Question 1

In 2005 and 2006, because of fears of inflation, the Fed:

Accepted Answer

A) increased interest rates which lead to higher monthly payments on fixed rate mortgages. 
B) increased interest rates which lead to higher monthly payments on ARMs. 
C) decreased interest rates which lead to higher monthly payments on fixed rate mortgages. 
D) decreased interest rates which lead to higher monthly payments on ARMs. 
A) increased interest rates which lead to higher monthly payments on fixed rate mortgages. 
B) increased interest rates which lead to higher monthly payments on ARMs. 
C) decreased interest rates which lead to higher monthly payments on fixed rate mortgages. 
D) decreased interest rates which lead to higher monthly payments on ARMs.

Question 2

If a foreign trading partner of the United States increases its budget deficit, raising interest rates in that country:

Accepted Answer

A) U.S. exports and AD will both tend to rise. 
B) U.S. exports and AD will both tend to fall. 
C) U.S. exports will increase but AD will be unchanged. 
D) there will be an indeterminate effect on U.S. exports and AD. 
A) U.S. exports and AD will both tend to rise. 
B) U.S. exports and AD will both tend to fall. 
C) U.S. exports will increase but AD will be unchanged. 
D) there will be an indeterminate effect on U.S. exports and AD.

Question 3

Activists believe that monetary and fiscal policy will only work if it comes as a surprise to the public.

Accepted Answer

A) True 
 B)False

Question 4

List the various reasons that contributed to the financial crisis that occurred in 2008.

Accepted Answer

Low interest rates from 2002 to 2004 cau

Question 5

Due to crowding-out effects, other things being equal:

Accepted Answer

A) net exports and investment will tend to move in the same direction as a change in transfer payments. 
B) net exports and investment will tend to move in the opposite direction from a change in transfer payments. 
C) net exports will tend to move in the same direction as a change in transfer payments and investment will tend to move in the opposite direction. 
D) net exports will tend to move in the opposite direction from a change in transfer payments and investment will tend to move in the same direction. 
A) net exports and investment will tend to move in the same direction as a change in transfer payments. 
B) net exports and investment will tend to move in the opposite direction from a change in transfer payments. 
C) net exports will tend to move in the same direction as a change in transfer payments and investment will tend to move in the opposite direction. 
D) net exports will tend to move in the opposite direction from a change in transfer payments and investment will tend to move in the same direction.

Question 6

Due to crowding-out effects, other things being equal:

Accepted Answer

A) net exports and investment will tend to move in the same direction as a change in taxes. 
B) net exports and investment will tend to move in the opposite direction from a change in taxes. 
C) net exports will tend to move in the same direction as a change in taxes and investment will tend to move in the opposite direction. 
D) net exports will tend to move in the opposite direction as a change in taxes and investment will tend to move in the same direction. 
A) net exports and investment will tend to move in the same direction as a change in taxes. 
B) net exports and investment will tend to move in the opposite direction from a change in taxes. 
C) net exports will tend to move in the same direction as a change in taxes and investment will tend to move in the opposite direction. 
D) net exports will tend to move in the opposite direction as a change in taxes and investment will tend to move in the same direction.

Question 7

When the economy is already at relatively high levels of employment, if policy makers try to further reduce the unemployment levels through expansionary policies, what will be the likely result?

Accepted Answer

Further stimulating fiscal or

Question 8

Rational expectations are:

Accepted Answer

A) forecasts that are technically correct. 
B) forecasts that, while not necessarily correct, are the best that can be made given the available data. 
C) forecasts that accurately predict the short-term future for wages and prices. 
D) forecasts made by economists based on sophisticated econometric models. 
A) forecasts that are technically correct. 
B) forecasts that, while not necessarily correct, are the best that can be made given the available data. 
C) forecasts that accurately predict the short-term future for wages and prices. 
D) forecasts made by economists based on sophisticated econometric models.

