Question 1

Classical economists focused mainly on:

Accepted Answer

A)  unemployment. 
B)  the short run. 
C)  the long run. 
D)  government economic policy. 
A)  unemployment. 
B)  the short run. 
C)  the long run. 
D)  government economic policy.

Question 2

Real business cycle theory argues that:

Accepted Answer

A)  changes in inventories are the cause of the business cycle. 
B)  fluctuations in the rate of growth of total factor productivity cause the business cycle. 
C)  aggregate demand is more important than aggregate supply in identifying the causes of the business cycle. 
D)  changes in the money supply are the primary cause of the business cycle. 
A)  changes in inventories are the cause of the business cycle. 
B)  fluctuations in the rate of growth of total factor productivity cause the business cycle. 
C)  aggregate demand is more important than aggregate supply in identifying the causes of the business cycle. 
D)  changes in the money supply are the primary cause of the business cycle.

Question 3

Most economists today believe that:

Accepted Answer

A)  the Bank of Canada should be abolished. 
B)  fiscal policy can decrease the unemployment rate below the natural rate of unemployment. 
C)  the federal government should always balance its budget. 
D)  the federal government should not seek to balance the budget annually,but let it function as an automatic stabilizer. 
A)  the Bank of Canada should be abolished. 
B)  fiscal policy can decrease the unemployment rate below the natural rate of unemployment. 
C)  the federal government should always balance its budget. 
D)  the federal government should not seek to balance the budget annually,but let it function as an automatic stabilizer.

Question 4

According to the classical model of the price level,the short-run aggregate supply curve is:

Accepted Answer

A)  flat. 
B)  negatively sloped. 
C)  vertical. 
D)  unstable. 
A)  flat. 
B)  negatively sloped. 
C)  vertical. 
D)  unstable.

Question 5

_____ emphasized the importance of short-run effects of changes in aggregate demand on aggregate output,unlike _____,who focused exclusively on the long-run determination of the aggregate price level.

Accepted Answer

A)  Keynes;the classicists 
B)  Monetarists;the classicists 
C)  classicists;Keynes 
D)  Monetarists;Keynes 
A)  Keynes;the classicists 
B)  Monetarists;the classicists 
C)  classicists;Keynes 
D)  Monetarists;Keynes

Question 6

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 7

If the overnight rate is only 1%,the economy is dangerously close to:

Accepted Answer

A)  an inflationary spiral. 
B)  a liquidity trap. 
C)  very high unemployment. 
D)  another recession. 
A)  an inflationary spiral. 
B)  a liquidity trap. 
C)  very high unemployment. 
D)  another recession.

Question 8

According to supply-side economics,tax cuts:

Accepted Answer

A)  cause dangerous budget deficits. 
B)  unfairly sacrifice equity to efficiency. 
C)  increase incentives to work and save and cause increases in potential output. 
D)  increase output by directly increasing aggregate demand. 
A)  cause dangerous budget deficits. 
B)  unfairly sacrifice equity to efficiency. 
C)  increase incentives to work and save and cause increases in potential output. 
D)  increase output by directly increasing aggregate demand.

Question 9

Many of the real business cycle theorists now acknowledge that the actual economic data indicate that their models need an upward-sloping aggregate supply curve-and that this gives __________ a potential role in determining aggregate output.

Accepted Answer

A)  the natural rate hypothesis 
B)  the permanent income hypothesis 
C)  aggregate supply 
D)  aggregate demand 
A)  the natural rate hypothesis 
B)  the permanent income hypothesis 
C)  aggregate supply 
D)  aggregate demand

Question 10

Which statement does NOT describe the Great Moderation consensus among macroeconomists?

Accepted Answer

A)  Monetary policy should play the main role in stabilization policy. 
B)  The central bank should be independent of politics. 
C)  Discretionary fiscal policy should be used sparingly. 
D)  Monetary policy is the only way to get out of the liquidity trap. 
A)  Monetary policy should play the main role in stabilization policy. 
B)  The central bank should be independent of politics. 
C)  Discretionary fiscal policy should be used sparingly. 
D)  Monetary policy is the only way to get out of the liquidity trap.

Question 11

Which view of macroeconomics holds that a decrease in the money supply will reduce inflationary pressure?

Accepted Answer

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

Question 12

The Great Moderation consensus includes the belief that expansionary monetary policy is effective in fighting recessions.

Accepted Answer

A) True 
 B)False

Question 13

The rational expectations theory states that when individuals and firms make decisions,they take everything into account.Thus:

Accepted Answer

A)  if it's clear that the government intends to trade off higher inflation for lower unemployment,the public will understand this and help the government achieve its goal. 
B)  if it's clear that the government intends to trade off higher inflation for lower unemployment,the public will understand this and inflation expectations will immediately rise. 
C)  a government attempt to trade off higher inflation for lower unemployment would not work in the short run but would be fine in the long run. 
D)  even if people are not expecting inflation and are unaware of government policies,inflation expectations are still going to be embedded. 
A)  if it's clear that the government intends to trade off higher inflation for lower unemployment,the public will understand this and help the government achieve its goal. 
B)  if it's clear that the government intends to trade off higher inflation for lower unemployment,the public will understand this and inflation expectations will immediately rise. 
C)  a government attempt to trade off higher inflation for lower unemployment would not work in the short run but would be fine in the long run. 
D)  even if people are not expecting inflation and are unaware of government policies,inflation expectations are still going to be embedded.

