Question 1

Which statement is FALSE? Keynesian economics:

Accepted Answer

A)  emphasizes the effects of shifts in aggregate demand on aggregate output. 
B)  focuses the attention of economists on situations in which the short-run aggregate supply curve slopes upward. 
C)  holds "animal spirits" mainly responsible for business cycles. 
D)  holds that changes in business confidence have no effect on either the aggregate price level or aggregate output. 
A)  emphasizes the effects of shifts in aggregate demand on aggregate output. 
B)  focuses the attention of economists on situations in which the short-run aggregate supply curve slopes upward. 
C)  holds "animal spirits" mainly responsible for business cycles. 
D)  holds that changes in business confidence have no effect on either the aggregate price level or aggregate output.

Question 2

Monetarism asserts that GDP will grow steadily if the money supply grows steadily.

Accepted Answer

A) True 
 B)False

Question 3

According to the Great Moderation consensus:
I.monetary policy should be the main stabilization tool.
II.the natural rate of unemployment doesn't actually exist.

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 4

According to the Great Moderation consensus,the effectiveness of economic policy is limited by the political business cycle.

Accepted Answer

A) True 
 B)False

Question 5

The _____ has the official role of declaring the beginnings of recessions and expansions.

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 6

Keynesians believed that the economy could get out of the Great Depression if:

Accepted Answer

A)  monetary policy focused on the use of a monetary rule. 
B)  fiscal authorities worked at balancing the budget. 
C)  government spent enough to offset the drop in both consumption and investment spending. 
D)  expansionary monetary policy was used. 
A)  monetary policy focused on the use of a monetary rule. 
B)  fiscal authorities worked at balancing the budget. 
C)  government spent enough to offset the drop in both consumption and investment spending. 
D)  expansionary monetary policy was used.

Question 7

Many economists believe that:

Accepted Answer

A)  fiscal policy can be used effectively to reduce unemployment below its natural rate. 
B)  monetary policy can be used effectively to reduce unemployment below its natural rate. 
C)  discretionary fiscal policy should be used sparingly because political influence may manipulate its implementation and use. 
D)  monetary rules are best. 
A)  fiscal policy can be used effectively to reduce unemployment below its natural rate. 
B)  monetary policy can be used effectively to reduce unemployment below its natural rate. 
C)  discretionary fiscal policy should be used sparingly because political influence may manipulate its implementation and use. 
D)  monetary rules are best.

Question 8

Real business cycle theory suggests that changes in _____ are the primary cause of business cycles.

Accepted Answer

A)  aggregate demand 
B)  the growth of factor productivity 
C)  fiscal policy 
D)  monetary policy 
A)  aggregate demand 
B)  the growth of factor productivity 
C)  fiscal policy 
D)  monetary policy

Question 9

Use the following to answer questions:  
-(Figure: Classical versus Keynesian Macroeconomics)Refer to Figure: Classical versus Keynesian Macroeconomics.According to the Keynesian view,if this economy shifts from AD2 to AD1,perhaps because of a large increase in government spending,the price level will _____ and real GDP will _____.

Accepted Answer

A)  rise;fall 
B)  not change;rise 
C)  rise;not change 
D)  rise;rise 
A)  rise;fall 
B)  not change;rise 
C)  rise;not change 
D)  rise;rise

Question 10

The Great Moderation consensus is the school of thought that monetary policy should be the main tool of stabilization policy and is sceptical about the use of fiscal policy.

Accepted Answer

A) True 
 B)False

Question 11

The belief that individuals and firms make their decisions optimally using all available information:

Accepted Answer

A)  is an assumption made by Keynesian economists. 
B)  is referred to as rational expectations. 
C)  leads to the conclusion by some new classical economists that discretionary policies work best. 
D)  is known as the real business cycle. 
A)  is an assumption made by Keynesian economists. 
B)  is referred to as rational expectations. 
C)  leads to the conclusion by some new classical economists that discretionary policies work best. 
D)  is known as the real business cycle.

Question 12

The Great Depression was ended in Canada by:

Accepted Answer

A)  the government running budget surpluses throughout the 1930s. 
B)  the government increasing the money supply throughout the 1930s. 
C)  central planning of the economy by the government. 
D)  the huge amounts of government spending required to fight the Second World War during the early 1940s. 
A)  the government running budget surpluses throughout the 1930s. 
B)  the government increasing the money supply throughout the 1930s. 
C)  central planning of the economy by the government. 
D)  the huge amounts of government spending required to fight the Second World War during the early 1940s.

Question 13

The natural rate hypothesis suggests there are limits to what macroeconomic policy can achieve.

Accepted Answer

A) True 
 B)False

Question 14

The consensus is that the Great Depression was ended by:

Accepted Answer

A)  imposing fiscal discipline and reducing budget deficits. 
B)  following Keynes's analysis regarding the "animal spirits." 
C)  increasing the money supply and lowering the interest rate. 
D)  applying expansionary fiscal policy on a large scale. 
A)  imposing fiscal discipline and reducing budget deficits. 
B)  following Keynes's analysis regarding the "animal spirits." 
C)  increasing the money supply and lowering the interest rate. 
D)  applying expansionary fiscal policy on a large scale.

