Question 1

Supply-side policy is designed to

Accepted Answer

A) Move the economy from a point inside the production possibilities curve to a point on the curve and shift the aggregate supply curve to the left. 
B) Move the economy from a point inside the production possibilities curve to a point on the curve and shift the aggregate supply curve to the right. 
C) Shift the production possibilities curve outward and shift the aggregate supply curve to the left. 
D) Shift the production possibilities curve outward and shift the long-run aggregate supply curve to the right. 
A) Move the economy from a point inside the production possibilities curve to a point on the curve and shift the aggregate supply curve to the left. 
B) Move the economy from a point inside the production possibilities curve to a point on the curve and shift the aggregate supply curve to the right. 
C) Shift the production possibilities curve outward and shift the aggregate supply curve to the left. 
D) Shift the production possibilities curve outward and shift the long-run aggregate supply curve to the right.

Question 2

Describe how delays can prevent economic policy from being successful.

Accepted Answer

There is a period of time between when a

Question 3

One World View article is titled "Comparative Macro Performance." According to the text,of the six countries listed,________ experienced the fastest growth in real GDP.

Accepted Answer

A) Canada 
B) Japan 
C) The United States 
D) The United Kingdom 
A) Canada 
B) Japan 
C) The United States 
D) The United Kingdom

Question 4

Which of the following is a supply-side policy action to eliminate a recession?

Accepted Answer

A) Increased investment in infrastructure. 
B) The purchase of securities in the open market by the Fed. 
C) An increase in the marginal tax rate. 
D) A decrease in the reserve requirement. 
A) Increased investment in infrastructure. 
B) The purchase of securities in the open market by the Fed. 
C) An increase in the marginal tax rate. 
D) A decrease in the reserve requirement.

Question 5

Since 1946 the U.S.economy has been marked by

Accepted Answer

A) Greater stability due to a hands-off policy by the government. 
B) A 46% macro failure rate. 
C) Less stability due to the discretionary policies of the government. 
D) A 32% macro failure rate. 
A) Greater stability due to a hands-off policy by the government. 
B) A 46% macro failure rate. 
C) Less stability due to the discretionary policies of the government. 
D) A 32% macro failure rate.

Question 6

Which of the following is a Keynesian approach for dealing with a recession?

Accepted Answer

A) Raise interest rates. 
B) Increase government expenditure. 
C) Raise taxes. 
D) Increase supply incentives for producers. 
A) Raise interest rates. 
B) Increase government expenditure. 
C) Raise taxes. 
D) Increase supply incentives for producers.

Question 7

The index of leading indicators is a factor that

Accepted Answer

A) We can observe today that is logically linked to future economic performance. 
B) Generally moves in a positive direction before recessions. 
C) Is published weekly and provides forecasts of the economy three to six months in advance. 
D) Is a mathematical summary of the economy's past performance. 
A) We can observe today that is logically linked to future economic performance. 
B) Generally moves in a positive direction before recessions. 
C) Is published weekly and provides forecasts of the economy three to six months in advance. 
D) Is a mathematical summary of the economy's past performance.

Question 8

If the data collected by policy makers overstate inflation,this is an example of

Accepted Answer

A) A goal conflict. 
B) A measurement problem. 
C) A design problem. 
D) An implementation problem. 
A) A goal conflict. 
B) A measurement problem. 
C) A design problem. 
D) An implementation problem.

Question 9

Supply-side policy to reduce inflation would focus on

Accepted Answer

A) Decreasing the money supply. 
B) Decreasing the interest rates to encourage investment. 
C) Increasing the incentives to produce goods and services. 
D) Raising marginal tax rates to reduce aggregate demand. 
A) Decreasing the money supply. 
B) Decreasing the interest rates to encourage investment. 
C) Increasing the incentives to produce goods and services. 
D) Raising marginal tax rates to reduce aggregate demand.

Question 10

The natural rate of unemployment is the

Accepted Answer

A) Rate that would occur if the structural deficit were zero. 
B) Rate that corresponds to 3 percent inflation on the Phillips curve. 
C) Long-term rate determined by structural forces in labor and product markets. 
D) Amount of cyclical unemployment minus the anticipated rate of unemployment. 
A) Rate that would occur if the structural deficit were zero. 
B) Rate that corresponds to 3 percent inflation on the Phillips curve. 
C) Long-term rate determined by structural forces in labor and product markets. 
D) Amount of cyclical unemployment minus the anticipated rate of unemployment.

Question 11

Which of the following explains why Congress or the president might hesitate to use restrictive fiscal policy in an election year?

Accepted Answer

A) Monetary policy is always more effective. 
B) Voters might become unemployed. 
C) Fiscal policy is too complex. 
D) Fiscal year appropriations are not under the authority of Congress. 
A) Monetary policy is always more effective. 
B) Voters might become unemployed. 
C) Fiscal policy is too complex. 
D) Fiscal year appropriations are not under the authority of Congress.

Question 12

Fiscal and monetary policy can be used to change the price level but not output when the aggregate

Accepted Answer

A) Supply curve is horizontal. 
B) Supply curve is vertical. 
C) Supply curve is upward-sloping but not vertical. 
D) Demand curve is vertical. 
A) Supply curve is horizontal. 
B) Supply curve is vertical. 
C) Supply curve is upward-sloping but not vertical. 
D) Demand curve is vertical.