Question 14

According to classical economists,the short-run aggregate supply curve is _____,while according to Keynesian economists,the short-run aggregate supply curve is _____.

Accepted Answer

A)  vertical;upward sloping 
B)  downward sloping;vertical 
C)  vertical;vertical 
D)  upward sloping;horizontal 
A)  vertical;upward sloping 
B)  downward sloping;vertical 
C)  vertical;vertical 
D)  upward sloping;horizontal

Question 15

Keynesian economics was mostly concerned with the short run.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer questions:  
-Christina believes that shifts in aggregate demand cause a change in both real output and the price level.She believes that an economic recession will not necessarily self-correct in the long run,and therefore she believes that active fiscal and monetary policy is justified to smooth out the business cycle.Christina is BEST described as a:

Accepted Answer

A)  classical economist. 
B)  Keynesian. 
C)  supply-sider. 
D)  monetarist. 
A)  classical economist. 
B)  Keynesian. 
C)  supply-sider. 
D)  monetarist.

Question 17

A policy of fiscal stimulus involves _____ taxes and _____ government spending.

Accepted Answer

A)  increasing;decreasing 
B)  increasing;increasing 
C)  decreasing;decreasing 
D)  decreasing;increasing 
A)  increasing;decreasing 
B)  increasing;increasing 
C)  decreasing;decreasing 
D)  decreasing;increasing

Question 18

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 19

"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 20

According to the theory of new classical economics,if business sentiment and investment spending decrease,the aggregate demand curve _____,the price level falls,and aggregate output _____.

Accepted Answer

A)  shifts right;increases 
B)  shifts left;remains constant 
C)  shifts right;decreases 
D)  shifts left;decreases 
A)  shifts right;increases 
B)  shifts left;remains constant 
C)  shifts right;decreases 
D)  shifts left;decreases

Classical economists focused mainly on:

Real business cycle theory argues that:

Most economists today believe that:

According to the classical model of the price level,the short-run aggregate supply curve is:

_ emphasized the importance of short-run effects of changes in aggregate demand on aggregate output,unlike _,who focused exclusively on the long-run determination of the aggregate price level.

The Great Moderation consensus about macroeconomic policy is that:

If the overnight rate is only 1%,the economy is dangerously close to:

According to supply-side economics,tax cuts:

Many of the real business cycle theorists now acknowledge that the actual economic data indicate that their models need an upward-sloping aggregate supply curve-and that this gives __________ a potential role in determining aggregate output.

Which statement does NOT describe the Great Moderation consensus among macroeconomists?

Which view of macroeconomics holds that a decrease in the money supply will reduce inflationary pressure?

The Great Moderation consensus includes the belief that expansionary monetary policy is effective in fighting recessions.

The rational expectations theory states that when individuals and firms make decisions,they take everything into account.Thus:

According to classical economists,the short-run aggregate supply curve is _,while according to Keynesian economists,the short-run aggregate supply curve is _.

Keynesian economics was mostly concerned with the short run.

A policy of fiscal stimulus involves _ taxes and _ government spending.

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

"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.

According to the theory of new classical economics,if business sentiment and investment spending decrease,the aggregate demand curve _,the price level falls,and aggregate output _.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Graphs in Economics

Filters

Exam 17: Macroeconomics: Events and Ideas

Classical economists focused mainly on:

Real business cycle theory argues that:

Most economists today believe that:

According to the classical model of the price level,the short-run aggregate supply curve is:

_____ emphasized the importance of short-run effects of changes in aggregate demand on aggregate output,unlike _____,who focused exclusively on the long-run determination of the aggregate price level.

The Great Moderation consensus about macroeconomic policy is that:

If the overnight rate is only 1%,the economy is dangerously close to:

According to supply-side economics,tax cuts:

Many of the real business cycle theorists now acknowledge that the actual economic data indicate that their models need an upward-sloping aggregate supply curve-and that this gives __________ a potential role in determining aggregate output.

Which statement does NOT describe the Great Moderation consensus among macroeconomists?

Which view of macroeconomics holds that a decrease in the money supply will reduce inflationary pressure?

The Great Moderation consensus includes the belief that expansionary monetary policy is effective in fighting recessions.

The rational expectations theory states that when individuals and firms make decisions,they take everything into account.Thus:

According to classical economists,the short-run aggregate supply curve is _____,while according to Keynesian economists,the short-run aggregate supply curve is _____.

Keynesian economics was mostly concerned with the short run.

A policy of fiscal stimulus involves _____ taxes and _____ government spending.

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

"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.

According to the theory of new classical economics,if business sentiment and investment spending decrease,the aggregate demand curve _____,the price level falls,and aggregate output _____.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Graphs in Economics

Filters

_ emphasized the importance of short-run effects of changes in aggregate demand on aggregate output,unlike _,who focused exclusively on the long-run determination of the aggregate price level.

According to classical economists,the short-run aggregate supply curve is _,while according to Keynesian economists,the short-run aggregate supply curve is _.

A policy of fiscal stimulus involves _ taxes and _ government spending.

According to the theory of new classical economics,if business sentiment and investment spending decrease,the aggregate demand curve _,the price level falls,and aggregate output _.