Question 15

Keynes believed that:

Accepted Answer

A)  monetary policies had the greatest impact on the economy. 
B)  long-run effects were most important and activist policies were most likely to be detrimental. 
C)  business decisions could be understood if policymakers did not use activist policies. 
D)  short-run effects were important and changes in aggregate demand could affect output and price levels. 
A)  monetary policies had the greatest impact on the economy. 
B)  long-run effects were most important and activist policies were most likely to be detrimental. 
C)  business decisions could be understood if policymakers did not use activist policies. 
D)  short-run effects were important and changes in aggregate demand could affect output and price levels.

Question 16

The Great Moderation consensus is that discretionary fiscal policy can be destabilizing because of lags in adjusting policy.

Accepted Answer

A) True 
 B)False

Question 17

When other things are equal and using the classical model,an increase in the money supply leads to an equal proportional _____ in the aggregate _____,with no effect on aggregate _____.

Accepted Answer

A)  rise;output;price level 
B)  fall;price level;output 
C)  rise;price level;output 
D)  fall;output;price level 
A)  rise;output;price level 
B)  fall;price level;output 
C)  rise;price level;output 
D)  fall;output;price level

Question 18

Classical economists believed that wages and prices were _____,and as a result,the aggregate _____ curve was vertical.

Accepted Answer

A)  inflexible;supply 
B)  inflexible;demand 
C)  flexible;demand 
D)  flexible;supply 
A)  inflexible;supply 
B)  inflexible;demand 
C)  flexible;demand 
D)  flexible;supply

Question 19

Keynesians argued that monetary policy would NOT be effective if:

Accepted Answer

A)  there was a liquidity trap. 
B)  the Bank of Canada was independent of political pressure. 
C)  other countries did not follow monetary policy similar to that of Canada. 
D)  no one bought bonds when the Bank of Canada conducted open-market operations. 
A)  there was a liquidity trap. 
B)  the Bank of Canada was independent of political pressure. 
C)  other countries did not follow monetary policy similar to that of Canada. 
D)  no one bought bonds when the Bank of Canada conducted open-market operations.

Question 20

Use the following to answer questions:  
-(Figure: Fiscal Policy and the End of the Great Depression)Refer to Figure: Fiscal Policy and the End of the Great Depression.The period from 1936 to 1938 would seem to indicate that in the short run a decrease in government deficit spending can _____ the unemployment rate.

Accepted Answer

A)  reduce 
B)  increase 
C)  not affect 
D)  eliminate 
A)  reduce 
B)  increase 
C)  not affect 
D)  eliminate

Which statement is FALSE? Keynesian economics:

Monetarism asserts that GDP will grow steadily if the money supply grows steadily.

According to the Great Moderation consensus: I.monetary policy should be the main stabilization tool. II.the natural rate of unemployment doesn't actually exist.

According to the Great Moderation consensus,the effectiveness of economic policy is limited by the political business cycle.

The _____ has the official role of declaring the beginnings of recessions and expansions.

Keynesians believed that the economy could get out of the Great Depression if:

Many economists believe that:

Real business cycle theory suggests that changes in _____ are the primary cause of business cycles.

The Great Moderation consensus is the school of thought that monetary policy should be the main tool of stabilization policy and is sceptical about the use of fiscal policy.

The belief that individuals and firms make their decisions optimally using all available information:

The Great Depression was ended in Canada by:

The natural rate hypothesis suggests there are limits to what macroeconomic policy can achieve.

The consensus is that the Great Depression was ended by:

Keynes believed that:

The Great Moderation consensus is that discretionary fiscal policy can be destabilizing because of lags in adjusting policy.

When other things are equal and using the classical model,an increase in the money supply leads to an equal proportional ___ in the aggregate _,with no effect on aggregate ___.

Classical economists believed that wages and prices were _,and as a result,the aggregate _ curve was vertical.

Keynesians argued that monetary policy would NOT be effective if:

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

Which statement is FALSE? Keynesian economics:

Monetarism asserts that GDP will grow steadily if the money supply grows steadily.

According to the Great Moderation consensus: I.monetary policy should be the main stabilization tool. II.the natural rate of unemployment doesn't actually exist.

According to the Great Moderation consensus,the effectiveness of economic policy is limited by the political business cycle.

The _____ has the official role of declaring the beginnings of recessions and expansions.

Keynesians believed that the economy could get out of the Great Depression if:

Many economists believe that:

Real business cycle theory suggests that changes in _____ are the primary cause of business cycles.

The Great Moderation consensus is the school of thought that monetary policy should be the main tool of stabilization policy and is sceptical about the use of fiscal policy.

The belief that individuals and firms make their decisions optimally using all available information:

The Great Depression was ended in Canada by:

The natural rate hypothesis suggests there are limits to what macroeconomic policy can achieve.

The consensus is that the Great Depression was ended by:

Keynes believed that:

The Great Moderation consensus is that discretionary fiscal policy can be destabilizing because of lags in adjusting policy.

When other things are equal and using the classical model,an increase in the money supply leads to an equal proportional _____ in the aggregate _____,with no effect on aggregate _____.

Classical economists believed that wages and prices were _____,and as a result,the aggregate _____ curve was vertical.

Keynesians argued that monetary policy would NOT be effective if:

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

When other things are equal and using the classical model,an increase in the money supply leads to an equal proportional ___ in the aggregate _,with no effect on aggregate ___.

Classical economists believed that wages and prices were _,and as a result,the aggregate _ curve was vertical.