Question 1

Unemployment that deviates from the natural rate of unemployment is referred to as

Accepted Answer

A) frictional unemployment. 
B) cyclical unemployment. 
C) seasonal unemployment. 
D) structural unemployment. 
A) frictional unemployment. 
B) cyclical unemployment. 
C) seasonal unemployment. 
D) structural unemployment.

Question 2

The Phillips curve shows

Accepted Answer

A) the relationship between the rate of interest and planned investment. 
B) the relationship between the money supply and the price level. 
C) that an increase in government spending will decrease real national income. 
D) that an increase in inflation may be associated with a decrease in the rate of unemployment. 
A) the relationship between the rate of interest and planned investment. 
B) the relationship between the money supply and the price level. 
C) that an increase in government spending will decrease real national income. 
D) that an increase in inflation may be associated with a decrease in the rate of unemployment.

Question 3

The real business cycle theory

Accepted Answer

A) is an extension of the Keynesian view of business cycles. 
B) is an extension of the adaptive expectations theory of business cycles. 
C) suggests that instability is caused by shifts in the long-run aggregate supply curve. 
D) suggests that instability is caused by shifts in the aggregate demand curve caused by changing consumer confidence in the economy. 
A) is an extension of the Keynesian view of business cycles. 
B) is an extension of the adaptive expectations theory of business cycles. 
C) suggests that instability is caused by shifts in the long-run aggregate supply curve. 
D) suggests that instability is caused by shifts in the aggregate demand curve caused by changing consumer confidence in the economy.

Question 4

Your friend recently graduated from college and is actively looking for employment.The economy has completely recovered from the last recession and your friend is taking her time,looking for the "perfect" job.In the meantime,the unemployment she is experiencing is categorized as

Accepted Answer

A) cyclical. 
B) structural. 
C) seasonal. 
D) frictional. 
A) cyclical. 
B) structural. 
C) seasonal. 
D) frictional.

Question 5

The policy irrelevance proposition states that

Accepted Answer

A) only relatively large expected changes in monetary policy impact the economy. 
B) anticipated changes in monetary policy are ineffective in changing real GDP. 
C) only statements from the White House have impact on the economy. 
D) in the short run unanticipated changes in monetary policy are ineffective in changing real GDP. 
A) only relatively large expected changes in monetary policy impact the economy. 
B) anticipated changes in monetary policy are ineffective in changing real GDP. 
C) only statements from the White House have impact on the economy. 
D) in the short run unanticipated changes in monetary policy are ineffective in changing real GDP.

Question 6

According to economists who promote sticky-price theories,

Accepted Answer

A) only fiscal policy is an effective stabilization policy. 
B) only monetary policy is an effective stabilization policy. 
C) both fiscal and monetary policy can be effective stabilization policies. 
D) neither fiscal nor monetary policy is an effective stabilization policy. 
A) only fiscal policy is an effective stabilization policy. 
B) only monetary policy is an effective stabilization policy. 
C) both fiscal and monetary policy can be effective stabilization policies. 
D) neither fiscal nor monetary policy is an effective stabilization policy.

Question 7

What best defines active policy making?

Accepted Answer

A) taking action to offset a change in economic performance 
B) taking action to increase long-term economic growth 
C) taking action to make markets more competitive so as to improve efficiency 
D) taking action to make markets less competitive so as to improve equity 
A) taking action to offset a change in economic performance 
B) taking action to increase long-term economic growth 
C) taking action to make markets more competitive so as to improve efficiency 
D) taking action to make markets less competitive so as to improve equity

Question 8

Which one of the following would likely reduce the level of structural unemployment?

Accepted Answer

A) increasing the minimum wage to encourage more people to work 
B) increasing the level of union bargaining power 
C) limiting unemployment insurance benefits 
D) strengthening restrictions on who can be licensed to enter certain professions 
A) increasing the minimum wage to encourage more people to work 
B) increasing the level of union bargaining power 
C) limiting unemployment insurance benefits 
D) strengthening restrictions on who can be licensed to enter certain professions

Question 9

The rational expectations hypothesis is based on the assumption that

Accepted Answer

A) individuals combine effects of past policy actions with their own judgment about future policy effects and changes when forming their expectations. 
B) individuals adapt in response to past policy actions and changes without looking ahead when forming their expectations. 
C) firms pay above equilibrium wages to their employees. 
D) most firms operate in a less than competitive environment. 
A) individuals combine effects of past policy actions with their own judgment about future policy effects and changes when forming their expectations. 
B) individuals adapt in response to past policy actions and changes without looking ahead when forming their expectations. 
C) firms pay above equilibrium wages to their employees. 
D) most firms operate in a less than competitive environment.

