Question 1

To close an inflationary gap,the Great Moderation consensus on macroeconomics suggests that:

Accepted Answer

A)  a close coordination of fiscal and monetary policy is crucial. 
B)  the automatic fiscal stabilizers are powerful enough to bring the economy back to equilibrium. 
C)  policymakers should wait until a negative productivity shock brings the economy back to equilibrium. 
D)  monetary policy should take the leading role in economic stabilization. 
A)  a close coordination of fiscal and monetary policy is crucial. 
B)  the automatic fiscal stabilizers are powerful enough to bring the economy back to equilibrium. 
C)  policymakers should wait until a negative productivity shock brings the economy back to equilibrium. 
D)  monetary policy should take the leading role in economic stabilization.

Question 2

Classical macroeconomists believed that monetary policy should be used to fight recessions.

Accepted Answer

A) True 
 B)False

Question 3

The theory of rational expectations is consistent with which statement?

Accepted Answer

A)  It takes into account only current information about inflation. 
B)  It takes into account only past information about inflation. 
C)  It takes into account past rates of inflation and available information about monetary and fiscal policy. 
D)  A government attempt to trade off higher inflation for lower unemployment would work in the short run but would eventually fail because higher inflation would get built into expectations. 
A)  It takes into account only current information about inflation. 
B)  It takes into account only past information about inflation. 
C)  It takes into account past rates of inflation and available information about monetary and fiscal policy. 
D)  A government attempt to trade off higher inflation for lower unemployment would work in the short run but would eventually fail because higher inflation would get built into expectations.

Question 4

The velocity of money is equal to:

Accepted Answer

A)  nominal GDP divided by the money supply. 
B)  real GDP divided by the aggregate price level. 
C)  nominal wages divided by the aggregate price level. 
D)  real GDP divided by the money supply. 
A)  nominal GDP divided by the money supply. 
B)  real GDP divided by the aggregate price level. 
C)  nominal wages divided by the aggregate price level. 
D)  real GDP divided by the money supply.

Question 5

Monetarism suggests that:

Accepted Answer

A)  money should be backed by gold. 
B)  the economy is unstable. 
C)  monetary policy should be used to offset economic fluctuations. 
D)  discretionary monetary policy does more harm than good. 
A)  money should be backed by gold. 
B)  the economy is unstable. 
C)  monetary policy should be used to offset economic fluctuations. 
D)  discretionary monetary policy does more harm than good.

Question 6

The belief that fluctuations in the rate of growth of factor productivity cause the business cycle is:

Accepted Answer

A)  new classicalism. 
B)  monetarism. 
C)  Keynesianism. 
D)  the real business cycle theory. 
A)  new classicalism. 
B)  monetarism. 
C)  Keynesianism. 
D)  the real business cycle theory.

Question 7

According to the Great Moderation consensus,expansionary fiscal policy will shift the aggregate demand curve to the _____ and lead to a _____ level of output and a _____ level of employment in the short run.

Accepted Answer

A)  right;higher;higher 
B)  left;lower;lower 
C)  right;higher;lower 
D)  left;lower;higher 
A)  right;higher;higher 
B)  left;lower;lower 
C)  right;higher;lower 
D)  left;lower;higher

Question 8

During the 1960s and 1970s,most monetarists believed that the velocity of money:

Accepted Answer

A)  was stable. 
B)  was inversely related to the money stock. 
C)  moved in tandem with the money stock. 
D)  was irrelevant to the price level. 
A)  was stable. 
B)  was inversely related to the money stock. 
C)  moved in tandem with the money stock. 
D)  was irrelevant to the price level.

Question 9

Which statement is FALSE? At the time of the Great Depression:

Accepted Answer

A)  the measurement of the business cycle was well advanced. 
B)  there was no widely accepted theory of the causes of depressions. 
C)  economists recognized that the economy did not always grow smoothly. 
D)  consensus about what economic policies to adopt. 
A)  the measurement of the business cycle was well advanced. 
B)  there was no widely accepted theory of the causes of depressions. 
C)  economists recognized that the economy did not always grow smoothly. 
D)  consensus about what economic policies to adopt.

Question 10

The idea of sticky wages and prices is most closely associated with:

Accepted Answer

A)  monetarism. 
B)  classical economics. 
C)  Keynesian economics. 
D)  rational expectations theory. 
A)  monetarism. 
B)  classical economics. 
C)  Keynesian economics. 
D)  rational expectations theory.

Question 11

The money velocity equation is stated as:

Accepted Answer

A)  M * V = P * Y. 
B)  M * P = V * Y. 
C)  M * Y = V * P. 
D)  M * Y * P = V. 
A)  M * V = P * Y. 
B)  M * P = V * Y. 
C)  M * Y = V * P. 
D)  M * Y * P = V.

Question 12

Nearly all economists agree that central banks should:

Accepted Answer

A)  be subject to political control. 
B)  be elected by voters. 
C)  be independent. 
D)  play a minor role in the economy. 
A)  be subject to political control. 
B)  be elected by voters. 
C)  be independent. 
D)  play a minor role in the economy.

Question 13

During the 1940s,1950s,and 1960s:

Accepted Answer

A)  the role of the government in the economy increased. 
B)  the role of the government in the economy decreased. 
C)  Keynes's ideas were constantly challenged by free-market policies. 
D)  Keynes's views were accepted only by left-wing socialist economists. 
A)  the role of the government in the economy increased. 
B)  the role of the government in the economy decreased. 
C)  Keynes's ideas were constantly challenged by free-market policies. 
D)  Keynes's views were accepted only by left-wing socialist economists.

