Question 1

Monetarists argued that fiscal policy was ineffective if the money supply increased.

Accepted Answer

A) True 
 B)False

Question 2

Discretionary fiscal policy may be counterproductive because:

Accepted Answer

A)  the countercyclical nature of such policies sometimes reduces their effectiveness. 
B)  in the short run,only monetary policy is effective. 
C)  increases in the government budget deficit affect economic growth in the long run. 
D)  the various lags in fiscal policy mean that it may take effect when the economy has already recovered. 
A)  the countercyclical nature of such policies sometimes reduces their effectiveness. 
B)  in the short run,only monetary policy is effective. 
C)  increases in the government budget deficit affect economic growth in the long run. 
D)  the various lags in fiscal policy mean that it may take effect when the economy has already recovered.

Question 3

Use the following to answer questions:  
-(Figure: Fiscal Policy with a Fixed Money Supply)Refer to 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 4

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 5

The Ricardian equivalence argument says that households and businesses view any increase in government spending as a sign that tax burdens will increase in the future,which will cause a decrease in private spending in anticipation of higher future taxes.

Accepted Answer

A) True 
 B)False

Question 6

From 1975 to 1982,the Bank of Canada:

Accepted Answer

A)  followed monetarist policy suggestions. 
B)  initiated a sharply expansionary monetary policy. 
C)  pursued a policy that shifted AD to the right. 
D)  fell into the liquidity trap. 
A)  followed monetarist policy suggestions. 
B)  initiated a sharply expansionary monetary policy. 
C)  pursued a policy that shifted AD to the right. 
D)  fell into the liquidity trap.

Question 7

Which argument was made in favour of using discretionary fiscal policy in fighting the Great Recession?

Accepted Answer

A)  Monetary policy could not be effective,since interest rates were near zero. 
B)  If taxes were increased,the budget could be balanced. 
C)  If government spending decreased,the budget surplus would increase. 
D)  The lags associated with monetary policy would be destabilizing. 
A)  Monetary policy could not be effective,since interest rates were near zero. 
B)  If taxes were increased,the budget could be balanced. 
C)  If government spending decreased,the budget surplus would increase. 
D)  The lags associated with monetary policy would be destabilizing.

Question 8

Proponents of rational expectations believe that:

Accepted Answer

A)  changes in AD cause business cycles. 
B)  people will not be surprised by systematic monetary and fiscal policies. 
C)  the economy will have to undergo long periods of unemployment during recessions. 
D)  the velocity of money does not exist. 
A)  changes in AD cause business cycles. 
B)  people will not be surprised by systematic monetary and fiscal policies. 
C)  the economy will have to undergo long periods of unemployment during recessions. 
D)  the velocity of money does not exist.

Question 9

Despite of the budget deficits that resulted from the fiscal stimulus of 2009:

Accepted Answer

A)  the public debt decreased. 
B)  interest rates remained very low. 
C)  interest rates increased to record high levels. 
D)  crowding-out occurred. 
A)  the public debt decreased. 
B)  interest rates remained very low. 
C)  interest rates increased to record high levels. 
D)  crowding-out occurred.

Question 10

Which year is often described as the worst year of the Great Depression?

Accepted Answer

A)  1913 
B)  1933 
C)  1953 
D)  1973 
A)  1913 
B)  1933 
C)  1953 
D)  1973

Question 11

Use the following to answer questions:  
-Friedman argued that with a _____ money supply,velocity is _____ that there's not much point in using monetary policy.

Accepted Answer

A)  steady increase in the;large 
B)  constant;small 
C)  steady increase in the;constant 
D)  constant;large 
A)  steady increase in the;large 
B)  constant;small 
C)  steady increase in the;constant 
D)  constant;large

Question 12

What is the consensus among most economists today with respect to the management of unemployment?

Accepted Answer

A)  Government can't do anything about it. 
B)  Expansionary policy can be used to achieve permanently low unemployment. 
C)  Unemployment cannot be kept below the natural rate. 
D)  Unemployment cannot be kept anywhere near the natural rate. 
A)  Government can't do anything about it. 
B)  Expansionary policy can be used to achieve permanently low unemployment. 
C)  Unemployment cannot be kept below the natural rate. 
D)  Unemployment cannot be kept anywhere near the natural rate.

Question 13

Keynesian economics emphasizes _____ shifts in aggregate _____.

Accepted Answer

A)  long-run;demand 
B)  long-run;supply 
C)  short-run;demand 
D)  short-run;supply 
A)  long-run;demand 
B)  long-run;supply 
C)  short-run;demand 
D)  short-run;supply

Question 14

The period of relative calm in the economy between 1992 and 2007 is called the:

Accepted Answer

A)  Great Depression 
B)  Great Moderation. 
C)  Great Recession. 
D)  Great Modernization. 
A)  Great Depression 
B)  Great Moderation. 
C)  Great Recession. 
D)  Great Modernization.

Question 15

Which school of thought believes that expansionary monetary policy is effective in fighting recessions?
I.classical macroeconomics
II.Great Moderation consensus

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  I and II 
D)  neither I nor II

Question 16

Most economists today believe that effective monetary and fiscal policy can limit the fluctuations of the actual unemployment rate around the natural rate,but they are unable to keep unemployment permanently below the natural rate.

