Question 1

Most economists today believe that the appropriate monetary and/or fiscal policy can permanently reduce the unemployment rate below the natural rate.

Accepted Answer

A) True 
 B)False

Question 2

The measurement of business cycles was pioneered by:

Accepted Answer

A) Ragnar Frisch. 
B) John Maynard Keynes. 
C) Wesley Mitchell. 
D) Andrew Mellon. 
A) Ragnar Frisch. 
B) John Maynard Keynes. 
C) Wesley Mitchell. 
D) Andrew Mellon.

Question 3

"A consistent countercyclical policy has no effect on employment and output, since individuals will recognize those policies as systematic and will anticipate them correctly." This statement is most closely associated with _____ theory.

Accepted Answer

A) classical 
B) Keynesian 
C) rational expectations 
D) monetarist 
A) classical 
B) Keynesian 
C) rational expectations 
D) monetarist

Question 4

Use the following to answer questions :
Figure: Fiscal Policy with a Fixed Money Supply  
-(Figure: Fiscal Policy with a Fixed Money Supply) Look at the figure Fiscal Policy with a Fixed Money Supply. Assume that this economy is at E1. Now government deficit spending increases and the Federal Reserve expands the money supply. According to this model:

Accepted Answer

A) real GDP might increase in the short run, but inflation can lead to a return to the original level of real GDP in the long run. 
B) real GDP will decrease because the government expanded deficit spending. 
C) real GDP will decrease, but not as much as if the Federal Reserve had contracted the money supply. 
D) interest rates will decrease. 
A) real GDP might increase in the short run, but inflation can lead to a return to the original level of real GDP in the long run. 
B) real GDP will decrease because the government expanded deficit spending. 
C) real GDP will decrease, but not as much as if the Federal Reserve had contracted the money supply. 
D) interest rates will decrease.

Question 5

The belief that expansionary monetary policy is NOT at all helpful to the economy in fighting recessions is attributed to:

Accepted Answer

A) classical macroeconomics. 
B) Keynesian macroeconomics. 
C) monetarism. 
D) Great Moderation consensus. 
A) classical macroeconomics. 
B) Keynesian macroeconomics. 
C) monetarism. 
D) Great Moderation consensus.

Question 6

Keynesians argued that monetary policy would NOT be effective if:

Accepted Answer

A) there was a liquidity trap. 
B) the Fed was independent of political pressure. 
C) other countries did not follow monetary policy similar to that of the United States. 
D) no one bought bonds when the Fed conducted open-market operations. 
A) there was a liquidity trap. 
B) the Fed was independent of political pressure. 
C) other countries did not follow monetary policy similar to that of the United States. 
D) no one bought bonds when the Fed conducted open-market operations.

Question 7

Monetarists argue that:

Accepted Answer

A) the Federal Reserve System should allow the money supply to increase at a slow, steady annual rate. 
B) since the velocity of money is unstable, a fixed annual increase in the money supply will exacerbate inflation in the long run. 
C) self-correction is less effective than activist monetary policy. 
D) fiscal policy should always be used before monetary policy. 
A) the Federal Reserve System should allow the money supply to increase at a slow, steady annual rate. 
B) since the velocity of money is unstable, a fixed annual increase in the money supply will exacerbate inflation in the long run. 
C) self-correction is less effective than activist monetary policy. 
D) fiscal policy should always be used before monetary policy.

Question 8

Keynes believed that wages and prices were sticky. Therefore, a rightward shift of the aggregate demand curve would cause a(n):

Accepted Answer

A) decrease in the level of income. 
B) increase in the unemployment level. 
C) change in the long-run aggregate supply curve. 
D) increase in employment, production, and income. 
A) decrease in the level of income. 
B) increase in the unemployment level. 
C) change in the long-run aggregate supply curve. 
D) increase in employment, production, and income.

Question 9

The political business cycle is MOST often found when:

Accepted Answer

A) monetary policy is used. 
B) monetary rule is implemented. 
C) activist macroeconomic policy is followed. 
D) macroeconomic policies are based on technical findings such as those reported by Friedman and Schwartz. 
A) monetary policy is used. 
B) monetary rule is implemented. 
C) activist macroeconomic policy is followed. 
D) macroeconomic policies are based on technical findings such as those reported by Friedman and Schwartz.

Question 10

In the 1970s and first half of the 1980s the U.S. economy had high inflation and high unemployment.

Accepted Answer

A) True 
 B)False

Question 11

If crowding out occurs:

Accepted Answer

A) increases in consumption are offset by decreases in government spending. 
B) increases in the money supply are offset by dollar outflows in foreign trade. 
C) increases in government spending cause higher interest rates and decreased investment spending. 
D) decreases in government spending cause lower interest rates and decreased investment spending. 
A) increases in consumption are offset by decreases in government spending. 
B) increases in the money supply are offset by dollar outflows in foreign trade. 
C) increases in government spending cause higher interest rates and decreased investment spending. 
D) decreases in government spending cause lower interest rates and decreased investment spending.

Question 12

Nearly all economists agree that expansionary fiscal policy can _____ aggregate _____.

Accepted Answer

A) increase; supply 
B) decrease; supply 
C) increase; demand 
D) decrease; demand 
A) increase; supply 
B) decrease; supply 
C) increase; demand 
D) decrease; demand

Question 13

_____ was a _____ economist who believed that _____ in wages and prices could block adjustments to full employment.

Accepted Answer

A) Adam Smith; British; flexibility 
B) Milton Friedman; U.S.; inflexibility 
C) John Maynard Keynes; British; stickiness 
D) Robert Lucas; U.S.; stickiness 
A) Adam Smith; British; flexibility 
B) Milton Friedman; U.S.; inflexibility 
C) John Maynard Keynes; British; stickiness 
D) Robert Lucas; U.S.; stickiness

Question 14

According to the classical model, prices are _____, making the aggregate supply curve _____ in the short run.

