips curve shows the relationship between:

Accepted Answer

A) the rate of change in the price level and the unemployment rate." 
B) the rate of change in the price level and the level of real output produced." 
C) the unemployment rate and real income." 
D) the price level and the level of unemployment." 
A) the rate of change in the price level and the unemployment rate." 
B) the rate of change in the price level and the level of real output produced." 
C) the unemployment rate and real income." 
D) the price level and the level of unemployment."

Question 8

Which of the following is an element of supply side policies?

Accepted Answer

A) The privatization of crown corporations. 
B) The deregulation of industry. 
C) The contracting-out of government services. 
D) The reduction of tax rates. 
E) The privatization of crown corporations,the deregulation of industry,the contracting-out of government services,and the reduction of tax rates. 
A) The privatization of crown corporations. 
B) The deregulation of industry. 
C) The contracting-out of government services. 
D) The reduction of tax rates. 
E) The privatization of crown corporations,the deregulation of industry,the contracting-out of government services,and the reduction of tax rates.

Question 9

What does the Laffer curve relate?

Accepted Answer

A) Tax rates and tax revenue. 
B) Tax rates and GDP. 
C) Tax revenue and government budgets. 
D) Unemployment and inflation rates. 
E) Spending and income. 
A) Tax rates and tax revenue. 
B) Tax rates and GDP. 
C) Tax revenue and government budgets. 
D) Unemployment and inflation rates. 
E) Spending and income.

Question 10

What is the crowding-out effect?

Accepted Answer

A) The idea that when a government borrows to finance a deficit,it crowds out private investment because it causes interest rates to fall 
B) The idea that when a government borrows to finance a deficit,it crowds out private investment because it causes interest rates to rise 
C) The idea that fiscal policy crowds out economic growth 
D) The idea that balanced budgets crowd out economic growth 
A) The idea that when a government borrows to finance a deficit,it crowds out private investment because it causes interest rates to fall 
B) The idea that when a government borrows to finance a deficit,it crowds out private investment because it causes interest rates to rise 
C) The idea that fiscal policy crowds out economic growth 
D) The idea that balanced budgets crowd out economic growth

Question 11

During the last two decades,Canada has experienced all of the following,except one.Which is the exception?

Accepted Answer

A) Robust economic growth 
B) A steady predictable exchange rate 
C) Low inflation rates 
D) Low interest rates 
A) Robust economic growth 
B) A steady predictable exchange rate 
C) Low inflation rates 
D) Low interest rates

Question 12

When is monetary policy least effective?

Accepted Answer

A) With fixed exchange rates. 
B) With a gold parity exchange rate. 
C) With flexible exchange rates. 
D) With a managed exchange rate. 
A) With fixed exchange rates. 
B) With a gold parity exchange rate. 
C) With flexible exchange rates. 
D) With a managed exchange rate.

Question 13

Which of the following is an argument of Arthur Laffer,the supply-side economist?

Accepted Answer

A) That present tax rates are too high but a cut in tax rates will lead to a drop in tax revenues. 
B) That present tax rates are too low and should be increased. 
C) That an increase in tax rates will force people to work harder. 
D) That a cut in tax rates will lead to higher tax revenues. 
A) That present tax rates are too high but a cut in tax rates will lead to a drop in tax revenues. 
B) That present tax rates are too low and should be increased. 
C) That an increase in tax rates will force people to work harder. 
D) That a cut in tax rates will lead to higher tax revenues.

Question 14

-Refer to the graph above to answer this question.Which statement is true of the shift from AS2 to AS1?

Accepted Answer

A) It could be caused by a tax cut. 
B) It illustrates stagflation. 
C) It would cause real GDP to rise. 
D) It illustrates economic growth. 
E) It could be a result of counter-cyclical monetary policy. 
A) It could be caused by a tax cut. 
B) It illustrates stagflation. 
C) It would cause real GDP to rise. 
D) It illustrates economic growth. 
E) It could be a result of counter-cyclical monetary policy.

Question 15

The problem portrayed by the short-run Phillips curve is that:

Accepted Answer

A) unemployment tends to increase when prices are rising. 
B) changes in the composition of the labor force tend to increase the natural rate of unemployment. 
C) inflation tends to increase when unemployment falls. 
D) stagflation is unavoidable. 
A) unemployment tends to increase when prices are rising. 
B) changes in the composition of the labor force tend to increase the natural rate of unemployment. 
C) inflation tends to increase when unemployment falls. 
D) stagflation is unavoidable.

Question 16

Monetary policy cannot be used effectively when a country has a fixed exchange rate.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following is true about deflation?

