Question 1

From 1945 until 1973, the U.S. economy experienced ________.

Accepted Answer

A)  rapid inflation 
B)  no major recessions or depressions 
C)  minimal interaction with the global economy 
D)  all of the above 
E)  none of the above 
A)  rapid inflation 
B)  no major recessions or depressions 
C)  minimal interaction with the global economy 
D)  all of the above 
E)  none of the above B

Question 2

Under monopolistic competition ________.

Accepted Answer

A)  prices are flexible, because producers can change them as often as they wish 
B)  prices are flexible, because producers can never set a price other than the market price 
C)  prices are flexible, because producers adopt Keynesian policies 
D)  all of the above 
E)  none of the above 
A)  prices are flexible, because producers can change them as often as they wish 
B)  prices are flexible, because producers can never set a price other than the market price 
C)  prices are flexible, because producers adopt Keynesian policies 
D)  all of the above 
E)  none of the above E

Question 3

GDP is a good proxy for the business cycle itself since ________.

Accepted Answer

A)  its real consumption spending component is procyclical and coincident 
B)  its real investment spending component is procyclical and coincident 
C)  it typically goes up in a boom and down in a recession 
D)  all of the above 
E)  none of the above 
A)  its real consumption spending component is procyclical and coincident 
B)  its real investment spending component is procyclical and coincident 
C)  it typically goes up in a boom and down in a recession 
D)  all of the above 
E)  none of the above D

Question 4

The U.S. economy of the 1970s is typically referred to as ________.

Accepted Answer

A)  "The Great Depression" 
B)  "The Great Inflation" 
C)  "The Great Moderation" 
D)  all of the above 
E)  none of the above 
A)  "The Great Depression" 
B)  "The Great Inflation" 
C)  "The Great Moderation" 
D)  all of the above 
E)  none of the above

Question 5

Staggered price setting ________.

Accepted Answer

A)  leads to frequent price adjustments 
B)  occurs when firms fail to consider the behavior of their competitors 
C)  is generally illegal 
D)  all of the above 
E)  none of the above 
A)  leads to frequent price adjustments 
B)  occurs when firms fail to consider the behavior of their competitors 
C)  is generally illegal 
D)  all of the above 
E)  none of the above

Question 6

Describe how Keynesian economics is a cyclical phenomenon. Is it leading, lagging, or coincident? Procyclical or countercyclical?

Accepted Answer

John Maynard Keynes presented his ideas

Question 7

During the period from 1970 to the present, the U.S. economy experienced a Great Inflation, a Great Moderation, and a Great Recession. How does this sequence illustrate the concept of a "business cycle"?

Accepted Answer

The sequence runs from bad economic cond

Question 8

Menu costs are an important source of price stickiness because ________.

Accepted Answer

A)  printing menus is costly 
B)  putting items "on sale" reduces firms' revenue 
C)  frequent price changes may lead to losing customers 
D)  all of the above 
E)  none of the above 
A)  printing menus is costly 
B)  putting items "on sale" reduces firms' revenue 
C)  frequent price changes may lead to losing customers 
D)  all of the above 
E)  none of the above

Question 9

In the 1970s, the U.S. economy ________.

Accepted Answer

A)  grew at a faster pace than in the previous decade 
B)  experienced low inflation 
C)  experienced increases in unemployment 
D)  all of the above 
E)  none of the above 
A)  grew at a faster pace than in the previous decade 
B)  experienced low inflation 
C)  experienced increases in unemployment 
D)  all of the above 
E)  none of the above

Question 10

According to the flexible price framework ________.

Accepted Answer

A)  an increase in inflation raises real savings 
B)  an increase in the money supply raises real output 
C)  an increase in inflation lowers real investment 
D)  all of the above 
E)  none of the above 
A)  an increase in inflation raises real savings 
B)  an increase in the money supply raises real output 
C)  an increase in inflation lowers real investment 
D)  all of the above 
E)  none of the above

Question 11

Keynesians believe ________.

Accepted Answer

A)  that economies move quickly to their long run equilibrium levels 
B)  that the government should pursue active policies to stabilize economic fluctuations 
C)  that the long run is more important than short-run fluctuations 
D)  all of the above 
E)  none of the above 
A)  that economies move quickly to their long run equilibrium levels 
B)  that the government should pursue active policies to stabilize economic fluctuations 
C)  that the long run is more important than short-run fluctuations 
D)  all of the above 
E)  none of the above

Question 12

Keynesian economists ________.

