Question 1

The concept of the monetary policy rule is based on the assumption that:

Accepted Answer

A)  discretionary fiscal policy crowds out investment spending. 
B)  the natural rate of unemployment is constant in the long run. 
C)  monetary policy lags are shorter than fiscal policy lags. 
D)  the velocity of money is constant in the short run. 
A)  discretionary fiscal policy crowds out investment spending. 
B)  the natural rate of unemployment is constant in the long run. 
C)  monetary policy lags are shorter than fiscal policy lags. 
D)  the velocity of money is constant in the short run.

Question 2

"Animal spirits" refers to _____ confidence.

Accepted Answer

A)  consumer 
B)  business 
C)  financial 
D)  government 
A)  consumer 
B)  business 
C)  financial 
D)  government

Question 3

According to the classical model:

Accepted Answer

A)  the aggregate supply curve is horizontal. 
B)  increases in the money supply lead to proportional increases in the price level but not to change in real output. 
C)  increases in the money supply lead to proportional changes in output but no change in the price level. 
D)  we are all dead in the long run. 
A)  the aggregate supply curve is horizontal. 
B)  increases in the money supply lead to proportional increases in the price level but not to change in real output. 
C)  increases in the money supply lead to proportional changes in output but no change in the price level. 
D)  we are all dead in the long run.

Question 4

Pablo believed that short-run changes in aggregate demand affected aggregate output as well as the price level.He believed that there was a role for monetary policy in managing the economy,but he advocated a simple monetary rule that would increase the money supply at a constant rate to grow the economy.Pablo was BEST described as a:

Accepted Answer

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

Question 5

The real business cycle theorists say that changes in total factor productivity are totally the result of:

Accepted Answer

A)  depressions. 
B)  shifts in aggregate supply. 
C)  shifts in aggregate demand. 
D)  uneven technological progress. 
A)  depressions. 
B)  shifts in aggregate supply. 
C)  shifts in aggregate demand. 
D)  uneven technological progress.

Question 6

Which statement 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 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

_____ is the MOST likely to advocate the use of fiscal policy in fighting recessions.

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 9

At the time of the Great Depression,there was:

Accepted Answer

A)  general agreement that monetary policy could help in the short run. 
B)  no widely accepted theory of the causes of depressions. 
C)  general agreement that fiscal policy could help in the short run. 
D)  a consensus about what economic policies to adopt. 
A)  general agreement that monetary policy could help in the short run. 
B)  no widely accepted theory of the causes of depressions. 
C)  general agreement that fiscal policy could help in the short run. 
D)  a consensus about what economic policies to adopt.

Question 10

The monetary policy rule suggests that:

Accepted Answer

A)  we should follow the rules set by the central bank. 
B)  the central bank should follow the rules set by the federal government. 
C)  the interest rate should grow at a slow and steady pace. 
D)  the money supply should grow at a slow and steady pace. 
A)  we should follow the rules set by the central bank. 
B)  the central bank should follow the rules set by the federal government. 
C)  the interest rate should grow at a slow and steady pace. 
D)  the money supply should grow at a slow and steady pace.

Question 11

The _____ hypothesis is that macroeconomic policy should be used to stabilize the economy rather than to permanently decrease the unemployment rate.

Accepted Answer

A)  natural rate 
B)  political business cycle 
C)  rational expectations 
D)  real business cycle 
A)  natural rate 
B)  political business cycle 
C)  rational expectations 
D)  real business cycle

Question 12

Most economists believe that discretionary fiscal policy should be used sparingly because of the risk of:

Accepted Answer

A)  budget deficits. 
B)  lags in adjusting policy,so that policies designed to fight a recession may end up intensifying an inflationary gap. 
C)  budget surpluses. 
D)  sacrificing equity for efficiency. 
A)  budget deficits. 
B)  lags in adjusting policy,so that policies designed to fight a recession may end up intensifying an inflationary gap. 
C)  budget surpluses. 
D)  sacrificing equity for efficiency.

Question 13

Nearly all economists agree that increases in money supply can _____ aggregate _____.

