Question 1

A scatter diagram of money growth rates and inflation rates from 1982 to 2010 indicates

Accepted Answer

A)  a clear direct relationship between money growth and inflation. 
B)  a clear indirect relationship between money growth and inflation. 
C)  no clear relationship between money growth rates and inflation. 
D)  that inflation is always and everywhere a monetary phenomenon. 
A)  a clear direct relationship between money growth and inflation. 
B)  a clear indirect relationship between money growth and inflation. 
C)  no clear relationship between money growth rates and inflation. 
D)  that inflation is always and everywhere a monetary phenomenon.

Question 2

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

Accepted Answer

A)  The Fed's policies cannot be targeted at only one sector of the economy. 
B)  Price changes for one asset or one industry cannot have a substantial impact on the entire economy. 
C)  The FDIC rather than the Fed is responsible for recognizing bad lending practices. 
D)  all of the above 
A)  The Fed's policies cannot be targeted at only one sector of the economy. 
B)  Price changes for one asset or one industry cannot have a substantial impact on the entire economy. 
C)  The FDIC rather than the Fed is responsible for recognizing bad lending practices. 
D)  all of the above

Question 3

During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had

Accepted Answer

A)  increased and the Treasury interest rate had risen. 
B)  increased and the Treasury interest rate had fallen. 
C)  decreased and the Treasury interest rate had risen. 
D)  decreased and the Treasury interest rate had fallen. 
A)  increased and the Treasury interest rate had risen. 
B)  increased and the Treasury interest rate had fallen. 
C)  decreased and the Treasury interest rate had risen. 
D)  decreased and the Treasury interest rate had fallen.

Question 4

The speed with which money circulates through the economy is called the

Accepted Answer

A)  oversimplified multiplier. 
B)  velocity of circulation. 
C)  exchange rate. 
D)  money multiplier. 
A)  oversimplified multiplier. 
B)  velocity of circulation. 
C)  exchange rate. 
D)  money multiplier.

Question 5

Which of the following is an example of a company whose stock showed evidence of a price bubble?

Accepted Answer

A)  Facebook 
B)  Google 
C)  Amazon 
D)  all of the above 
A)  Facebook 
B)  Google 
C)  Amazon 
D)  all of the above

Question 6

Advocates of fixed rules believe that politicians focus more on re-election than on sound policy.

Accepted Answer

A) True 
 B)False

Question 7

More economists adopted monetarism in the early 1990s.

Accepted Answer

A) True 
 B)False

Question 8

If the velocity of circulation is 10 and the money supply is $250,the value of transactions will be $25.

Accepted Answer

A) True 
 B)False

Question 9

In the second quarter of 1995,the following values were observed: real GDP = 4,359.3 billion; GDP Deflator = 325.1; and M1 = 989.5.What is the value of velocity?

Accepted Answer

A)  32.51 
B)  24.31 
C)  14.32 
D)  2.31 
A)  32.51 
B)  24.31 
C)  14.32 
D)  2.31

Question 10

Which of the following policies would a Keynesian expect to produce the largest decrease in income?

Accepted Answer

A)  a reduction in government spending of $100 billion 
B)  a decrease in transfer payments of $100 billion 
C)  an increase in government spending of $100 billion 
D)  a tax increase of $100 billion 
A)  a reduction in government spending of $100 billion 
B)  a decrease in transfer payments of $100 billion 
C)  an increase in government spending of $100 billion 
D)  a tax increase of $100 billion

Question 11

During the financial crisis of 2007-2009,both fiscal and monetary policy turned more expansionary.

Accepted Answer

A) True 
 B)False

Question 12

The subprime mortgage bubble featured ____ leverage and the technology stock bubble featured ____ leverage.

