Question 1

Macroeconomic policy activism:

Accepted Answer

A)  is the use of political activism made popular by liberal economists. 
B)  mandates a balanced government budget. 
C)  is the use of monetary and fiscal policy to smooth out the business cycle. 
D)  was the tool used by classical economists. 
A)  is the use of political activism made popular by liberal economists. 
B)  mandates a balanced government budget. 
C)  is the use of monetary and fiscal policy to smooth out the business cycle. 
D)  was the tool used by classical economists.

Question 2

_____ answers "no" to all five key questions about whether macroeconomic policy,either monetary or fiscal,can help fight recession,reduce unemployment,or should be used in a discretionary way.

Accepted Answer

A)  Classical macroeconomics 
B)  Keynesian economics 
C)  Rational expectations theory 
D)  Monetarism 
A)  Classical macroeconomics 
B)  Keynesian economics 
C)  Rational expectations theory 
D)  Monetarism

Question 3

According to the natural rate hypothesis:

Accepted Answer

A)  once inflation is built into expectations,a policy aimed at lowering unemployment below the natural rate would lead to accelerating inflation. 
B)  the natural rate of unemployment is above the NAIRU. 
C)  once inflation is embedded in the public's expectations,it will stop accelerating. 
D)  changes in discretionary policy aimed at increasing GDP will have no impact on inflation expectations. 
A)  once inflation is built into expectations,a policy aimed at lowering unemployment below the natural rate would lead to accelerating inflation. 
B)  the natural rate of unemployment is above the NAIRU. 
C)  once inflation is embedded in the public's expectations,it will stop accelerating. 
D)  changes in discretionary policy aimed at increasing GDP will have no impact on inflation expectations.

Question 4

According to monetarism:

Accepted Answer

A)  the federal government and prime minister should be responsible for controlling the money supply. 
B)  output will grow steadily if the money supply grows at a steady rate. 
C)  the central bank should vary the growth rate of the money supply on a monthly basis. 
D)  changes in the money supply affect the real output only in the long run. 
A)  the federal government and prime minister should be responsible for controlling the money supply. 
B)  output will grow steadily if the money supply grows at a steady rate. 
C)  the central bank should vary the growth rate of the money supply on a monthly basis. 
D)  changes in the money supply affect the real output only in the long run.

Question 5

The set of ideas known as the new Keynesian economics states that:

Accepted Answer

A)  markets clear in the short run because prices adjust whenever there are surpluses or shortages. 
B)  market imperfections tend to make prices sticky in the short run. 
C)  markets tend to be in equilibrium because of the inherent forces in the economy. 
D)  wage and price inflation is the main problem that most economies face in the short run. 
A)  markets clear in the short run because prices adjust whenever there are surpluses or shortages. 
B)  market imperfections tend to make prices sticky in the short run. 
C)  markets tend to be in equilibrium because of the inherent forces in the economy. 
D)  wage and price inflation is the main problem that most economies face in the short run.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The classical school of economics:

Accepted Answer

A)  emphasizes the short run. 
B)  emphasizes the flexibility of wages and prices. 
C)  has a problem with potential output,since potential output cannot be achieved without active policy. 
D)  advocates the use of discretionary fiscal policy. 
A)  emphasizes the short run. 
B)  emphasizes the flexibility of wages and prices. 
C)  has a problem with potential output,since potential output cannot be achieved without active policy. 
D)  advocates the use of discretionary fiscal policy.

Question 8

A stimulus is an expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 9

For the most part,Keynesians believe that:

Accepted Answer

A)  monetary policy is best at fighting recessions. 
B)  fiscal policy is best at fighting recessions. 
C)  a monetary rule is best for evening out the business cycle. 
D)  balancing the budget is the best policy for fighting a recession. 
A)  monetary policy is best at fighting recessions. 
B)  fiscal policy is best at fighting recessions. 
C)  a monetary rule is best for evening out the business cycle. 
D)  balancing the budget is the best policy for fighting a recession.

Question 10

The main ideas of Keynesian economics are the importance of the _____ and emphasis on _____.

Accepted Answer

A)  long run over the short run;a vertical SRAS curve 
B)  long run over the short run;the AD curve and the SRAS curve 
C)  short run over the long run;the AD curve and a rising SRAS curve 
D)  free market with no government intervention;monetary policy in the long run 
A)  long run over the short run;a vertical SRAS curve 
B)  long run over the short run;the AD curve and the SRAS curve 
C)  short run over the long run;the AD curve and a rising SRAS curve 
D)  free market with no government intervention;monetary policy in the long run

Question 11

Use the following to answer questions:
Suppose that the money supply is equal to $10 billion and the velocity of money is 6.
-(Scenario: The Quantity Theory of Money)Refer to Scenario: The Quantity Theory of Money.If the aggregate price level is 4,then the real GDP is:

Accepted Answer

A)  $60 billion. 
B)  $30 billion. 
C)  $20 billion. 
D)  $15 billion. 
A)  $60 billion. 
B)  $30 billion. 
C)  $20 billion. 
D)  $15 billion.

Question 12

For Keynes,changes in aggregate demand had their greatest impact:

Accepted Answer

A)  on the aggregate price level. 
B)  in the long run. 
C)  on the aggregate output level. 
D)  equally on the aggregate output level and the aggregate price level. 
A)  on the aggregate price level. 
B)  in the long run. 
C)  on the aggregate output level. 
D)  equally on the aggregate output level and the aggregate price level.