Accepted Answer

A)  increase;supply 
B)  decrease;supply 
C)  decrease;demand 
D)  increase;demand 
A)  increase;supply 
B)  decrease;supply 
C)  decrease;demand 
D)  increase;demand

Question 14

The measurement of business cycles was pioneered by:

Accepted Answer

A)  Ragnar Frisch. 
B)  John Maynard Keynes. 
C)  Wesley Mitchell. 
D)  Andrew Mellon. 
A)  Ragnar Frisch. 
B)  John Maynard Keynes. 
C)  Wesley Mitchell. 
D)  Andrew Mellon.

Question 15

The political business cycle refers to policies that:

Accepted Answer

A)  slow down the economy in election years. 
B)  keep the economy on a constant growth path. 
C)  speed the economy up in election years. 
D)  run surpluses in election years. 
A)  slow down the economy in election years. 
B)  keep the economy on a constant growth path. 
C)  speed the economy up in election years. 
D)  run surpluses in election years.

Question 16

If the money supply is growing at a constant rate of 2% and the economy undergoes a negative demand shock,the theory of monetarism recommends:

Accepted Answer

A)  coordinating a monetary expansion with a fiscal expansion to increase aggregate demand. 
B)  raising the growth rate of money supply to 3% to lower the interest rate. 
C)  lowering the growth rate of money supply to 1% to increase saving. 
D)  maintaining the growth rate of money supply at 2% and letting the aggregate price level fall. 
A)  coordinating a monetary expansion with a fiscal expansion to increase aggregate demand. 
B)  raising the growth rate of money supply to 3% to lower the interest rate. 
C)  lowering the growth rate of money supply to 1% to increase saving. 
D)  maintaining the growth rate of money supply at 2% and letting the aggregate price level fall.

Question 17

Keynesian economists didn't oppose monetary policy,but they felt that it was ineffective in fighting a recession.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

The start of an expansion is determined 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.

The concept of the monetary policy rule is based on the assumption that:

"Animal spirits" refers to _____ confidence.

According to the classical model:

The real business cycle theorists say that changes in total factor productivity are totally the result of:

Which statement about new classical macroeconomics is FALSE?

Keynes believed that to end the Great Depression:

_____ is the MOST likely to advocate the use of fiscal policy in fighting recessions.

At the time of the Great Depression,there was:

The monetary policy rule suggests that:

The _____ hypothesis is that macroeconomic policy should be used to stabilize the economy rather than to permanently decrease the unemployment rate.

Most economists believe that discretionary fiscal policy should be used sparingly because of the risk of:

Nearly all economists agree that increases in money supply can _ aggregate _.

The measurement of business cycles was pioneered by:

The political business cycle refers to policies that:

If the money supply is growing at a constant rate of 2% and the economy undergoes a negative demand shock,the theory of monetarism recommends:

Keynesian economists didn't oppose monetary policy,but they felt that it was ineffective in fighting a recession.

Monetarists believe that:

Proponents of the theory of rational expectations contend that:

The start of an expansion is determined by the:

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

The concept of the monetary policy rule is based on the assumption that:

"Animal spirits" refers to _____ confidence.

According to the classical model:

The real business cycle theorists say that changes in total factor productivity are totally the result of:

Which statement about new classical macroeconomics is FALSE?

Keynes believed that to end the Great Depression:

_____ is the MOST likely to advocate the use of fiscal policy in fighting recessions.

At the time of the Great Depression,there was:

The monetary policy rule suggests that:

The _____ hypothesis is that macroeconomic policy should be used to stabilize the economy rather than to permanently decrease the unemployment rate.

Most economists believe that discretionary fiscal policy should be used sparingly because of the risk of:

Nearly all economists agree that increases in money supply can _____ aggregate _____.

The measurement of business cycles was pioneered by:

The political business cycle refers to policies that:

If the money supply is growing at a constant rate of 2% and the economy undergoes a negative demand shock,the theory of monetarism recommends:

Keynesian economists didn't oppose monetary policy,but they felt that it was ineffective in fighting a recession.

Monetarists believe that:

Proponents of the theory of rational expectations contend that:

The start of an expansion is determined by the:

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

Nearly all economists agree that increases in money supply can _ aggregate _.