Accepted Answer

A) It is associated with stagflation. 
B) It occurs whenever an inflationary gap gets large enough. 
C) It precedes periods of high investment. 
D) It is a period of decreases in the general price level. 
A) It is associated with stagflation. 
B) It occurs whenever an inflationary gap gets large enough. 
C) It precedes periods of high investment. 
D) It is a period of decreases in the general price level.

Question 18

-Refer to the above diagram for a specific economy.Which of the following best describes the relationship shown by this curve?

Accepted Answer

A) The demand for labor is large when the rate of inflation is small. 
B) When the rate of unemployment is high,the rate of inflation is high. 
C) The rate of inflation and the rate of unemployment are inversely related. 
D) The rate of inflation and the rate of unemployment are directly related. 
A) The demand for labor is large when the rate of inflation is small. 
B) When the rate of unemployment is high,the rate of inflation is high. 
C) The rate of inflation and the rate of unemployment are inversely related. 
D) The rate of inflation and the rate of unemployment are directly related.

Question 19

All of the following,except one,would cause the aggregate demand curve to shift to the right.Which is the exception?

Accepted Answer

A) An increase in taxes 
B) An increase in government spending on goods and services 
C) An increase in the money supply 
D) A decrease in the exchange rate 
A) An increase in taxes 
B) An increase in government spending on goods and services 
C) An increase in the money supply 
D) A decrease in the exchange rate

Question 20

The crowding-out effect of expansionary fiscal policy suggests that:

Accepted Answer

A) government spending increases at the expense of private investment. 
B) imports replace domestic production. 
C) private investment increases at the expense of government spending. 
D) saving increases at the expense of investment. 
A) government spending increases at the expense of private investment. 
B) imports replace domestic production. 
C) private investment increases at the expense of government spending. 
D) saving increases at the expense of investment.

What is the result of contractionary fiscal and monetary policies if an economy is suffering stagflation?

What is the most serious criticism of anti-inflationary monetary policy?

What is the result of expansionary fiscal and monetary policies if an economy is suffering stagflation?

All of the following statements about deflation,except one,are true.Which is the exception?

Stagflation is the simultaneous occurrence of both:

An increase in government spending can result in crowding-out.Which of the following is a correct statement of the process?

Select the answer that correctly completes this sentence: "The Phillips curve shows the relationship between:

Which of the following is an element of supply side policies?

What does the Laffer curve relate?

What is the crowding-out effect?

During the last two decades,Canada has experienced all of the following,except one.Which is the exception?

When is monetary policy least effective?

Which of the following is an argument of Arthur Laffer,the supply-side economist?

-Refer to the graph above to answer this question.Which statement is true of the shift from AS₂ to AS₁?

The problem portrayed by the short-run Phillips curve is that:

Monetary policy cannot be used effectively when a country has a fixed exchange rate.

Which one of the following is true about deflation?

-Refer to the above diagram for a specific economy.Which of the following best describes the relationship shown by this curve?

All of the following,except one,would cause the aggregate demand curve to shift to the right.Which is the exception?

The crowding-out effect of expansionary fiscal policy suggests that:

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

A Walk Through the Twentieth Century and Beyond

Filters

Exam 12: Macroeconomic Policy Revisited

What is the result of contractionary fiscal and monetary policies if an economy is suffering stagflation?

What is the most serious criticism of anti-inflationary monetary policy?

What is the result of expansionary fiscal and monetary policies if an economy is suffering stagflation?

All of the following statements about deflation,except one,are true.Which is the exception?

Stagflation is the simultaneous occurrence of both:

An increase in government spending can result in crowding-out.Which of the following is a correct statement of the process?

Select the answer that correctly completes this sentence: "The Phillips curve shows the relationship between:

Which of the following is an element of supply side policies?

What does the Laffer curve relate?

What is the crowding-out effect?

During the last two decades,Canada has experienced all of the following,except one.Which is the exception?

When is monetary policy least effective?

Which of the following is an argument of Arthur Laffer,the supply-side economist?

-Refer to the graph above to answer this question.Which statement is true of the shift from AS2 to AS1?

The problem portrayed by the short-run Phillips curve is that:

Monetary policy cannot be used effectively when a country has a fixed exchange rate.

Which one of the following is true about deflation?

-Refer to the above diagram for a specific economy.Which of the following best describes the relationship shown by this curve?

All of the following,except one,would cause the aggregate demand curve to shift to the right.Which is the exception?

The crowding-out effect of expansionary fiscal policy suggests that:

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Fiscal Policy

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

A Walk Through the Twentieth Century and Beyond

Filters

-Refer to the graph above to answer this question.Which statement is true of the shift from AS₂ to AS₁?