Accepted Answer

A) sticky; upward sloping 
B) flexible; vertical 
C) flexible; downward sloping 
D) sticky; vertical 
A) sticky; upward sloping 
B) flexible; vertical 
C) flexible; downward sloping 
D) sticky; vertical

Question 15

Proponents of expansionary austerity cite the experience of _____ since 2005 as evidence of its effectiveness.

Accepted Answer

A) Japan 
B) China 
C) the United States 
D) Latvia 
A) Japan 
B) China 
C) the United States 
D) Latvia

Question 16

Use the following to answer questions :
Figure: Fiscal Policy and the End of the Great Depression  
-(Figure: Fiscal Policy and the End of the Great Depression) Look at the figure Fiscal Policy and the End of the Great Depression. The period from 1939 through 1943 would seem to indicate that in the short run a large increase in government deficit spending can _____ the unemployment rate.

Accepted Answer

A) reduce 
B) increase 
C) not affect 
D) reduce or increase 
A) reduce 
B) increase 
C) not affect 
D) reduce or increase

Question 17

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

Accepted Answer

A) True 
 B)False

Question 18

The Great Moderation consensus includes the idea that the central bank should be independent of politics.

Accepted Answer

A) True 
 B)False

Question 19

If the money supply is growing at a constant rate of 2% and the economy undergoes a negative demand shock, the theory of monetarism recommends:

Accepted Answer

A) coordinating a monetary expansion with a fiscal expansion to increase aggregate demand. 
B) raising the growth rate of money supply to 3% to lower the interest rate. 
C) lowering the growth rate of money supply to 1% to increase saving. 
D) maintaining the growth rate of money supply at 2% and letting the aggregate price level fall. 
A) coordinating a monetary expansion with a fiscal expansion to increase aggregate demand. 
B) raising the growth rate of money supply to 3% to lower the interest rate. 
C) lowering the growth rate of money supply to 1% to increase saving. 
D) maintaining the growth rate of money supply at 2% and letting the aggregate price level fall.

Question 20

The Great Depression was ended in the United States by:

Accepted Answer

A) the government running budget surpluses throughout the 1930s. 
B) the government increasing the money supply throughout the 1930s. 
C) central planning of the economy by the government. 
D) the huge amounts of government spending required to fight WWII during the early 1940s. 
A) the government running budget surpluses throughout the 1930s. 
B) the government increasing the money supply throughout the 1930s. 
C) central planning of the economy by the government. 
D) the huge amounts of government spending required to fight WWII during the early 1940s.

Most economists today believe that the appropriate monetary and/or fiscal policy can permanently reduce the unemployment rate below the natural rate.

The measurement of business cycles was pioneered by:

"A consistent countercyclical policy has no effect on employment and output, since individuals will recognize those policies as systematic and will anticipate them correctly." This statement is most closely associated with _____ theory.

The belief that expansionary monetary policy is NOT at all helpful to the economy in fighting recessions is attributed to:

Keynesians argued that monetary policy would NOT be effective if:

Monetarists argue that:

Keynes believed that wages and prices were sticky. Therefore, a rightward shift of the aggregate demand curve would cause a(n):

The political business cycle is MOST often found when:

In the 1970s and first half of the 1980s the U.S. economy had high inflation and high unemployment.

If crowding out occurs:

Nearly all economists agree that expansionary fiscal policy can _ aggregate _.

___ was a _ economist who believed that ___ in wages and prices could block adjustments to full employment.

According to the classical model, prices are _, making the aggregate supply curve _ in the short run.

Proponents of expansionary austerity cite the experience of _____ since 2005 as evidence of its effectiveness.

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

The Great Moderation consensus includes the idea that the central bank should be independent of politics.

If the money supply is growing at a constant rate of 2% and the economy undergoes a negative demand shock, the theory of monetarism recommends:

The Great Depression was ended in the United States by:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 18: Events and Ideas

Most economists today believe that the appropriate monetary and/or fiscal policy can permanently reduce the unemployment rate below the natural rate.

The measurement of business cycles was pioneered by:

"A consistent countercyclical policy has no effect on employment and output, since individuals will recognize those policies as systematic and will anticipate them correctly." This statement is most closely associated with _____ theory.

The belief that expansionary monetary policy is NOT at all helpful to the economy in fighting recessions is attributed to:

Keynesians argued that monetary policy would NOT be effective if:

Monetarists argue that:

Keynes believed that wages and prices were sticky. Therefore, a rightward shift of the aggregate demand curve would cause a(n):

The political business cycle is MOST often found when:

In the 1970s and first half of the 1980s the U.S. economy had high inflation and high unemployment.

If crowding out occurs:

Nearly all economists agree that expansionary fiscal policy can _____ aggregate _____.

_____ was a _____ economist who believed that _____ in wages and prices could block adjustments to full employment.

According to the classical model, prices are _____, making the aggregate supply curve _____ in the short run.

Proponents of expansionary austerity cite the experience of _____ since 2005 as evidence of its effectiveness.

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

The Great Moderation consensus includes the idea that the central bank should be independent of politics.

If the money supply is growing at a constant rate of 2% and the economy undergoes a negative demand shock, the theory of monetarism recommends:

The Great Depression was ended in the United States by:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Nearly all economists agree that expansionary fiscal policy can _ aggregate _.

___ was a _ economist who believed that ___ in wages and prices could block adjustments to full employment.

According to the classical model, prices are _, making the aggregate supply curve _ in the short run.