Accepted Answer

A)  observe that prices respond slowly to changes in supply and demand 
B)  believe that the classical dichotomy does not hold in the short run 
C)  believe that monetary policy affect aggregate output and the real interest rate 
D)  all of the above 
E)  none of the above 
A)  observe that prices respond slowly to changes in supply and demand 
B)  believe that the classical dichotomy does not hold in the short run 
C)  believe that monetary policy affect aggregate output and the real interest rate 
D)  all of the above 
E)  none of the above

Question 13

Why is the credit spread countercyclical and coincident?

Accepted Answer

The credit spread is the interest rate o

Question 14

The years from 1933 to 1937 are notable for ________.

Accepted Answer

A)  high unemployment, despite rapid growth of real output 
B)  low unemployment, despite sluggish output growth 
C)  persistent deflation, despite rising unemployment 
D)  the creation of the Federal Reserve System 
E)  none of the above 
A)  high unemployment, despite rapid growth of real output 
B)  low unemployment, despite sluggish output growth 
C)  persistent deflation, despite rising unemployment 
D)  the creation of the Federal Reserve System 
E)  none of the above

Question 15

Empirical evidence shows that prices are sticky ________.

Accepted Answer

A)  in all sectors of the economy 
B)  in hardly any sectors of the economy 
C)  except in response to changes within individual markets 
D)  all of the above 
E)  none of the above 
A)  in all sectors of the economy 
B)  in hardly any sectors of the economy 
C)  except in response to changes within individual markets 
D)  all of the above 
E)  none of the above

Question 16

What did the U.S. business cycles in the early 1890s and early 1930s have in common?

Accepted Answer

A)  rapid industrialization 
B)  persistently high inflation 
C)  high consumer confidence 
D)  all of the above 
E)  none of the above 
A)  rapid industrialization 
B)  persistently high inflation 
C)  high consumer confidence 
D)  all of the above 
E)  none of the above

Question 17

Keynesian economists ________.

Accepted Answer

A)  observe that prices are perfectly flexible 
B)  believe that the classical dichotomy never holds 
C)  believe that only the interaction between savings and investment affects the real interest rate 
D)  all of the above 
E)  none of the above 
A)  observe that prices are perfectly flexible 
B)  believe that the classical dichotomy never holds 
C)  believe that only the interaction between savings and investment affects the real interest rate 
D)  all of the above 
E)  none of the above

Question 18

If events in a single country cause its economic activity to move up or down through a business cycle, what difference(s) might it make that the economy is closely integrated with other economies in the world?

Accepted Answer

One consequence of global integration is

Question 19

The years from 1945 to 1973 are notable for ________.

Accepted Answer

A)  a Great Moderation 
B)  generally low inflation 
C)  brief, but severe, recessions 
D)  all of the above 
E)  none of the above 
A)  a Great Moderation 
B)  generally low inflation 
C)  brief, but severe, recessions 
D)  all of the above 
E)  none of the above

Question 20

An increase in the price level that leads to no expansion of economic activity ________.

Accepted Answer

A)  is consistent with classical models 
B)  implies that there has been no change in the money supply 
C)  is a strictly short-run phenomenon 
D)  all of the above 
E)  none of the above 
A)  is consistent with classical models 
B)  implies that there has been no change in the money supply 
C)  is a strictly short-run phenomenon 
D)  all of the above 
E)  none of the above

Exam 8: Business Cycles: an Introduction

From 1945 until 1973, the U.S. economy experienced ________.

Under monopolistic competition ________.

GDP is a good proxy for the business cycle itself since ________.

The U.S. economy of the 1970s is typically referred to as ________.

Staggered price setting ________.

Describe how Keynesian economics is a cyclical phenomenon. Is it leading, lagging, or coincident? Procyclical or countercyclical?

During the period from 1970 to the present, the U.S. economy experienced a Great Inflation, a Great Moderation, and a Great Recession. How does this sequence illustrate the concept of a "business cycle"?

Menu costs are an important source of price stickiness because ________.

In the 1970s, the U.S. economy ________.

According to the flexible price framework ________.

Keynesians believe ________.

Keynesian economists ________.

Why is the credit spread countercyclical and coincident?

The years from 1933 to 1937 are notable for ________.

Empirical evidence shows that prices are sticky ________.

What did the U.S. business cycles in the early 1890s and early 1930s have in common?

Keynesian economists ________.

If events in a single country cause its economic activity to move up or down through a business cycle, what difference(s) might it make that the economy is closely integrated with other economies in the world?

The years from 1945 to 1973 are notable for ________.

An increase in the price level that leads to no expansion of economic activity ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, Policy, and Institutions

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, Employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

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