Question 10

The Phillips curve is thought to reflect the relationship between

Accepted Answer

A) unemployment and real GDP. 
B) unemployment and inflation. 
C) inflation and real GDP. 
D) the price level and inflation. 
A) unemployment and real GDP. 
B) unemployment and inflation. 
C) inflation and real GDP. 
D) the price level and inflation.

Question 11

Under the assumption of rational expectations,government fiscal and monetary policy changes are effective in the short run

Accepted Answer

A) all of the time. 
B) only when the short-run aggregate supply curve is the same as the long-run aggregate supply curve. 
C) only when the policy changes leave the position of the aggregate demand curve unaffected. 
D) only when the policy changes are unanticipated. 
A) all of the time. 
B) only when the short-run aggregate supply curve is the same as the long-run aggregate supply curve. 
C) only when the policy changes leave the position of the aggregate demand curve unaffected. 
D) only when the policy changes are unanticipated.

Question 12

New Keynesian inflation dynamics can account for sluggish responses of

Accepted Answer

A) real GDP to variations in aggregate supply. 
B) real GDP to variations in aggregate demand. 
C) inflation to variations in aggregate supply. 
D) inflation to variations in aggregate demand. 
A) real GDP to variations in aggregate supply. 
B) real GDP to variations in aggregate demand. 
C) inflation to variations in aggregate supply. 
D) inflation to variations in aggregate demand.

Question 13

-In the above figure,if we start at   and   ,and the money supply increases unexpectedly,what would be the long-run equilibrium?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 14

We observe the duration of unemployment falling and wage rates rising.It is likely that

Accepted Answer

A) the government has initiated expansionary fiscal policy but the policies haven't taken effect yet. 
B) summer has arrived. 
C) aggregate demand has increased. 
D) aggregate supply has increased. 
A) the government has initiated expansionary fiscal policy but the policies haven't taken effect yet. 
B) summer has arrived. 
C) aggregate demand has increased. 
D) aggregate supply has increased.

Question 15

According to the new Keynesian sticky-price theory,a rise in aggregate demand results in ________ price level in the near term and in ________ price level in the longer term.

Accepted Answer

A) a higher;an unchanged 
B) an unchanged;a higher 
C) a lower;an unchanged 
D) a lower;a higher 
A) a higher;an unchanged 
B) an unchanged;a higher 
C) a lower;an unchanged 
D) a lower;a higher

Question 16

Cyclical unemployment is positive when

Accepted Answer

A) the inflation rate is positive. 
B) the economy is at the peak of a business expansion. 
C) the natural rate of unemployment exceeds the actual rate. 
D) the actual unemployment rate exceeds the natural rate. 
A) the inflation rate is positive. 
B) the economy is at the peak of a business expansion. 
C) the natural rate of unemployment exceeds the actual rate. 
D) the actual unemployment rate exceeds the natural rate.

Question 17

The Phillips curve shows the relationship between

Accepted Answer

A) the rate of growth in real GDP and the unemployment rate. 
B) the inflation rate and the unemployment rate. 
C) aggregate demand and the unemployment rate. 
D) aggregate supply and the unemployment rate. 
A) the rate of growth in real GDP and the unemployment rate. 
B) the inflation rate and the unemployment rate. 
C) aggregate demand and the unemployment rate. 
D) aggregate supply and the unemployment rate.

Question 18

According to New Keynesians,which of the following is one of the two key factors that determines the inflation rate?

