Question 1

Actions on the part of monetary and fiscal policy makers that are undertaken in response to some change in the overall economy are known as

Accepted Answer

A) nondiscretionary policy making. 
B) passive policy making. 
C) creative policy making. 
D) active policy making. 
A) nondiscretionary policy making. 
B) passive policy making. 
C) creative policy making. 
D) active policy making.

Question 2

When the economy is operating at a level of real GDP that is greater than its potential level,we know that

Accepted Answer

A) the actual unemployment rate is greater than the natural rate of unemployment. 
B) the structural rate of unemployment is negative. 
C) the frictional unemployment is zero. 
D) the cyclical rate of unemployment is negative. 
A) the actual unemployment rate is greater than the natural rate of unemployment. 
B) the structural rate of unemployment is negative. 
C) the frictional unemployment is zero. 
D) the cyclical rate of unemployment is negative.

Question 3

If people do not always make the same mistakes when forecasting the future,then

Accepted Answer

A) rational expectations are irrational. 
B) the Fed can control monetary policy and determine real variables such as real GDP. 
C) the policy irrelevance theorem holds. 
D) fiscal policy is more effective than monetary policy at fine-tuning the economy. 
A) rational expectations are irrational. 
B) the Fed can control monetary policy and determine real variables such as real GDP. 
C) the policy irrelevance theorem holds. 
D) fiscal policy is more effective than monetary policy at fine-tuning the economy.

Question 4

Those who favor passive policy making do so because they conclude that

Accepted Answer

A) price and wage flexibility is a common and speedy occurrence. 
B) price and wage flexibility is an uncommon occurrence. 
C) pure competition is not typical in most markets. 
D) there is a stable trade-off between inflation and unemployment in the short run. 
A) price and wage flexibility is a common and speedy occurrence. 
B) price and wage flexibility is an uncommon occurrence. 
C) pure competition is not typical in most markets. 
D) there is a stable trade-off between inflation and unemployment in the short run.

Question 5

The idea of policy making being undertaken as a response to a change in the economy is referred to as

Accepted Answer

A) active policy making. 
B) non-discretionary policy making. 
C) passive policy making. 
D) Keynesianism. 
A) active policy making. 
B) non-discretionary policy making. 
C) passive policy making. 
D) Keynesianism.

Question 6

According to the real business cycle theory,an increase in an input price,such as oil,will

Accepted Answer

A) increase both real Gross Domestic Product (GDP)and the price level. 
B) increase real Gross Domestic Product (GDP)but not change the price level. 
C) decrease real Gross Domestic Product (GDP)but increase the price level. 
D) decrease both real Gross Domestic Product (GDP)and the price level. 
A) increase both real Gross Domestic Product (GDP)and the price level. 
B) increase real Gross Domestic Product (GDP)but not change the price level. 
C) decrease real Gross Domestic Product (GDP)but increase the price level. 
D) decrease both real Gross Domestic Product (GDP)and the price level.

Question 7

If the rate of growth in the money supply is predetermined on the basis of a monetary rule,this is known as

Accepted Answer

A) direct policy making. 
B) active policy making. 
C) passive policy making. 
D) fiscal policy making. 
A) direct policy making. 
B) active policy making. 
C) passive policy making. 
D) fiscal policy making.

Question 8

The Phillips curve shows the relationship between

Accepted Answer

A) the price level and real Gross Domestic Product (GDP). 
B) the tax rate and tax revenues. 
C) the unemployment rate and inflation rate. 
D) the interest rate and exchange rate. 
A) the price level and real Gross Domestic Product (GDP). 
B) the tax rate and tax revenues. 
C) the unemployment rate and inflation rate. 
D) the interest rate and exchange rate.

Question 9

According to New Keynesian economists,

Accepted Answer

A) activist policy has little effect on real GDP. 
B) activist policy can be used to minimize variations in real GDP. 
C) fluctuations in output are primarily caused by supply shocks. 
D) the amount of time it takes firms to adjust prices is less than six months. 
A) activist policy has little effect on real GDP. 
B) activist policy can be used to minimize variations in real GDP. 
C) fluctuations in output are primarily caused by supply shocks. 
D) the amount of time it takes firms to adjust prices is less than six months.

Question 10

-In the above figure,starting at   ,if there is a supply shock that is temporary,the

Accepted Answer

A) aggregate supply would shift to   and   would shift to   . 
B) aggregate supply would shift to   and   would shift to   . 
C) aggregate supply would shift to   and   would shift to   . 
D) aggregate supply would shift to   and then return to   . 
A) aggregate supply would shift to   and   would shift to   . 
B) aggregate supply would shift to   and   would shift to   . 
C) aggregate supply would shift to   and   would shift to   . 
D) aggregate supply would shift to   and then return to   .