Question 9

When the crowding-out (or crowding in) effect of a decrease in government purchases is included in the analysis:

Accepted Answer

A) AD shifts left. 
B) AD doesn't change. 
C) AD shifts right, but by more than the simple multiplier analysis would imply. 
D) AD shifts right, but by less than the simple multiplier analysis would imply. 
A) AD shifts left. 
B) AD doesn't change. 
C) AD shifts right, but by more than the simple multiplier analysis would imply. 
D) AD shifts right, but by less than the simple multiplier analysis would imply.

Question 10

The real business cycle theorists believe that ____ lead to changes in the growth rate of productivity.

Accepted Answer

A) technological changes 
B) unexpected changes in the money supply 
C) changes in fiscal and monetary policies 
D) foreign competition 
A) technological changes 
B) unexpected changes in the money supply 
C) changes in fiscal and monetary policies 
D) foreign competition

Question 11

Rational expectation theory implies that accurately anticipated change in aggregate demand:

Accepted Answer

A) will increase RGDP in the short run. 
B) will affect RGDP and inflation only in the long run. 
C) may affect RGDP but not nominal GDP in the short run. 
D) will do none of the above. 
A) will increase RGDP in the short run. 
B) will affect RGDP and inflation only in the long run. 
C) may affect RGDP but not nominal GDP in the short run. 
D) will do none of the above.

Question 12

Which of the following is true?

Accepted Answer

A) When the federal budget moves toward surplus, net exports tend to increase as a result. 
B) When the federal budget moves toward surplus, net exports tend to decrease as a result. 
C) When the federal budget moves toward surplus, net exports do not change as a result. 
D) When the federal budget moves toward surplus, there is an indeterminate effect on net exports that results. 
A) When the federal budget moves toward surplus, net exports tend to increase as a result. 
B) When the federal budget moves toward surplus, net exports tend to decrease as a result. 
C) When the federal budget moves toward surplus, net exports do not change as a result. 
D) When the federal budget moves toward surplus, there is an indeterminate effect on net exports that results.

Question 13

The time span between recognition of the need for a policy change and the legislation being signed into a law is known as:

Accepted Answer

A) signal lag. 
B) implementation lag. 
C) impact lag. 
D) recognition lag. 
A) signal lag. 
B) implementation lag. 
C) impact lag. 
D) recognition lag.

Question 14

Which of the following is false?

Accepted Answer

A) The multiplier effect of an increase in government purchases implies that the increase in aggregate demand will tend to be greater than the initial fiscal stimulus, other things equal. 
B) Expansionary fiscal policy will tend to decrease the demand for dollars relative to other currencies. 
C) Big increases and big decreases in real GDP are both lessened by automatic changes in income tax receipts. 
D) None of the above are false; all are true. 
A) The multiplier effect of an increase in government purchases implies that the increase in aggregate demand will tend to be greater than the initial fiscal stimulus, other things equal. 
B) Expansionary fiscal policy will tend to decrease the demand for dollars relative to other currencies. 
C) Big increases and big decreases in real GDP are both lessened by automatic changes in income tax receipts. 
D) None of the above are false; all are true.

Question 15

Targeting a zero inflation rate could possibly lead to deflation.

Accepted Answer

A) True 
 B)False

Question 16

In 2005, the percentages of mortgages that were considered sub-prime:

Accepted Answer

A) dipped to 13.55%. 
B) peaked at 13.5%. 
C) peaked at 7.6%. 
D) dipped to 3.4%. 
A) dipped to 13.55%. 
B) peaked at 13.5%. 
C) peaked at 7.6%. 
D) dipped to 3.4%.

Question 17

If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated increase in aggregate demand will result in:

Accepted Answer

A) a decrease in both aggregate demand and short-run aggregate supply. 
B) an increase in short-run aggregate supply that will maintain full employment. 
C) higher prices that will reduce aggregate demand to its original level. 
D) a decrease in short-run aggregate supply that will maintain full employment. 
E) no shift in either aggregate demand or short-run aggregate supply. 
A) a decrease in both aggregate demand and short-run aggregate supply. 
B) an increase in short-run aggregate supply that will maintain full employment. 
C) higher prices that will reduce aggregate demand to its original level. 
D) a decrease in short-run aggregate supply that will maintain full employment. 
E) no shift in either aggregate demand or short-run aggregate supply.