Question 13

The school of economics that predominated prior to the Great Depression was the:

Accepted Answer

A)  business cycle theorists. 
B)  classical school. 
C)  post-Keynesian school. 
D)  Marxists. 
A)  business cycle theorists. 
B)  classical school. 
C)  post-Keynesian school. 
D)  Marxists.

Question 14

Economists who agree with the Great Moderation consensus believe that monetary policy can keep unemployment below the natural rate.

Accepted Answer

A) True 
 B)False

Question 15

Under rational expectations,government policy can be effective:

Accepted Answer

A)  if it is rationally thought out before implementation. 
B)  if it is anticipated,so people can make realistic preparations. 
C)  if it surprises people. 
D)  whenever the economy reacts rationally to the decision. 
A)  if it is rationally thought out before implementation. 
B)  if it is anticipated,so people can make realistic preparations. 
C)  if it surprises people. 
D)  whenever the economy reacts rationally to the decision.

Question 16

Which group of economists disagrees with discretionary monetary policy in favour of a monetary rule that prescribes a slow increase in the money supply?

Accepted Answer

A)  Keynesians 
B)  monetarists 
C)  supply-side economists 
D)  classical economists 
A)  Keynesians 
B)  monetarists 
C)  supply-side economists 
D)  classical economists

Question 17

The policies that seemed to be effective during the Great Moderation seemed to be inadequate to fight the Great Recession.

Accepted Answer

A) True 
 B)False

Question 18

The economic view that reducing tax rates will increase the incentives to work and invest and will ensure a high growth rate of the potential output is known as _____ economics.

Accepted Answer

A)  supply-side 
B)  demand-side 
C)  new classical 
D)  new Keynesian 
A)  supply-side 
B)  demand-side 
C)  new classical 
D)  new Keynesian

Question 19

Because Keynes's theory recognized the problem of interest rates being at the zero bound (the liquidity trap),it:

Accepted Answer

A)  perceived the economy as being mostly self-adjusting. 
B)  favoured the use of monetary policy over fiscal policy. 
C)  considered technological progress the answer to any economic slump. 
D)  favoured the use of fiscal policy over monetary policy. 
A)  perceived the economy as being mostly self-adjusting. 
B)  favoured the use of monetary policy over fiscal policy. 
C)  considered technological progress the answer to any economic slump. 
D)  favoured the use of fiscal policy over monetary policy.

Question 20

The predominant economic thinking up to the 1930s was:

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.

Macroeconomic policy activism:

_____ answers "no" to all five key questions about whether macroeconomic policy,either monetary or fiscal,can help fight recession,reduce unemployment,or should be used in a discretionary way.

According to the natural rate hypothesis:

According to monetarism:

The set of ideas known as the new Keynesian economics states that:

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

The classical school of economics:

A stimulus is an expansionary fiscal policy.

For the most part,Keynesians believe that:

The main ideas of Keynesian economics are the importance of the _ and emphasis on _.

Use the following to answer questions: Suppose that the money supply is equal to $10 billion and the velocity of money is 6. -(Scenario: The Quantity Theory of Money)Refer to Scenario: The Quantity Theory of Money.If the aggregate price level is 4,then the real GDP is:

For Keynes,changes in aggregate demand had their greatest impact:

The school of economics that predominated prior to the Great Depression was the:

Economists who agree with the Great Moderation consensus believe that monetary policy can keep unemployment below the natural rate.

Under rational expectations,government policy can be effective:

Which group of economists disagrees with discretionary monetary policy in favour of a monetary rule that prescribes a slow increase in the money supply?

The policies that seemed to be effective during the Great Moderation seemed to be inadequate to fight the Great Recession.

The economic view that reducing tax rates will increase the incentives to work and invest and will ensure a high growth rate of the potential output is known as _____ economics.

Because Keynes's theory recognized the problem of interest rates being at the zero bound (the liquidity trap),it:

The predominant economic thinking up to the 1930s was:

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

Macroeconomic policy activism:

_____ answers "no" to all five key questions about whether macroeconomic policy,either monetary or fiscal,can help fight recession,reduce unemployment,or should be used in a discretionary way.

According to the natural rate hypothesis:

According to monetarism:

The set of ideas known as the new Keynesian economics states that:

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

The classical school of economics:

A stimulus is an expansionary fiscal policy.

For the most part,Keynesians believe that:

The main ideas of Keynesian economics are the importance of the _____ and emphasis on _____.

Use the following to answer questions: Suppose that the money supply is equal to $10 billion and the velocity of money is 6. -(Scenario: The Quantity Theory of Money)Refer to Scenario: The Quantity Theory of Money.If the aggregate price level is 4,then the real GDP is:

For Keynes,changes in aggregate demand had their greatest impact:

The school of economics that predominated prior to the Great Depression was the:

Economists who agree with the Great Moderation consensus believe that monetary policy can keep unemployment below the natural rate.

Under rational expectations,government policy can be effective:

Which group of economists disagrees with discretionary monetary policy in favour of a monetary rule that prescribes a slow increase in the money supply?

The policies that seemed to be effective during the Great Moderation seemed to be inadequate to fight the Great Recession.

The economic view that reducing tax rates will increase the incentives to work and invest and will ensure a high growth rate of the potential output is known as _____ economics.

Because Keynes's theory recognized the problem of interest rates being at the zero bound (the liquidity trap),it:

The predominant economic thinking up to the 1930s was:

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

The main ideas of Keynesian economics are the importance of the _ and emphasis on _.