Accepted Answer

A) anticipated future inflation 
B) fiscal policy 
C) oil prices 
D) stock prices 
A) anticipated future inflation 
B) fiscal policy 
C) oil prices 
D) stock prices

Question 19

During the 1960s,many Keynesian economists felt that by studying the Phillips curve,

Accepted Answer

A) policy makers could dispense with the Federal Reserve's open-market operations. 
B) policy makers could fine-tune the economy by selecting policies that would produce the exact mix of unemployment and inflation that suited current government objectives. 
C) the President and Congress did not need to attempt to balance the budget. 
D) policy makers could eliminate even frictional unemployment in the economy. 
A) policy makers could dispense with the Federal Reserve's open-market operations. 
B) policy makers could fine-tune the economy by selecting policies that would produce the exact mix of unemployment and inflation that suited current government objectives. 
C) the President and Congress did not need to attempt to balance the budget. 
D) policy makers could eliminate even frictional unemployment in the economy.

Question 20

-In the above figure,suppose the economy is currently in equilibrium at point C.Applying rational expectations theory,what happens if the Fed announces that it is decreasing the money supply and follows through on its statement?

Accepted Answer

A) The price level will increase. 
B) Real Gross Domestic Product (GDP)per year will increase. 
C) Real Gross Domestic Product (GDP)per year will decrease. 
D) The price level will decrease. 
A) The price level will increase. 
B) Real Gross Domestic Product (GDP)per year will increase. 
C) Real Gross Domestic Product (GDP)per year will decrease. 
D) The price level will decrease.

Unemployment that deviates from the natural rate of unemployment is referred to as

The Phillips curve shows

The real business cycle theory

Your friend recently graduated from college and is actively looking for employment.The economy has completely recovered from the last recession and your friend is taking her time,looking for the "perfect" job.In the meantime,the unemployment she is experiencing is categorized as

The policy irrelevance proposition states that

According to economists who promote sticky-price theories,

What best defines active policy making?

Which one of the following would likely reduce the level of structural unemployment?

The rational expectations hypothesis is based on the assumption that

The Phillips curve is thought to reflect the relationship between

Under the assumption of rational expectations,government fiscal and monetary policy changes are effective in the short run

New Keynesian inflation dynamics can account for sluggish responses of

-In the above figure,if we start at and ,and the money supply increases unexpectedly,what would be the long-run equilibrium?

We observe the duration of unemployment falling and wage rates rising.It is likely that

According to the new Keynesian sticky-price theory,a rise in aggregate demand results in price level in the near term and in price level in the longer term.

Cyclical unemployment is positive when

The Phillips curve shows the relationship between

According to New Keynesians,which of the following is one of the two key factors that determines the inflation rate?

During the 1960s,many Keynesian economists felt that by studying the Phillips curve,

-In the above figure,suppose the economy is currently in equilibrium at point C.Applying rational expectations theory,what happens if the Fed announces that it is decreasing the money supply and follows through on its statement?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 17: Stabilization in an Integrated World Economy

Unemployment that deviates from the natural rate of unemployment is referred to as

The Phillips curve shows

The real business cycle theory

Your friend recently graduated from college and is actively looking for employment.The economy has completely recovered from the last recession and your friend is taking her time,looking for the "perfect" job.In the meantime,the unemployment she is experiencing is categorized as

The policy irrelevance proposition states that

According to economists who promote sticky-price theories,

What best defines active policy making?

Which one of the following would likely reduce the level of structural unemployment?

The rational expectations hypothesis is based on the assumption that

The Phillips curve is thought to reflect the relationship between

Under the assumption of rational expectations,government fiscal and monetary policy changes are effective in the short run

New Keynesian inflation dynamics can account for sluggish responses of

-In the above figure,if we start at and ,and the money supply increases unexpectedly,what would be the long-run equilibrium?

We observe the duration of unemployment falling and wage rates rising.It is likely that

According to the new Keynesian sticky-price theory,a rise in aggregate demand results in ________ price level in the near term and in ________ price level in the longer term.

Cyclical unemployment is positive when

The Phillips curve shows the relationship between

According to New Keynesians,which of the following is one of the two key factors that determines the inflation rate?

During the 1960s,many Keynesian economists felt that by studying the Phillips curve,

-In the above figure,suppose the economy is currently in equilibrium at point C.Applying rational expectations theory,what happens if the Fed announces that it is decreasing the money supply and follows through on its statement?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

According to the new Keynesian sticky-price theory,a rise in aggregate demand results in price level in the near term and in price level in the longer term.