Question 1

An advantage of macroeconomic policy based on pre-specified rules might be that ________.

Accepted Answer

A)  it is easier to stick to long-run considerations and avoid bad long-run outcomes 
B)  it is more flexible than discretionary policy 
C)  it is easier to adapt to short-run changes and avoid a bad short-run outcome 
D)  all of the above 
E)  none of the above

Question 2

Opponents of rule-determined policies might point out that ________.

Accepted Answer

A)  markets self-correct quickly so rules become obsolete 
B)  unforeseen changes in the structure of the economy may make a rule obsolete 
C)  policies that kick in at the wrong time may lead to undesirable results 
D)  all of the above 
E)  none of the above

Question 3

The Federal Reserve ________.

Accepted Answer

A)  is the U.S. central bank 
B)  controls the amount of money in the economy 
C)  sets interest rates 
D)  all of the above 
E)  none of the above

Question 4

Since World War II the U.S. ________.

Accepted Answer

A)  has seen a substantial decrease in the inflation rate 
B)  has seen frequent periods of deflation 
C)  has not seen a significant increase in trend unemployment 
D)  has seen real GDP grow slower, on average, than in the pre-war period 
E)  none of the above

Question 5

Recent events have convinced many that reforms are needed in the financial system to discourage speculation, in which people seek to make money by merely buying and selling pre-existing things, rather than by making new or better or, at least, more things. Describe how speculation might have macroeconomic consequences that justify government prohibition or regulation .

Accepted Answer

The answer of Recent events have convinced many that reforms...

Question 6

Economists apply the term "Great Inflation" to which decade?

Accepted Answer

A)  1930s 
B)  1940s 
C)  1950s 
D)  1960s 
E)  1970s

Question 7

An increase in interest rates might be an example of a ________ policy for the purpose of ________.

Accepted Answer

A)  monetary; reducing inflation 
B)  monetary; lowering unemployment 
C)  monetary; increasing the quantity of money 
D)  fiscal; reducing inflation 
E)  fiscal; lowering unemployment

Question 8

Consider an economic policy regime in which rules are well-known but frequently ignored. Which of these statements is true?

Accepted Answer

A)  This regime might work in the long-run, but is unlikely to produce good outcomes in the short run. 
B)  Policymakers in this regime might find that rules are being broken with increasing frequency. 
C)  This regime is more likely to be supported by nonactivist, than by activist policymakers. 
D)  This regime is more likely to result in high unemployment than in high inflation. 
E)  This regime is unlikely to produce large government budget deficits.

Question 9

Raising taxes and cutting spending are examples of ________.

Accepted Answer

A)  fiscal policy tightening 
B)  fiscal policy expansion 
C)  monetary policy tightening 
D)  monetary policy expansion 
E)  none of the above

Question 10

Macroeconomic models particularly focus on the following three economic data series.

Accepted Answer

A)  real GDP, the unemployment rate, and inflation 
B)  endogenous variables, exogenous variables, and GDP per person 
C)  inflation, recessions, and business cycles 
D)  real GDP, the employment rate, and interest rates 
E)  real GDP, the unemployment rate, and depressions

Question 11

Which of these economies has the highest saving rate?

Accepted Answer

A)  Greece 
B)  China 
C)  United States 
D)  Brazil 
E)  Japan

Question 12

In the 2000s, the U.S. economy had both a ________ and a ________.

Accepted Answer

A)  large trade deficit; large capital inflow 
B)  large trade surplus; large capital inflow 
C)  large trade deficit; high saving rate 
D)  large capital inflow; high saving rate 
E)  large capital inflow; small government budget deficit

Question 13

The long-standing debate over rules versus discretion in macroeconomics centers on the following statement ________.

Accepted Answer

A)  "discretionary policy can lead to bad long-run outcomes but rules lack flexibility in the short-run" 
B)  "the speed with which the self-correcting mechanism in the economy acts is in question" 
C)  "the speed with which unemployment tends to disappear is debatable" 
D)  all of the above 
E)  none of the above

Question 14

Macroeconomics is the study of ________ while microeconomics studies ________.

Accepted Answer

A)  large biological systems; political implications of nanotechnology 
B)  the overall economic activity and prices; an individual firm, household, or market 
C)  an individual firm; the overall economic performance of a nation 
D)  the overall economic performance of the world; the economy of a single country 
E)  firm behavior; market behavior

Question 15

Nonactivists propose doing nothing in the face of economic hardship because ________.

Accepted Answer

A)  activist policies can kick in at the wrong time and be counterproductive 
B)  "markets self-correct pretty rapidly anyway" 
C)  in the face of high unemployment, activist policies would likely lead to surges in inflation 
D)  all of the above 
E)  none of the above

Question 16

Looking at the U.S. personal saving rate over the last sixty years, we can say that ________.

Accepted Answer

A)  it has always been low 
B)  Americans used to spend a lot more than they have in recent years 
C)  Americans used to save a lot more than they have in recent years 
D)  it has always been fairly high 
E)  Americans spend more when concerned about their future earnings

Question 17

If a macroeconomist studying the causes of unemployment asserts that a particular change in technology will cause the rate of unemployment to decrease by ten percent, then this macroeconomist is at which step in the process of developing an economic model?

Accepted Answer

A)  Identify the endogenous variables. 
B)  Develop a model. 
C)  Compare the model with the data. 
D)  Identify the exogenous variables. 
E)  Conduct prediction and policy analysis.

Question 18

What explains the rise in income in the U.S. between 1900 and 2010?

Accepted Answer

A)  business cycles 
B)  economic growth 
C)  recessions 
D)  depressions 
E)  the purchasing power of the dollar

Question 19

Since World War II the U.S. ________.

Accepted Answer

A)  has seen a substantial decrease in the inflation rate 
B)  has seen frequent periods of deflation 
C)  has seen a significant increase in trend unemployment 
D)  has seen real GDP grow as fast, on average, as in the pre-war period 
E)  none of the above

Question 20

The unemployment rate measures, at a point in time, the ________.

Accepted Answer

A)  percentage of workers who do not have a job 
B)  percentage of workers who do not have a job but are looking for work 
C)  percentage of workers who stop working 
D)  percentage of workers who are looking for work 
E)  none of the above

Exam 1: The Policy and Practice of Macroeconomics

An advantage of macroeconomic policy based on pre-specified rules might be that ________.

Opponents of rule-determined policies might point out that ________.

The Federal Reserve ________.

Since World War II the U.S. ________.

Economists apply the term "Great Inflation" to which decade?

An increase in interest rates might be an example of a policy for the purpose of .

Consider an economic policy regime in which rules are well-known but frequently ignored. Which of these statements is true?

Raising taxes and cutting spending are examples of ________.

Macroeconomic models particularly focus on the following three economic data series.

Which of these economies has the highest saving rate?

In the 2000s, the U.S. economy had both a and a .

The long-standing debate over rules versus discretion in macroeconomics centers on the following statement ________.

Macroeconomics is the study of while microeconomics studies .

Nonactivists propose doing nothing in the face of economic hardship because ________.

Looking at the U.S. personal saving rate over the last sixty years, we can say that ________.

If a macroeconomist studying the causes of unemployment asserts that a particular change in technology will cause the rate of unemployment to decrease by ten percent, then this macroeconomist is at which step in the process of developing an economic model?

What explains the rise in income in the U.S. between 1900 and 2010?

Since World War II the U.S. ________.

The unemployment rate measures, at a point in time, the ________.