Question 11

If the price of bubble gum changed in the market from 1 cent to 1.5 cents and Joe's Market didn't change the price it charges for the bubble gum,this behavior is likely due to

Accepted Answer

A) discretionary policy. 
B) economic laziness. 
C) large menu costs. 
D) small menu costs. 
A) discretionary policy. 
B) economic laziness. 
C) large menu costs. 
D) small menu costs.

Question 12

Which statement is true when rational expectations exist and there is a change in monetary policy which is unexpected?

Accepted Answer

A) The change in monetary policy leads to a change in aggregate demand that leads to a temporary short-run equilibrium that is different from the long-run equilibrium. 
B) The change in monetary policy leads to a simultaneous shift of the short-run aggregate supply curve. 
C) The change in monetary policy lead to a simultaneous shift in the long-run aggregate supply curve. 
D) The change in monetary policy does not change equilibrium in either the short-run or long-run. 
A) The change in monetary policy leads to a change in aggregate demand that leads to a temporary short-run equilibrium that is different from the long-run equilibrium. 
B) The change in monetary policy leads to a simultaneous shift of the short-run aggregate supply curve. 
C) The change in monetary policy lead to a simultaneous shift in the long-run aggregate supply curve. 
D) The change in monetary policy does not change equilibrium in either the short-run or long-run.

Question 13

The rational expectations hypothesis indicates that a monetary policy designed to alter real Gross Domestic Product (GDP)will fail unless

Accepted Answer

A) changes in the money supply are unexpected. 
B) the government's budget is not in deficit. 
C) labor unions have long-term contracts. 
D) changes in the money supply are completely anticipated. 
A) changes in the money supply are unexpected. 
B) the government's budget is not in deficit. 
C) labor unions have long-term contracts. 
D) changes in the money supply are completely anticipated.

Question 14

The downward slope of the Phillips curve suggests that

Accepted Answer

A) an increase in the price level will depress nominal wages. 
B) an increase in the price level will increase the money supply. 
C) a decrease in the money supply will stimulate aggregate demand. 
D) policy makers face a trade-off between inflation and unemployment. 
A) an increase in the price level will depress nominal wages. 
B) an increase in the price level will increase the money supply. 
C) a decrease in the money supply will stimulate aggregate demand. 
D) policy makers face a trade-off between inflation and unemployment.

Question 15

The term for a pattern of initially sluggish adjustment of the equilibrium price level to a change in aggregate demand followed by a greater adjustment in the future is

Accepted Answer

A) real-business-cycle inflation dynamics. 
B) New Keynesian inflation dynamics. 
C) passive price dynamics. 
D) active price dynamics. 
A) real-business-cycle inflation dynamics. 
B) New Keynesian inflation dynamics. 
C) passive price dynamics. 
D) active price dynamics.

Question 16

According to the rational expectations hypothesis,individuals form their expectations about future values of economic variables by all of the following EXCEPT

Accepted Answer

A) past information. 
B) current information. 
C) their understanding of how the economy operates. 
D) formal models of macroeconomics. 
A) past information. 
B) current information. 
C) their understanding of how the economy operates. 
D) formal models of macroeconomics.

Question 17

Economists Milton Friedman and E.S.Phelps suggested that the apparent trade-off suggested by the Phillips curve could not be exploited by policy makers,because

Accepted Answer

A) economic participants routinely incorporate changes in the inflation rate into their expectations. 
B) economic participants are not rational,and therefore act unpredictably to any policy change. 
C) unemployment levels and the inflation rate have a clear,positive relationship. 
D) unemployment levels and the inflation rate have a negative (inverse)relationship. 
A) economic participants routinely incorporate changes in the inflation rate into their expectations. 
B) economic participants are not rational,and therefore act unpredictably to any policy change. 
C) unemployment levels and the inflation rate have a clear,positive relationship. 
D) unemployment levels and the inflation rate have a negative (inverse)relationship.

Question 18

During a recession,the overall unemployment rate

Accepted Answer

A) falls rapidly. 
B) exceeds the natural rate of unemployment. 
C) falls below the natural rate of unemployment. 
D) equals the inflation rate. 
A) falls rapidly. 
B) exceeds the natural rate of unemployment. 
C) falls below the natural rate of unemployment. 
D) equals the inflation rate.