Accepted Answer

A) True 
 B)False

Question 17

Classical macroeconomics was based largely on the foundation of:

Accepted Answer

A)  flexible wages and prices. 
B)  persistent unemployment. 
C)  government intervention in the market. 
D)  Adam Smith's model of imperfectly competitive markets. 
A)  flexible wages and prices. 
B)  persistent unemployment. 
C)  government intervention in the market. 
D)  Adam Smith's model of imperfectly competitive markets.

Question 18

Crowding out is MOST likely when expansionary fiscal policy is accompanied by:

Accepted Answer

A)  expansionary monetary policy. 
B)  open-market purchases. 
C)  slow growth of the money supply. 
D)  an investment tax credit. 
A)  expansionary monetary policy. 
B)  open-market purchases. 
C)  slow growth of the money supply. 
D)  an investment tax credit.

Question 19

The Great Moderation consensus is that:

Accepted Answer

A)  fiscal policy should play the main role in stabilization policy. 
B)  monetary policy should play the main role in stabilization policy. 
C)  automatic stabilizers should be the only type of policy used. 
D)  government budgets should always be balanced. 
A)  fiscal policy should play the main role in stabilization policy. 
B)  monetary policy should play the main role in stabilization policy. 
C)  automatic stabilizers should be the only type of policy used. 
D)  government budgets should always be balanced.

Question 20

New classical macroeconomists believe that the short-run aggregate:

Accepted Answer

A)  supply curve is vertical. 
B)  demand curve is vertical. 
C)  demand curve has a positive slope. 
D)  supply curve is horizontal. 
A)  supply curve is vertical. 
B)  demand curve is vertical. 
C)  demand curve has a positive slope. 
D)  supply curve is horizontal.

Monetarists argued that fiscal policy was ineffective if the money supply increased.

Discretionary fiscal policy may be counterproductive because:

Use the following to answer questions: -(Figure: Fiscal Policy with a Fixed Money Supply)Refer to 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:

Monetarists believe that:

The Ricardian equivalence argument says that households and businesses view any increase in government spending as a sign that tax burdens will increase in the future,which will cause a decrease in private spending in anticipation of higher future taxes.

From 1975 to 1982,the Bank of Canada:

Which argument was made in favour of using discretionary fiscal policy in fighting the Great Recession?

Proponents of rational expectations believe that:

Despite of the budget deficits that resulted from the fiscal stimulus of 2009:

Which year is often described as the worst year of the Great Depression?

Use the following to answer questions: -Friedman argued that with a _ money supply,velocity is _ that there's not much point in using monetary policy.

What is the consensus among most economists today with respect to the management of unemployment?

Keynesian economics emphasizes _ shifts in aggregate _.

The period of relative calm in the economy between 1992 and 2007 is called the:

Which school of thought believes that expansionary monetary policy is effective in fighting recessions? I.classical macroeconomics II.Great Moderation consensus

Most economists today believe that effective monetary and fiscal policy can limit the fluctuations of the actual unemployment rate around the natural rate,but they are unable to keep unemployment permanently below the natural rate.

Classical macroeconomics was based largely on the foundation of:

Crowding out is MOST likely when expansionary fiscal policy is accompanied by:

The Great Moderation consensus is that:

New classical macroeconomists believe that the short-run aggregate:

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

Monetarists argued that fiscal policy was ineffective if the money supply increased.

Discretionary fiscal policy may be counterproductive because:

Use the following to answer questions: -(Figure: Fiscal Policy with a Fixed Money Supply)Refer to 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:

Monetarists believe that:

The Ricardian equivalence argument says that households and businesses view any increase in government spending as a sign that tax burdens will increase in the future,which will cause a decrease in private spending in anticipation of higher future taxes.

From 1975 to 1982,the Bank of Canada:

Which argument was made in favour of using discretionary fiscal policy in fighting the Great Recession?

Proponents of rational expectations believe that:

Despite of the budget deficits that resulted from the fiscal stimulus of 2009:

Which year is often described as the worst year of the Great Depression?

Use the following to answer questions: -Friedman argued that with a _____ money supply,velocity is _____ that there's not much point in using monetary policy.

What is the consensus among most economists today with respect to the management of unemployment?

Keynesian economics emphasizes _____ shifts in aggregate _____.

The period of relative calm in the economy between 1992 and 2007 is called the:

Which school of thought believes that expansionary monetary policy is effective in fighting recessions? I.classical macroeconomics II.Great Moderation consensus

Most economists today believe that effective monetary and fiscal policy can limit the fluctuations of the actual unemployment rate around the natural rate,but they are unable to keep unemployment permanently below the natural rate.

Classical macroeconomics was based largely on the foundation of:

Crowding out is MOST likely when expansionary fiscal policy is accompanied by:

The Great Moderation consensus is that:

New classical macroeconomists believe that the short-run aggregate:

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

Use the following to answer questions: -(Figure: Fiscal Policy with a Fixed Money Supply)Refer to 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:

Use the following to answer questions: -Friedman argued that with a _ money supply,velocity is _ that there's not much point in using monetary policy.

Keynesian economics emphasizes _ shifts in aggregate _.