Question 18

Which of the following is closely associated with activists?

Accepted Answer

A) external shocks to the economy 
B) aggregate demand management 
C) policy changes that come as a surprise 
D) avoiding supply shocks 
A) external shocks to the economy 
B) aggregate demand management 
C) policy changes that come as a surprise 
D) avoiding supply shocks

Question 19

A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:

Accepted Answer

A) result in no net change in AD once people's expectations adjustments have been accounted for. 
B) shift AD in the opposite direction intended once people's expectations adjustments have been accounted for. 
C) be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment. 
D) have to be a surprise to change real output in the intended direction. 
A) result in no net change in AD once people's expectations adjustments have been accounted for. 
B) shift AD in the opposite direction intended once people's expectations adjustments have been accounted for. 
C) be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment. 
D) have to be a surprise to change real output in the intended direction.

Question 20

If the economy has substantial unemployment, then the inflationary costs of expansionary policy are likely to be:

Accepted Answer

A) low, and the unemployment gains minimal. 
B) low, and the unemployment gains large. 
C) high, and the unemployment gains minimal. 
D) high, and the unemployment gains large. 
A) low, and the unemployment gains minimal. 
B) low, and the unemployment gains large. 
C) high, and the unemployment gains minimal. 
D) high, and the unemployment gains large.

In 2005 and 2006, because of fears of inflation, the Fed:

If a foreign trading partner of the United States increases its budget deficit, raising interest rates in that country:

Activists believe that monetary and fiscal policy will only work if it comes as a surprise to the public.

List the various reasons that contributed to the financial crisis that occurred in 2008.

Due to crowding-out effects, other things being equal:

Due to crowding-out effects, other things being equal:

When the economy is already at relatively high levels of employment, if policy makers try to further reduce the unemployment levels through expansionary policies, what will be the likely result?

Rational expectations are:

When the crowding-out (or crowding in) effect of a decrease in government purchases is included in the analysis:

The real business cycle theorists believe that ____ lead to changes in the growth rate of productivity.

Rational expectation theory implies that accurately anticipated change in aggregate demand:

Which of the following is true?

The time span between recognition of the need for a policy change and the legislation being signed into a law is known as:

Which of the following is false?

Targeting a zero inflation rate could possibly lead to deflation.

In 2005, the percentages of mortgages that were considered sub-prime:

If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated increase in aggregate demand will result in:

Which of the following is closely associated with activists?

A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:

If the economy has substantial unemployment, then the inflationary costs of expansionary policy are likely to be:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

International Economics

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Exam 17: Issues in Macroeconomic Theory and Policy

In 2005 and 2006, because of fears of inflation, the Fed:

If a foreign trading partner of the United States increases its budget deficit, raising interest rates in that country:

Activists believe that monetary and fiscal policy will only work if it comes as a surprise to the public.

List the various reasons that contributed to the financial crisis that occurred in 2008.

Due to crowding-out effects, other things being equal:

Due to crowding-out effects, other things being equal:

When the economy is already at relatively high levels of employment, if policy makers try to further reduce the unemployment levels through expansionary policies, what will be the likely result?

Rational expectations are:

When the crowding-out (or crowding in) effect of a decrease in government purchases is included in the analysis:

The real business cycle theorists believe that ____ lead to changes in the growth rate of productivity.

Rational expectation theory implies that accurately anticipated change in aggregate demand:

Which of the following is true?

The time span between recognition of the need for a policy change and the legislation being signed into a law is known as:

Which of the following is false?

Targeting a zero inflation rate could possibly lead to deflation.

In 2005, the percentages of mortgages that were considered sub-prime:

If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated increase in aggregate demand will result in:

Which of the following is closely associated with activists?

A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:

If the economy has substantial unemployment, then the inflationary costs of expansionary policy are likely to be:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

International Economics

Filters