Question 1

If income is $40 billion, the price level is 10, and the stock of money is $20 billion, what is the velocity of money?

Accepted Answer

A)  0.8 
B)  5 
C)  8 
D)  20 
A)  0.8 
B)  5 
C)  8 
D)  20

Question 2

Refer to the information provided in Figure 17.1 below to answer the questions that follow.   Figure 17.1
-Refer to Figure 17.1. If the economy is at a point such as C on the Laffer curve, a(n) ________ in tax rates will ________ tax revenue.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  change; not change 
A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  change; not change

Question 3

Refer to Figure 17.3. Suppose the economy is at Point C. According to the new classical theory, an anticipated decrease in aggregate demand

Accepted Answer

A)  moves the economy to Point A. 
B)  moves the economy to Point B. 
C)  leaves the economy at Point C. 
D)  moves the economy to Point D. 
A)  moves the economy to Point A. 
B)  moves the economy to Point B. 
C)  leaves the economy at Point C. 
D)  moves the economy to Point D.

Question 4

Which of the following schools of economic thought will recommend an expansionary fiscal policy to reduce the unemployment rate?

Accepted Answer

A)  the monetary schools 
B)  the classical school 
C)  the Keynesian school 
D)  the rational expectation school 
A)  the monetary schools 
B)  the classical school 
C)  the Keynesian school 
D)  the rational expectation school

Question 5

Most empirical data support the idea that money demand depends on the interest rate.

Accepted Answer

A) True 
 B)False

Question 6

If nominal GDP is $1.2 trillion, velocity is $1.2 trillion multiplied by the stock of money.

Accepted Answer

A) True 
 B)False

Question 7

John Maynard Keynes emphasized the problem that sticky wages may have on the economy.

Accepted Answer

A) True 
 B)False

Question 8

The new classical macroeconomists believe that people should form expectations by

Accepted Answer

A)  actually seeking to forecast the future. 
B)  assuming that the future will be like the past. 
C)  assuming that the future will be like the present. 
D)  overlooking information that allows them to make more accurate forecasts. 
A)  actually seeking to forecast the future. 
B)  assuming that the future will be like the past. 
C)  assuming that the future will be like the present. 
D)  overlooking information that allows them to make more accurate forecasts.

Question 9

Nearly $2 trillion was added to the national debt between 1983 and 1992.

Accepted Answer

A) True 
 B)False

Question 10

When expectations are rational, disequilibrium in the labor market would exist only temporarily as a result of unpredictable shocks in the economy.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Related to the Economics in Practice on p. 325: 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 13

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 14

According to the Laffer curve, an increase in the tax rate will decrease tax revenue

Accepted Answer

A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the 0% tax rate point on the curve. 
D)  no matter the location of the economy on the curve. 
A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the 0% tax rate point on the curve. 
D)  no matter the location of the economy on the curve.

Question 15

According to ________ economics, the government needs to focus on policies to stimulate supply.

Accepted Answer

A)  Keynesian 
B)  monetarist 
C)  supply-side 
D)  new classical 
A)  Keynesian 
B)  monetarist 
C)  supply-side 
D)  new classical

Question 16

It is difficult to test whether the velocity of money is constant over time because

Accepted Answer

A)  there has been very little variation in the money supply over time. 
B)  there may be a time lag between a change in the money supply and its effects on nominal GDP. 
C)  there is only one definition of the money supply. 
D)  it is difficult to measure the value of nominal GDP over time. 
A)  there has been very little variation in the money supply over time. 
B)  there may be a time lag between a change in the money supply and its effects on nominal GDP. 
C)  there is only one definition of the money supply. 
D)  it is difficult to measure the value of nominal GDP over time.

Question 17

A velocity of 1 means that money will not change hands during a particular year.

Accepted Answer

A) True 
 B)False

Question 18

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 19

According to the Laffer curve, a decrease in the tax rate will decrease tax revenue

Accepted Answer

A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the 100% tax rate point on the curve. 
D)  no matter the location of the economy on the curve. 
A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the 100% tax rate point on the curve. 
D)  no matter the location of the economy on the curve.

Question 20

According to the rational expectations hypothesis, the occurrence of unemployment is due to

Accepted Answer

A)  imperfect information. 
B)  unpredictable shocks. 
C)  downwardly rigid wages. 
D)  a deficient level of aggregate demand. 
A)  imperfect information. 
B)  unpredictable shocks. 
C)  downwardly rigid wages. 
D)  a deficient level of aggregate demand.

Exam 17: Alternative Views in Macroeconomics

If income is $40 billion, the price level is 10, and the stock of money is $20 billion, what is the velocity of money?

Refer to the information provided in Figure 17.1 below to answer the questions that follow. Figure 17.1 -Refer to Figure 17.1. If the economy is at a point such as C on the Laffer curve, a(n) ________ in tax rates will ________ tax revenue.

Refer to Figure 17.3. Suppose the economy is at Point C. According to the new classical theory, an anticipated decrease in aggregate demand

Which of the following schools of economic thought will recommend an expansionary fiscal policy to reduce the unemployment rate?

Most empirical data support the idea that money demand depends on the interest rate.

If nominal GDP is $1.2 trillion, velocity is $1.2 trillion multiplied by the stock of money.

John Maynard Keynes emphasized the problem that sticky wages may have on the economy.

The new classical macroeconomists believe that people should form expectations by

Nearly $2 trillion was added to the national debt between 1983 and 1992.

When expectations are rational, disequilibrium in the labor market would exist only temporarily as a result of unpredictable shocks in the economy.

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. 325: Surveys by the bank of England suggest that two important factors in influencing consumer perceptions of inflation are ________ and ________.

Monetarists believe that real output is determined by

According to the Laffer curve, an increase in the tax rate will decrease tax revenue

According to ________ economics, the government needs to focus on policies to stimulate supply.

It is difficult to test whether the velocity of money is constant over time because

A velocity of 1 means that money will not change hands during a particular year.

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

According to the Laffer curve, a decrease in the tax rate will decrease tax revenue

According to the rational expectations hypothesis, the occurrence of unemployment is due to

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

Refer to the information provided in Figure 17.1 below to answer the questions that follow. Figure 17.1 -Refer to Figure 17.1. If the economy is at a point such as C on the Laffer curve, a(n) in tax rates will tax revenue.

Related to the Economics in Practice on p. 325: Surveys by the bank of England suggest that two important factors in influencing consumer perceptions of inflation are and .