Question 19

Suppose the natural rate of unemployment is 5 percent.If the actual unemployment rate is 7 percent,then the cyclical unemployment rate

Accepted Answer

A) is 2 percent. 
B) is -2 percent. 
C) is 12 percent. 
D) cannot be determined given the information. 
A) is 2 percent. 
B) is -2 percent. 
C) is 12 percent. 
D) cannot be determined given the information.

Question 20

-Refer to the above figure.Government policy that moved the economy from A to B would be accomplished by

Accepted Answer

A) an expansionary fiscal policy combined with a contractionary monetary policy. 
B) a contractionary fiscal policy combined with an expansionary monetary policy. 
C) a contractionary policy that would reduce the rate of inflation and would cause workers to remain unemployed longer than they were before. 
D) raising the minimum wage. 
A) an expansionary fiscal policy combined with a contractionary monetary policy. 
B) a contractionary fiscal policy combined with an expansionary monetary policy. 
C) a contractionary policy that would reduce the rate of inflation and would cause workers to remain unemployed longer than they were before. 
D) raising the minimum wage.

Actions on the part of monetary and fiscal policy makers that are undertaken in response to some change in the overall economy are known as

When the economy is operating at a level of real GDP that is greater than its potential level,we know that

If people do not always make the same mistakes when forecasting the future,then

Those who favor passive policy making do so because they conclude that

The idea of policy making being undertaken as a response to a change in the economy is referred to as

According to the real business cycle theory,an increase in an input price,such as oil,will

If the rate of growth in the money supply is predetermined on the basis of a monetary rule,this is known as

The Phillips curve shows the relationship between

According to New Keynesian economists,

-In the above figure,starting at ,if there is a supply shock that is temporary,the

If the price of bubble gum changed in the market from 1 cent to 1.5 cents and Joe's Market didn't change the price it charges for the bubble gum,this behavior is likely due to

Which statement is true when rational expectations exist and there is a change in monetary policy which is unexpected?

The rational expectations hypothesis indicates that a monetary policy designed to alter real Gross Domestic Product (GDP)will fail unless

The downward slope of the Phillips curve suggests that

The term for a pattern of initially sluggish adjustment of the equilibrium price level to a change in aggregate demand followed by a greater adjustment in the future is

According to the rational expectations hypothesis,individuals form their expectations about future values of economic variables by all of the following EXCEPT

Economists Milton Friedman and E.S.Phelps suggested that the apparent trade-off suggested by the Phillips curve could not be exploited by policy makers,because

During a recession,the overall unemployment rate

Suppose the natural rate of unemployment is 5 percent.If the actual unemployment rate is 7 percent,then the cyclical unemployment rate

-Refer to the above figure.Government policy that moved the economy from A to B would be accomplished by

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

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Exam 17: Stabilization in an Integrated World Economy

Actions on the part of monetary and fiscal policy makers that are undertaken in response to some change in the overall economy are known as

When the economy is operating at a level of real GDP that is greater than its potential level,we know that

If people do not always make the same mistakes when forecasting the future,then

Those who favor passive policy making do so because they conclude that

The idea of policy making being undertaken as a response to a change in the economy is referred to as

According to the real business cycle theory,an increase in an input price,such as oil,will

If the rate of growth in the money supply is predetermined on the basis of a monetary rule,this is known as

The Phillips curve shows the relationship between

According to New Keynesian economists,

-In the above figure,starting at ,if there is a supply shock that is temporary,the

If the price of bubble gum changed in the market from 1 cent to 1.5 cents and Joe's Market didn't change the price it charges for the bubble gum,this behavior is likely due to

Which statement is true when rational expectations exist and there is a change in monetary policy which is unexpected?

The rational expectations hypothesis indicates that a monetary policy designed to alter real Gross Domestic Product (GDP)will fail unless

The downward slope of the Phillips curve suggests that

The term for a pattern of initially sluggish adjustment of the equilibrium price level to a change in aggregate demand followed by a greater adjustment in the future is

According to the rational expectations hypothesis,individuals form their expectations about future values of economic variables by all of the following EXCEPT

Economists Milton Friedman and E.S.Phelps suggested that the apparent trade-off suggested by the Phillips curve could not be exploited by policy makers,because

During a recession,the overall unemployment rate

Suppose the natural rate of unemployment is 5 percent.If the actual unemployment rate is 7 percent,then the cyclical unemployment rate

-Refer to the above figure.Government policy that moved the economy from A to B would be accomplished by

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