Question 1

Keynesian economics was mostly concerned with the short run.

Accepted Answer

A) True 
 B)False

Question 2

The macroeconomic theory that because workers and firms take all information into account, only unexpected changes in the money supply affect aggregate output is called _____ theory.

Accepted Answer

A) real business cycle 
B) rational expectations 
C) new classical 
D) supply-side 
A) real business cycle 
B) rational expectations 
C) new classical 
D) supply-side

Question 3

Monetarism asserts that GDP will grow steadily if the:

Accepted Answer

A) government keeps its budget deficit high. 
B) government engages in crowding out. 
C) money supply grows steadily. 
D) money supply grows faster than the economy. 
A) government keeps its budget deficit high. 
B) government engages in crowding out. 
C) money supply grows steadily. 
D) money supply grows faster than the economy.

Question 4

When other things are equal and using the classical model, an increase in the money supply leads to an equal proportional _____ in the aggregate _____, with no effect on aggregate_____.

Accepted Answer

A) rise; output; price level 
B) fall; price level; output 
C) rise; price level; output 
D) fall; output; price level 
A) rise; output; price level 
B) fall; price level; output 
C) rise; price level; output 
D) fall; output; price level

Question 5

A stimulus is an expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 6

Real business cycle theory contends that the:

Accepted Answer

A) aggregate supply curve is vertical, and it shifts to the left in a recession. 
B) aggregate demand curve is vertical, and it is the main factor that causes the business cycle. 
C) aggregate supply curve is horizontal, indicating that business cycles have been stabilized. 
D) aggregate demand curve is downward sloping, which shows that productivity growth is slowing down, causing the business cycle. 
A) aggregate supply curve is vertical, and it shifts to the left in a recession. 
B) aggregate demand curve is vertical, and it is the main factor that causes the business cycle. 
C) aggregate supply curve is horizontal, indicating that business cycles have been stabilized. 
D) aggregate demand curve is downward sloping, which shows that productivity growth is slowing down, causing the business cycle.

Question 7

Keynes believed that to end the Great Depression:

Accepted Answer

A) only a government takeover of industry could save the economy. 
B) the capitalist system needed only a narrow technical fix. 
C) a decrease in government spending would increase the budget deficit. 
D) a decrease in the money supply would cause inflation. 
A) only a government takeover of industry could save the economy. 
B) the capitalist system needed only a narrow technical fix. 
C) a decrease in government spending would increase the budget deficit. 
D) a decrease in the money supply would cause inflation.

Question 8

Proponents of the theory of rational expectations contend that:

Accepted Answer

A) people make rational forecasts using all existing information. 
B) business cycles are generally caused by shifts in aggregate demand. 
C) full employment is rarely achieved. 
D) stickiness of prices is the primary cause of inflation. 
A) people make rational forecasts using all existing information. 
B) business cycles are generally caused by shifts in aggregate demand. 
C) full employment is rarely achieved. 
D) stickiness of prices is the primary cause of inflation.

Question 9

The economy is in a recession. The head of the President's Council of Economic Advisers is a student of economic history, and his philosophy tends to follow the Great Moderation consensus. What will this economist recommend or not recommend? Explain.

Accepted Answer

This economist will likely recommend bot

Question 10

We now typically refer to the Keynesian term "animal spirits" as:

Accepted Answer

A) rational expectation. 
B) business confidence. 
C) adaptive expectation. 
D) irrational exuberance. 
A) rational expectation. 
B) business confidence. 
C) adaptive expectation. 
D) irrational exuberance.

Question 11

Monetarists believe that:

Accepted Answer

A) full employment is the norm. 
B) countercyclical policies do not affect the economy. 
C) a fixed increase in the rate of growth of the money supply is better than discretionary policies. 
D) discretionary monetary policy is better than a fixed growth rate of the money supply. 
A) full employment is the norm. 
B) countercyclical policies do not affect the economy. 
C) a fixed increase in the rate of growth of the money supply is better than discretionary policies. 
D) discretionary monetary policy is better than a fixed growth rate of the money supply.

Question 12

If real business cycle theory uses an upward-sloping aggregate _____ curve, aggregate _____ is _____.

Accepted Answer

A) demand; supply; relevant 
B) demand; supply; irrelevant 
C) supply; demand; irrelevant 
D) supply; demand; relevant 
A) demand; supply; relevant 
B) demand; supply; irrelevant 
C) supply; demand; irrelevant 
D) supply; demand; relevant

Question 13

Which of the following about new classical macroeconomics is FALSE?

Accepted Answer

A) It returned to the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output. 
B) It challenged traditional arguments about the slope of the short-run aggregate supply curve based on the concept of rational expectations. 
C) It suggested that changes in productivity cause economic fluctuations. 
D) It embraced the Keynesian notion that changes in aggregate demand may affect aggregate output in the short run. 
A) It returned to the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output. 
B) It challenged traditional arguments about the slope of the short-run aggregate supply curve based on the concept of rational expectations. 
C) It suggested that changes in productivity cause economic fluctuations. 
D) It embraced the Keynesian notion that changes in aggregate demand may affect aggregate output in the short run.

Question 14

The economy is booming and under inflationary pressure. There is also a budget surplus. The head of the President's Council of Economic Advisers is a proponent of classical economics. What will this classical economist recommend or not recommend? Will she advocate balancing the budget? Explain.

Accepted Answer

First and foremost, this economist belie

Question 15

The General Theory of Employment, Interest, and Money was written by:

Accepted Answer

A) Adam Smith. 
B) Paul Samuelson. 
C) Joseph Schumpeter. 
D) John Maynard Keynes. 
A) Adam Smith. 
B) Paul Samuelson. 
C) Joseph Schumpeter. 
D) John Maynard Keynes.

