Question 1

Empirical evidence suggests that from 1960 until 2007, the velocity of money had, on average, been

Accepted Answer

A)  constant. 
B)  decreasing. 
C)  rising. 
D)  fluctuating around zero. 
A)  constant. 
B)  decreasing. 
C)  rising. 
D)  fluctuating around zero.

Question 2

The equation Y = f(P - Pe) represents the

Accepted Answer

A)  income velocity of money. 
B)  equation of exchange. 
C)  Keynesian consumption function. 
D)  Lucas supply function. 
A)  income velocity of money. 
B)  equation of exchange. 
C)  Keynesian consumption function. 
D)  Lucas supply function.

Question 3

A problem with comparing macroeconomic models is that

Accepted Answer

A)  people may change how they react when economic policies are changed. 
B)  macroeconomic models do not predict the same outcomes from policies. 
C)  macroeconomic models cannot be expressed in mathematical terms. 
D)  macroeconomic models must meet government standards for uniformity. 
A)  people may change how they react when economic policies are changed. 
B)  macroeconomic models do not predict the same outcomes from policies. 
C)  macroeconomic models cannot be expressed in mathematical terms. 
D)  macroeconomic models must meet government standards for uniformity.

Question 4

If nominal GDP is $300 billion and the velocity is 3, the stock of money is $900 billion.

Accepted Answer

A) True 
 B)False

Question 5

If GDP increases and the stock of money does not change, the income velocity of money will increase.

Accepted Answer

A) True 
 B)False

Question 6

If the demand for money depends on the ________ and the velocity is not constant, then the quantity theory of money ________.

Accepted Answer

A)  level of GDP; does not hold 
B)  interest rate; does not hold 
C)  interest rate; still holds 
D)  level of GDP; still holds 
A)  level of GDP; does not hold 
B)  interest rate; does not hold 
C)  interest rate; still holds 
D)  level of GDP; still holds

Question 7

New classical macroeconomics developed from the

Accepted Answer

A)  theoretical and empirical critiques of traditional economics. 
B)  discrepancies between classical theory and the Great Depression. 
C)  global transition from agrarian to industrial economies. 
D)  conversion form closed to open economies. 
A)  theoretical and empirical critiques of traditional economics. 
B)  discrepancies between classical theory and the Great Depression. 
C)  global transition from agrarian to industrial economies. 
D)  conversion form closed to open economies.

Question 8

The leading spokesperson for monetarism was

Accepted Answer

A)  John Maynard Keynes. 
B)  Milton Friedman. 
C)  Arthur Laffer. 
D)  Ronald Reagan. 
A)  John Maynard Keynes. 
B)  Milton Friedman. 
C)  Arthur Laffer. 
D)  Ronald Reagan.

Question 9

Those who believe in the rational expectations hypothesis advocate ________ policy intervention.

Accepted Answer

A)  continual 
B)  sporadic 
C)  limited 
D)  no 
A)  continual 
B)  sporadic 
C)  limited 
D)  no

Question 10

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 11

Related to the Economics in Practice on p. 325: Surveys by the bank of England suggest that consumers tend to expect future inflation to be

Accepted Answer

A)  what they perceive past inflation to have been. 
B)  equal to the actual estimates of past inflation made by the government. 
C)  directly related to the interest rate. 
D)  relatively unpredictable. 
A)  what they perceive past inflation to have been. 
B)  equal to the actual estimates of past inflation made by the government. 
C)  directly related to the interest rate. 
D)  relatively unpredictable.

Question 12

If nominal GDP is $200 billion and the stock of money is $40 billion, the velocity is 5.

Accepted Answer

A) True 
 B)False

Question 13

If the equation for the ________ is looked on as a demand-for-money equation, then the demand for money depends on nominal income but not the interest rate.

Accepted Answer

A)  real business cycle theory 
B)  quantity theory of money 
C)  Keynesian income-expenditure model 
D)  unanticipated inflation rate 
A)  real business cycle theory 
B)  quantity theory of money 
C)  Keynesian income-expenditure model 
D)  unanticipated inflation rate

Question 14

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 15

The velocity of money is 3. If nominal GDP is $1,500 billion then the stock of money is

Accepted Answer

A)  $300 billion. 
B)  $500 billion. 
C)  $4,500 billion. 
D)  $7,500 billion. 
A)  $300 billion. 
B)  $500 billion. 
C)  $4,500 billion. 
D)  $7,500 billion.

Question 16

Among the propositions of the Keynesian school of thought is

Accepted Answer

A)  economic policies are ineffective. 
B)  aggregate supply management is the key to a stable economy. 
C)  aggregate demand determines equilibrium output. 
D)  rational expectations. 
A)  economic policies are ineffective. 
B)  aggregate supply management is the key to a stable economy. 
C)  aggregate demand determines equilibrium output. 
D)  rational expectations.

Question 17

Refer to the information provided in Figure 17.2 below to answer the questions that follow.   Figure 17.2
-Refer to Figure 17.2. According to the ________ economists, under rational expectations an expected decrease in taxes would not change AD or AS.

Accepted Answer

A)  Keynesian 
B)  the new classical 
C)  monetarist 
D)  none of the above 
A)  Keynesian 
B)  the new classical 
C)  monetarist 
D)  none of the above

Question 18

Data suggests that the tax cuts of the 1980s significantly decreased the supply of labor in the United States.

Accepted Answer

A) True 
 B)False

Question 19

Increasing government spending is a contractionary Keynesian economic policy.

Accepted Answer

A) True 
 B)False

Question 20

Velocity will be ________ if the demand for money with respect to the interest rate is perfectly elastic.

Accepted Answer

A)  negative 
B)  constant 
C)  variable 
D)  zero 
A)  negative 
B)  constant 
C)  variable 
D)  zero

Exam 17: Alternative Views in Macroeconomics

Empirical evidence suggests that from 1960 until 2007, the velocity of money had, on average, been

The equation Y = f(P - Pe) represents the

A problem with comparing macroeconomic models is that

If nominal GDP is $300 billion and the velocity is 3, the stock of money is $900 billion.

If GDP increases and the stock of money does not change, the income velocity of money will increase.

If the demand for money depends on the ________ and the velocity is not constant, then the quantity theory of money ________.

New classical macroeconomics developed from the

The leading spokesperson for monetarism was

Those who believe in the rational expectations hypothesis advocate ________ policy intervention.

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

Related to the Economics in Practice on p. 325: Surveys by the bank of England suggest that consumers tend to expect future inflation to be

If nominal GDP is $200 billion and the stock of money is $40 billion, the velocity is 5.

If the equation for the ________ is looked on as a demand-for-money equation, then the demand for money depends on nominal income but not the interest rate.

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 velocity of money is 3. If nominal GDP is $1,500 billion then the stock of money is

Among the propositions of the Keynesian school of thought is

Refer to the information provided in Figure 17.2 below to answer the questions that follow. Figure 17.2 -Refer to Figure 17.2. According to the ________ economists, under rational expectations an expected decrease in taxes would not change AD or AS.

Data suggests that the tax cuts of the 1980s significantly decreased the supply of labor in the United States.

Increasing government spending is a contractionary Keynesian economic policy.

Velocity will be ________ if the demand for money with respect to the interest rate is perfectly elastic.

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

Money, the Federal Reserve, and the Interest Rate

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

Policy Effects and Cost 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 Economies

Critical Thinking About Research

Filters

The equation Y = f(P - P^e) represents the

If the demand for money depends on the and the velocity is not constant, then the quantity theory of money .