Question 13

According to Figure 18.2,a shift from AS2 to AS3 is most likely to result from

Accepted Answer

A) An increase in government spending. 
B) An increase in government regulation. 
C) A decrease in the reserve requirement. 
D) A decrease in the marginal tax rate. 
A) An increase in government spending. 
B) An increase in government regulation. 
C) A decrease in the reserve requirement. 
D) A decrease in the marginal tax rate.

Question 14

Many economic policies fail for all of the following reasons except

Accepted Answer

A) It is difficult to accurately measure economic performance. 
B) Economic forecasts may be inaccurate. 
C) There are significant lags in response to policy implementation. 
D) Politicians and economists work together in formulating policies. 
A) It is difficult to accurately measure economic performance. 
B) Economic forecasts may be inaccurate. 
C) There are significant lags in response to policy implementation. 
D) Politicians and economists work together in formulating policies.

Question 15

Which of the following would be most likely stated by an economist who advocates for fine-tuning?

Accepted Answer

A) Political disagreements make economic policies difficult to implement. 
B) Measuring economic performance is complicated because of the size of the economy. 
C) Designing economic policies that please everyone is complex. 
D) Changing economic policies in response to market changes is reasonable. 
A) Political disagreements make economic policies difficult to implement. 
B) Measuring economic performance is complicated because of the size of the economy. 
C) Designing economic policies that please everyone is complex. 
D) Changing economic policies in response to market changes is reasonable.

Question 16

Which of the following is true about the U.S.economy from 1992 to 1999?

Accepted Answer

A) It performed above average based on most measures. 
B) It had the lowest unemployment levels of the century. 
C) It experienced zero inflation most years. 
D) It experienced sluggish growth in GDP most years. 
A) It performed above average based on most measures. 
B) It had the lowest unemployment levels of the century. 
C) It experienced zero inflation most years. 
D) It experienced sluggish growth in GDP most years.

Question 17

Which of the following groups believes that the money supply should be expanded at a steady,predictable rate to ensure a natural rate of unemployment?

Accepted Answer

A) New classical economists. 
B) Keynesians. 
C) Supply-siders. 
D) Monetarists. 
A) New classical economists. 
B) Keynesians. 
C) Supply-siders. 
D) Monetarists.

Question 18

One In the News article is titled "Fed Chief Sees No Recession." According to the text,Bernanke cited all of the following responsible for sluggish growth except

Accepted Answer

A) High energy prices. 
B) A weaker dollar. 
C) Rising unemployment. 
D) Declining home values. 
A) High energy prices. 
B) A weaker dollar. 
C) Rising unemployment. 
D) Declining home values.

Question 19

Which of the following would a Keynesian macro model include to describe the effect of a tax cut?

Accepted Answer

A) Labor supply and production responses. 
B) Interest rate rises. 
C) Multiplier spending responses. 
D) A positive relationship between interest rates and investment. 
A) Labor supply and production responses. 
B) Interest rate rises. 
C) Multiplier spending responses. 
D) A positive relationship between interest rates and investment.

Question 20

Which of the following efforts did the Clinton administration embrace?

Accepted Answer

A) Expansion of the money supply. 
B) "New Direction" tax increases and spending cuts 
C) Reduction in immigration of highly skilled workers. 
D) Increase in taxes on capital gains. 
A) Expansion of the money supply. 
B) "New Direction" tax increases and spending cuts 
C) Reduction in immigration of highly skilled workers. 
D) Increase in taxes on capital gains.

Exam 18: Theory Versus Reality

Supply-side policy is designed to

Describe how delays can prevent economic policy from being successful.

One World View article is titled "Comparative Macro Performance." According to the text,of the six countries listed,________ experienced the fastest growth in real GDP.

Which of the following is a supply-side policy action to eliminate a recession?

Since 1946 the U.S.economy has been marked by

Which of the following is a Keynesian approach for dealing with a recession?

The index of leading indicators is a factor that

If the data collected by policy makers overstate inflation,this is an example of

Supply-side policy to reduce inflation would focus on

The natural rate of unemployment is the

Which of the following explains why Congress or the president might hesitate to use restrictive fiscal policy in an election year?

Fiscal and monetary policy can be used to change the price level but not output when the aggregate

According to Figure 18.2,a shift from AS2 to AS3 is most likely to result from

Many economic policies fail for all of the following reasons except

Which of the following would be most likely stated by an economist who advocates for fine-tuning?

Which of the following is true about the U.S.economy from 1992 to 1999?

Which of the following groups believes that the money supply should be expanded at a steady,predictable rate to ensure a natural rate of unemployment?

One In the News article is titled "Fed Chief Sees No Recession." According to the text,Bernanke cited all of the following responsible for sluggish growth except

Which of the following would a Keynesian macro model include to describe the effect of a tax cut?

Which of the following efforts did the Clinton administration embrace?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters

According to Figure 18.2,a shift from AS₂ to AS₃ is most likely to result from