Question 1

The Keynesian hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.

Accepted Answer

A) True 
 B)False

Question 2

The velocity of money is the ratio of

Accepted Answer

A) real GDP to the stock of money. 
B) the overall price level to the stock of money. 
C) nominal GDP to the stock of money. 
D) nominal GDP to the overall price level. 
A) real GDP to the stock of money. 
B) the overall price level to the stock of money. 
C) nominal GDP to the stock of money. 
D) nominal GDP to the overall price level.

Question 3

If tax rates are cut so that people have an increased incentive to work and businesses have an increased incentive to invest,

Accepted Answer

A) aggregate supply will increase,aggregate output will increase,and the price level will increase. 
B) aggregate supply will increase,aggregate output will increase,and the price level will decrease. 
C) both aggregate supply and demand will increase,aggregate output will increase,and the price level will increase. 
D) aggregate supply will increase,aggregate demand will decrease,aggregate output will increase,and the price level will decrease. 
A) aggregate supply will increase,aggregate output will increase,and the price level will increase. 
B) aggregate supply will increase,aggregate output will increase,and the price level will decrease. 
C) both aggregate supply and demand will increase,aggregate output will increase,and the price level will increase. 
D) aggregate supply will increase,aggregate demand will decrease,aggregate output will increase,and the price level will decrease.

Question 4

Related to the Economics in Practice on p.656: Surveys by the bank of England suggest that two important factors in influencing consumer perceptions of inflation are ________ and ________.

Accepted Answer

A) the value of the British pound; the value of the euro 
B) food prices; the stock of money 
C) interest rates; the unemployment rate 
D) gas prices; media attention to price increases 
A) the value of the British pound; the value of the euro 
B) food prices; the stock of money 
C) interest rates; the unemployment rate 
D) gas prices; media attention to price increases

Question 5

Which of the following would be considered a supply-side policy?

Accepted Answer

A) an increase in the minimum wage that would cause consumer spending to increase 
B) an increase in government spending that would lead to increased aggregate demand 
C) investment tax credits for businesses to encourage investment 
D) a decrease in the growth of the money supply 
A) an increase in the minimum wage that would cause consumer spending to increase 
B) an increase in government spending that would lead to increased aggregate demand 
C) investment tax credits for businesses to encourage investment 
D) a decrease in the growth of the money supply

Question 6

Suppose that the stock of money is $150 billion and nominal GDP is $750 billion.The velocity of money is

Accepted Answer

A) 4. 
B) 5. 
C) 16.7. 
D) 600. 
A) 4. 
B) 5. 
C) 16.7. 
D) 600.

Question 7

The velocity of money is 4.If nominal GDP is $1,200 billion then the stock of money

Accepted Answer

A) is $300 billion. 
B) is $400 billion. 
C) is $500 billion. 
D) is $4,800 billion. 
A) is $300 billion. 
B) is $400 billion. 
C) is $500 billion. 
D) is $4,800 billion.

Question 8

If the stock of money is $60 billion,velocity is 5,and real output is $100 billion,what is the price level?

Accepted Answer

A) 0.12 
B) 1.4 
C) 3 
D) 6 
A) 0.12 
B) 1.4 
C) 3 
D) 6

Question 9

If real output is $10 billion,the price level is 3,and velocity is 6,what is the stock of money?

Accepted Answer

A) $1.8 billion 
B) $5 billion 
C) $19 billion 
D) $180 billion 
A) $1.8 billion 
B) $5 billion 
C) $19 billion 
D) $180 billion

Question 10

According to new classical economists,if the Fed increases the money supply after it announces it,output ________ and the price level ________.

Accepted Answer

A) increases; remains constant 
B) remains constant; increases 
C) remains constant; remains constant 
D) increases; increase 
A) increases; remains constant 
B) remains constant; increases 
C) remains constant; remains constant 
D) increases; increase

Question 11

Refer to the information provided in Figure 18.1 below to answer the questions that follow.
   Figure 18.1
-Refer to Figure 18.1.According to the new classical economists,under rational expectations an expected increase in government spending would

Accepted Answer

A) shift AS1 to the right. 
B) shift AD1 to the right. 
C) shift AD1 to the left. 
D) none of the above 
A) shift AS1 to the right. 
B) shift AD1 to the right. 
C) shift AD1 to the left. 
D) none of the above

Question 12

The primary argument against the rational-expectations assumption is that

Accepted Answer

A) the costs of formulating rational expectations are very low. 
B) it requires households and firms to know too much. 
C) it assumes that unexploited opportunities for profit persist in the economy. 
D) people expect certain outcomes from the government's policy actions. 
A) the costs of formulating rational expectations are very low. 
B) it requires households and firms to know too much. 
C) it assumes that unexploited opportunities for profit persist in the economy. 
D) people expect certain outcomes from the government's policy actions.

Question 13

Monetarists believe that the underlying economy is stable.