Question 16

The Great Moderation consensus about macroeconomic policy is that:

Accepted Answer

A) only monetary policy works against recessions, but fiscal policy is effective only in the long run. 
B) expansionary monetary and fiscal policies can both reduce unemployment in the long run. 
C) expansionary monetary and fiscal policies are both effective in the short run but not in the long run. 
D) discretionary monetary and fiscal policies are effective in the short run and in the long run. 
A) only monetary policy works against recessions, but fiscal policy is effective only in the long run. 
B) expansionary monetary and fiscal policies can both reduce unemployment in the long run. 
C) expansionary monetary and fiscal policies are both effective in the short run but not in the long run. 
D) discretionary monetary and fiscal policies are effective in the short run and in the long run.

Question 17

An economy that is primarily agricultural will have a _____ aggregate _____ curve.

Accepted Answer

A) horizontal; supply 
B) nearly vertical; supply 
C) horizontal; demand 
D) nearly vertical; demand 
A) horizontal; supply 
B) nearly vertical; supply 
C) horizontal; demand 
D) nearly vertical; demand

Question 18

Keynes's theory did not endorse the use of monetary policy during the Great Depression because:

Accepted Answer

A) at the time, the nominal interest rate was very close to zero. 
B) during WWII, the convertibility of the pound sterling into gold was suspended. 
C) under the gold standard, the zero bound on nominal interest rates did not exist. 
D) monetary expansions were impossible under a gold standard. 
A) at the time, the nominal interest rate was very close to zero. 
B) during WWII, the convertibility of the pound sterling into gold was suspended. 
C) under the gold standard, the zero bound on nominal interest rates did not exist. 
D) monetary expansions were impossible under a gold standard.

Question 19

Monetarists believe that:

Accepted Answer

A) short-run problems are not likely. 
B) GDP fluctuations will be less pronounced if the Federal Reserve uses discretionary monetary policy. 
C) price fluctuations are likely in the short or long run. 
D) GDP will grow steadily if the money supply grows steadily. 
A) short-run problems are not likely. 
B) GDP fluctuations will be less pronounced if the Federal Reserve uses discretionary monetary policy. 
C) price fluctuations are likely in the short or long run. 
D) GDP will grow steadily if the money supply grows steadily.

Question 20

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 1933 through 1936 would seem to indicate that in the short run a moderate level of government deficit spending can _____ the unemployment rate.

Accepted Answer

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

Keynesian economics was mostly concerned with the short run.

The macroeconomic theory that because workers and firms take all information into account, only unexpected changes in the money supply affect aggregate output is called _____ theory.

Monetarism asserts that GDP will grow steadily if the:

When other things are equal and using the classical model, an increase in the money supply leads to an equal proportional ___ in the aggregate _, with no effect on aggregate___.

A stimulus is an expansionary fiscal policy.

Real business cycle theory contends that the:

Keynes believed that to end the Great Depression:

Proponents of the theory of rational expectations contend that:

The economy is in a recession. The head of the President's Council of Economic Advisers is a student of economic history, and his philosophy tends to follow the Great Moderation consensus. What will this economist recommend or not recommend? Explain.

We now typically refer to the Keynesian term "animal spirits" as:

Monetarists believe that:

If real business cycle theory uses an upward-sloping aggregate ___ curve, aggregate _ is ___.

Which of the following about new classical macroeconomics is FALSE?

The economy is booming and under inflationary pressure. There is also a budget surplus. The head of the President's Council of Economic Advisers is a proponent of classical economics. What will this classical economist recommend or not recommend? Will she advocate balancing the budget? Explain.

The General Theory of Employment, Interest, and Money was written by:

The Great Moderation consensus about macroeconomic policy is that:

An economy that is primarily agricultural will have a _ aggregate _ curve.

Keynes's theory did not endorse the use of monetary policy during the Great Depression because:

Monetarists believe that:

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

Keynesian economics was mostly concerned with the short run.

The macroeconomic theory that because workers and firms take all information into account, only unexpected changes in the money supply affect aggregate output is called _____ theory.

Monetarism asserts that GDP will grow steadily if the:

When other things are equal and using the classical model, an increase in the money supply leads to an equal proportional _____ in the aggregate _____, with no effect on aggregate_____.

A stimulus is an expansionary fiscal policy.

Real business cycle theory contends that the:

Keynes believed that to end the Great Depression:

Proponents of the theory of rational expectations contend that:

The economy is in a recession. The head of the President's Council of Economic Advisers is a student of economic history, and his philosophy tends to follow the Great Moderation consensus. What will this economist recommend or not recommend? Explain.

We now typically refer to the Keynesian term "animal spirits" as:

Monetarists believe that:

If real business cycle theory uses an upward-sloping aggregate _____ curve, aggregate _____ is _____.

Which of the following about new classical macroeconomics is FALSE?

The economy is booming and under inflationary pressure. There is also a budget surplus. The head of the President's Council of Economic Advisers is a proponent of classical economics. What will this classical economist recommend or not recommend? Will she advocate balancing the budget? Explain.

The General Theory of Employment, Interest, and Money was written by:

The Great Moderation consensus about macroeconomic policy is that:

An economy that is primarily agricultural will have a _____ aggregate _____ curve.

Keynes's theory did not endorse the use of monetary policy during the Great Depression because:

Monetarists believe that:

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

When other things are equal and using the classical model, an increase in the money supply leads to an equal proportional ___ in the aggregate _, with no effect on aggregate___.

If real business cycle theory uses an upward-sloping aggregate ___ curve, aggregate _ is ___.

An economy that is primarily agricultural will have a _ aggregate _ curve.