Question 14

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 15

The beginning of a recession is declared by the:

Accepted Answer

A)  C.D.Howe Institute. 
B)  Parliamentary Budget Office. 
C)  Bank of Canada. 
D)  Prime Minister. 
A)  C.D.Howe Institute. 
B)  Parliamentary Budget Office. 
C)  Bank of Canada. 
D)  Prime Minister.

Question 16

Use the following to answer questions:  
-Friedman favoured:

Accepted Answer

A)  activist monetary policy to stabilize the economy. 
B)  activist fiscal policy coupled with a neutral monetary policy. 
C)  a monetary policy rule. 
D)  interest rate targeting. 
A)  activist monetary policy to stabilize the economy. 
B)  activist fiscal policy coupled with a neutral monetary policy. 
C)  a monetary policy rule. 
D)  interest rate targeting.

Question 17

Which statement is a point of the Great Moderation consensus?
I.Monetary policy should be the main stabilization policy.
II.The central bank should be independent of political influence.
III.Discretionary fiscal policy should be used sparingly.

Accepted Answer

A)  I only 
B)  II only 
C)  III only 
D)  I,II,and III 
A)  I only 
B)  II only 
C)  III only 
D)  I,II,and III

Question 18

The experience of the Great Depression led to the widespread acceptance of classical economics.

Accepted Answer

A) True 
 B)False

Question 19

Which statement BEST explains why the central bank flirted with monetarism but then gave up?

Accepted Answer

A)  The natural rate hypothesis failed to predict a worsening of the trade-off between inflation and unemployment. 
B)  A sharp rise in inflation during the 1970s broke the perceived trade-off between inflation and unemployment and discredited traditional Keynesianism. 
C)  Inflation started dropping off sharply in the 1980s,and this helped bolster the view that targeting the money supply no longer made sense. 
D)  It finally became evident that there was no longer a trade-off between inflation and unemployment. 
A)  The natural rate hypothesis failed to predict a worsening of the trade-off between inflation and unemployment. 
B)  A sharp rise in inflation during the 1970s broke the perceived trade-off between inflation and unemployment and discredited traditional Keynesianism. 
C)  Inflation started dropping off sharply in the 1980s,and this helped bolster the view that targeting the money supply no longer made sense. 
D)  It finally became evident that there was no longer a trade-off between inflation and unemployment.

Question 20

Use the following to answer questions:  
-Which statement is FALSE? Keynesian economics:

Accepted Answer

A)  emphasizes that factors other than the money supply can affect aggregate demand. 
B)  provides the rationale for macroeconomic policy activism. 
C)  emphasizes short-run economic fluctuations. 
D)  emphasizes long-run fluctuations. 
A)  emphasizes that factors other than the money supply can affect aggregate demand. 
B)  provides the rationale for macroeconomic policy activism. 
C)  emphasizes short-run economic fluctuations. 
D)  emphasizes long-run fluctuations.

To close an inflationary gap,the Great Moderation consensus on macroeconomics suggests that:

Classical macroeconomists believed that monetary policy should be used to fight recessions.

The theory of rational expectations is consistent with which statement?

The velocity of money is equal to:

Monetarism suggests that:

The belief that fluctuations in the rate of growth of factor productivity cause the business cycle is:

According to the Great Moderation consensus,expansionary fiscal policy will shift the aggregate demand curve to the ___ and lead to a _ level of output and a ___ level of employment in the short run.

During the 1960s and 1970s,most monetarists believed that the velocity of money:

Which statement is FALSE? At the time of the Great Depression:

The idea of sticky wages and prices is most closely associated with:

The money velocity equation is stated as:

Nearly all economists agree that central banks should:

During the 1940s,1950s,and 1960s:

If crowding out occurs:

The beginning of a recession is declared by the:

Use the following to answer questions: -Friedman favoured:

Which statement is a point of the Great Moderation consensus? I.Monetary policy should be the main stabilization policy. II.The central bank should be independent of political influence. III.Discretionary fiscal policy should be used sparingly.

The experience of the Great Depression led to the widespread acceptance of classical economics.

Which statement BEST explains why the central bank flirted with monetarism but then gave up?

Use the following to answer questions: -Which statement is FALSE? Keynesian economics:

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

To close an inflationary gap,the Great Moderation consensus on macroeconomics suggests that:

Classical macroeconomists believed that monetary policy should be used to fight recessions.

The theory of rational expectations is consistent with which statement?

The velocity of money is equal to:

Monetarism suggests that:

The belief that fluctuations in the rate of growth of factor productivity cause the business cycle is:

According to the Great Moderation consensus,expansionary fiscal policy will shift the aggregate demand curve to the _____ and lead to a _____ level of output and a _____ level of employment in the short run.

During the 1960s and 1970s,most monetarists believed that the velocity of money:

Which statement is FALSE? At the time of the Great Depression:

The idea of sticky wages and prices is most closely associated with:

The money velocity equation is stated as:

Nearly all economists agree that central banks should:

During the 1940s,1950s,and 1960s:

If crowding out occurs:

The beginning of a recession is declared by the:

Use the following to answer questions: -Friedman favoured:

Which statement is a point of the Great Moderation consensus? I.Monetary policy should be the main stabilization policy. II.The central bank should be independent of political influence. III.Discretionary fiscal policy should be used sparingly.

The experience of the Great Depression led to the widespread acceptance of classical economics.

Which statement BEST explains why the central bank flirted with monetarism but then gave up?

Use the following to answer questions: -Which statement is FALSE? Keynesian economics:

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

According to the Great Moderation consensus,expansionary fiscal policy will shift the aggregate demand curve to the ___ and lead to a _ level of output and a ___ level of employment in the short run.