Accepted Answer

A) True 
 B)False

Question 14

Keynesians believe that government policies can improve economic performance.

Accepted Answer

A) True 
 B)False

Question 15

Competing macroeconomic models may be hard to test because people may change how they react when economic policies are changed.

Accepted Answer

A) True 
 B)False

Question 16

If the equation for the quantity theory of money is looked on as a demand-for-money equation,then the demand for money depends on

Accepted Answer

A) nominal income but not on the interest rate. 
B) nominal income and the interest rate. 
C) real income but not on the interest rate. 
D) real income and the interest rate. 
A) nominal income but not on the interest rate. 
B) nominal income and the interest rate. 
C) real income but not on the interest rate. 
D) real income and the interest rate.

Question 17

The Lucas supply function,in combination with the assumption that expectations are rational,implies that

Accepted Answer

A) anticipated policy changes have a significant effect on real output. 
B) unanticipated policy changes have no effect on real output. 
C) anticipated policy changes have no effect on real output. 
D) the effect that policy changes have on real output is the same,regardless of whether those changes are anticipated or not. 
A) anticipated policy changes have a significant effect on real output. 
B) unanticipated policy changes have no effect on real output. 
C) anticipated policy changes have no effect on real output. 
D) the effect that policy changes have on real output is the same,regardless of whether those changes are anticipated or not.

Question 18

A rational-expectations theorist argues for increased government involvement in the economy to ensure stable price and employment growth.

Accepted Answer

A) True 
 B)False

Question 19

Supporters of supply-side economics claim that Reagan's tax policies were quite successful in stimulating the economy because

Accepted Answer

A) almost immediately after the tax cuts,the economy expanded and the recession of 1980-1982 came to an end. 
B) inflation rates fell sharply from the high rates of 1980 and 1981. 
C) throughout most of the 1980s,federal receipts continued to rise even though tax rates had been cut. 
D) all of the above 
A) almost immediately after the tax cuts,the economy expanded and the recession of 1980-1982 came to an end. 
B) inflation rates fell sharply from the high rates of 1980 and 1981. 
C) throughout most of the 1980s,federal receipts continued to rise even though tax rates had been cut. 
D) all of the above

Question 20

If firms have rational expectations and if they set prices and wages on this basis,then on average

Accepted Answer

A) prices and wages will be set at levels that do not clear the goods and labor markets. 
B) prices will be set at levels that ensure equilibrium in the goods market,but wages will be set at levels that do not clear the labor market. 
C) prices and wages will be set at levels that ensure equilibrium in the goods and labor markets. 
D) wages will be set at levels that ensure equilibrium in the labor market,but prices will be set at levels that do not clear the goods market. 
A) prices and wages will be set at levels that do not clear the goods and labor markets. 
B) prices will be set at levels that ensure equilibrium in the goods market,but wages will be set at levels that do not clear the labor market. 
C) prices and wages will be set at levels that ensure equilibrium in the goods and labor markets. 
D) wages will be set at levels that ensure equilibrium in the labor market,but prices will be set at levels that do not clear the goods market.

Exam 18: Alternative Views in Macroeconomics

The Keynesian hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.

The velocity of money is the ratio of

If tax rates are cut so that people have an increased incentive to work and businesses have an increased incentive to invest,

Related to the Economics in Practice on p.656: Surveys by the bank of England suggest that two important factors in influencing consumer perceptions of inflation are ________ and ________.

Which of the following would be considered a supply-side policy?

Suppose that the stock of money is $150 billion and nominal GDP is $750 billion.The velocity of money is

The velocity of money is 4.If nominal GDP is $1,200 billion then the stock of money

If the stock of money is $60 billion,velocity is 5,and real output is $100 billion,what is the price level?

If real output is $10 billion,the price level is 3,and velocity is 6,what is the stock of money?

According to new classical economists,if the Fed increases the money supply after it announces it,output ________ and the price level ________.

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1.According to the new classical economists,under rational expectations an expected increase in government spending would

The primary argument against the rational-expectations assumption is that

Monetarists believe that the underlying economy is stable.

Keynesians believe that government policies can improve economic performance.

Competing macroeconomic models may be hard to test because people may change how they react when economic policies are changed.

If the equation for the quantity theory of money is looked on as a demand-for-money equation,then the demand for money depends on

The Lucas supply function,in combination with the assumption that expectations are rational,implies that

A rational-expectations theorist argues for increased government involvement in the economy to ensure stable price and employment growth.

Supporters of supply-side economics claim that Reagan's tax policies were quite successful in stimulating the economy because

If firms have rational expectations and if they set prices and wages on this basis,then on average

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment,inflation,and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

International Trade, comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters

Related to the Economics in Practice on p.656: Surveys by the bank of England suggest that two important factors in influencing consumer perceptions of inflation are and .

According to new classical economists,if the Fed increases the money supply after it announces it,output and the price level .