Question 1

If the stock of money is $250 billion,velocity is 5,and the price level is 10,what is real output?

Accepted Answer

A) $5 billion 
B) $125 billion 
C) $500 billion 
D) $12,500 billion 
A) $5 billion 
B) $125 billion 
C) $500 billion 
D) $12,500 billion

Question 2

Those who believe in the rational expectations hypothesis advocate

Accepted Answer

A) active fiscal policy during recessions. 
B) active monetary policy during recessions. 
C) active monetary policy during inflationary periods only. 
D) no policy intervention. 
A) active fiscal policy during recessions. 
B) active monetary policy during recessions. 
C) active monetary policy during inflationary periods only. 
D) no policy intervention.

Question 3

Any test of rational expectations is a joint test of the underlying model that expectations are formed rationally.

Accepted Answer

A) True 
 B)False

Question 4

Monetarists believe that real output is determined by

Accepted Answer

A) government spending. 
B) the rate of growth of the money supply. 
C) government planning. 
D) aggregate supply. 
A) government spending. 
B) the rate of growth of the money supply. 
C) government planning. 
D) aggregate supply.

Question 5

Keynesians believe the economy can be managed using monetary and fiscal policy.

Accepted Answer

A) True 
 B)False

Question 6

According to the Lucas supply function,in combination with the assumption that expectations are rational,change in government policy can affect real output only if

Accepted Answer

A) the policy change is correctly anticipated by the public. 
B) the policy change is a surprise. 
C) the policy change is a mix of both fiscal and monetary policy changes. 
D) expansionary policy changes are made. 
A) the policy change is correctly anticipated by the public. 
B) the policy change is a surprise. 
C) the policy change is a mix of both fiscal and monetary policy changes. 
D) expansionary policy changes are made.

Question 7

The rational-expectations hypothesis suggests that errors in forecasting future inflation rates are due to

Accepted Answer

A) random,unpredictable events. 
B) the fact that people assume that the current inflation rate will continue into the future. 
C) the fact that people consistently underestimate future inflation. 
D) the fact that people consistently overestimate future inflation. 
A) random,unpredictable events. 
B) the fact that people assume that the current inflation rate will continue into the future. 
C) the fact that people consistently underestimate future inflation. 
D) the fact that people consistently overestimate future inflation.

Question 8

If real output is $25 billion,the price level is 5,and velocity is 5,what is the stock of money?

Accepted Answer

A) $1 billion 
B) $10 billion 
C) $25 billion 
D) $625 billion 
A) $1 billion 
B) $10 billion 
C) $25 billion 
D) $625 billion

Question 9

The velocity of money is

Accepted Answer

A) the number of times a dollar bill exchanges hands in a year. 
B) the ratio of deposits to money supply. 
C) the number of times the Fed increases money supply in a year. 
D) the relationship between money supply and money demand. 
A) the number of times a dollar bill exchanges hands in a year. 
B) the ratio of deposits to money supply. 
C) the number of times the Fed increases money supply in a year. 
D) the relationship between money supply and money demand.

Question 10

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 Keynes,an expansionary monetary policy in the long run and after all the adjustments have been made

Accepted Answer

A) does not increase equilibrium output. 
B) increases equilibrium output above Y1. 
C) decreases equilibrium output below Y1. 
D) increases equilibrium output above Y1 and decreases the price level below P1. 
A) does not increase equilibrium output. 
B) increases equilibrium output above Y1. 
C) decreases equilibrium output below Y1. 
D) increases equilibrium output above Y1 and decreases the price level below P1.

Question 11

If nominal GDP is $400 billion and the money supply is $50 billion,the velocity of money is

Accepted Answer

A) 0.125. 
B) 8. 
C) 12. 
D) 20. 
A) 0.125. 
B) 8. 
C) 12. 
D) 20.

Question 12

Monetarists and Keynesians

Accepted Answer

A) disagree on the speed at which wages change. 
B) agree on the impact of fiscal policy on the economy. 
C) disagree on how the Fed changes money supply. 
D) agree on the usefulness of discretionary policy. 
A) disagree on the speed at which wages change. 
B) agree on the impact of fiscal policy on the economy. 
C) disagree on how the Fed changes money supply. 
D) agree on the usefulness of discretionary policy.

Question 13

Velocity will be constant if the demand for money with respect to the interest rate is

Accepted Answer

A) unitary elastic. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) elastic,but not perfectly elastic. 
A) unitary elastic. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) elastic,but not perfectly elastic.

Question 14

The ratio of nominal GDP to the stock of money is the

Accepted Answer

A) money multiplier. 
B) velocity of money. 
C) real GDP. 
D) GDP deflator. 
A) money multiplier. 
B) velocity of money. 
C) real GDP. 
D) GDP deflator.

Question 15

Monetarists believe that the underlying economy is stable.

Accepted Answer

A) True 
 B)False

Question 16

Keynesians believe that the economy will never will reach a full employment equilibrium.

Accepted Answer

A) True 
 B)False

Question 17

According to the quantity theory of money,nominal GDP will double if the money supply is

Accepted Answer

A) reduced by one-half. 
B) reduced threefold. 
C) doubled. 
D) tripled. 
A) reduced by one-half. 
B) reduced threefold. 
C) doubled. 
D) tripled.

Question 18

Fluctuations in velocity tend to increase when measured using M1 instead of M2.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Velocity is NOT constant if

Accepted Answer

A) the money supply does not depend on the interest rate. 
B) the supply of money depends on the interest rate. 
C) the price level increases as aggregate output increases. 
D) the demand for money depends on the interest rate. 
A) the money supply does not depend on the interest rate. 
B) the supply of money depends on the interest rate. 
C) the price level increases as aggregate output increases. 
D) the demand for money depends on the interest rate.

Exam 18: Alternative Views in Macroeconomics

If the stock of money is $250 billion,velocity is 5,and the price level is 10,what is real output?

Those who believe in the rational expectations hypothesis advocate

Any test of rational expectations is a joint test of the underlying model that expectations are formed rationally.

Monetarists believe that real output is determined by

Keynesians believe the economy can be managed using monetary and fiscal policy.

According to the Lucas supply function,in combination with the assumption that expectations are rational,change in government policy can affect real output only if

The rational-expectations hypothesis suggests that errors in forecasting future inflation rates are due to

If real output is $25 billion,the price level is 5,and velocity is 5,what is the stock of money?

The velocity of money is

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 Keynes,an expansionary monetary policy in the long run and after all the adjustments have been made

If nominal GDP is $400 billion and the money supply is $50 billion,the velocity of money is

Monetarists and Keynesians

Velocity will be constant if the demand for money with respect to the interest rate is

The ratio of nominal GDP to the stock of money is the

Monetarists believe that the underlying economy is stable.

Keynesians believe that the economy will never will reach a full employment equilibrium.

According to the quantity theory of money,nominal GDP will double if the money supply is

Fluctuations in velocity tend to increase when measured using M1 instead of M2.

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

Velocity is NOT constant if

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

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