Accepted Answer

A)  significant; significant 
B)  significant; limited 
C)  limited; significant 
D)  limited; limited 
A)  significant; significant 
B)  significant; limited 
C)  limited; significant 
D)  limited; limited

Question 13

When something happens to the economy,monetarists ask two questions:

Accepted Answer

A)  What does this do to government spending,and what does it do to tax revenues? 
B)  What does this do to real GDP,and what does it do to the price level? 
C)  What does this do to investment spending,and what does it do to net exports? 
D)  What does this do to the money supply,and what does it do to velocity? 
A)  What does this do to government spending,and what does it do to tax revenues? 
B)  What does this do to real GDP,and what does it do to the price level? 
C)  What does this do to investment spending,and what does it do to net exports? 
D)  What does this do to the money supply,and what does it do to velocity?

Question 14

What is the effect on velocity if payments are made more often?

Accepted Answer

A)  It will decrease. 
B)  It will increase. 
C)  It will remain constant. 
D)  Velocity is unrelated to payments. 
A)  It will decrease. 
B)  It will increase. 
C)  It will remain constant. 
D)  Velocity is unrelated to payments.

Question 15

As we approached the end of the millennium,many economic crackpots advised citizens to hold large quantities of cash in anticipation of Y2K disasters.What effect would this have had on velocity if many people had been foolish enough to follow this advice?

Accepted Answer

A)  It would have decreased. 
B)  It would have increased. 
C)  It would have remained constant. 
D)  Velocity is unrelated to cash balances. 
A)  It would have decreased. 
B)  It would have increased. 
C)  It would have remained constant. 
D)  Velocity is unrelated to cash balances.

Question 16

The velocity of circulation is the number of times per year a dollar is spent.

Accepted Answer

A) True 
 B)False

Question 17

The differences between monetarist and Keynesian theories are more apparent than real.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following best describes the assumption that monetarists make regarding velocity?

Accepted Answer

A)  It is fairly predictable in the short run and certainly in the long run. 
B)  It is not possible to predict velocity in the short or long run. 
C)  It is variable in the long run but predictable in the short run. 
D)  It is constant in the long run but variable in the short run. 
A)  It is fairly predictable in the short run and certainly in the long run. 
B)  It is not possible to predict velocity in the short or long run. 
C)  It is variable in the long run but predictable in the short run. 
D)  It is constant in the long run but variable in the short run.

Question 19

It is ____ to identify an asset bubble before it bursts ____ to identify an asset bubble after it bursts.

Accepted Answer

A)  simple; and also simple 
B)  simple; but difficult 
C)  difficult; but simple 
D)  difficult; and also difficult 
A)  simple; and also simple 
B)  simple; but difficult 
C)  difficult; but simple 
D)  difficult; and also difficult

Question 20

Although asset price bubbles seem obvious after the fact,it is much more difficult to draw such a conclusion before the fact.

Accepted Answer

A) True 
 B)False

A scatter diagram of money growth rates and inflation rates from 1982 to 2010 indicates

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had

The speed with which money circulates through the economy is called the

Which of the following is an example of a company whose stock showed evidence of a price bubble?

Advocates of fixed rules believe that politicians focus more on re-election than on sound policy.

More economists adopted monetarism in the early 1990s.

If the velocity of circulation is 10 and the money supply is $250,the value of transactions will be $25.

In the second quarter of 1995,the following values were observed: real GDP = 4,359.3 billion; GDP Deflator = 325.1; and M₁ = 989.5.What is the value of velocity?

Which of the following policies would a Keynesian expect to produce the largest decrease in income?

During the financial crisis of 2007-2009,both fiscal and monetary policy turned more expansionary.

The subprime mortgage bubble featured leverage and the technology stock bubble featured leverage.

When something happens to the economy,monetarists ask two questions:

What is the effect on velocity if payments are made more often?

As we approached the end of the millennium,many economic crackpots advised citizens to hold large quantities of cash in anticipation of Y2K disasters.What effect would this have had on velocity if many people had been foolish enough to follow this advice?

The velocity of circulation is the number of times per year a dollar is spent.

The differences between monetarist and Keynesian theories are more apparent than real.

Which of the following best describes the assumption that monetarists make regarding velocity?

It is to identify an asset bubble before it bursts to identify an asset bubble after it bursts.

Although asset price bubbles seem obvious after the fact,it is much more difficult to draw such a conclusion before the fact.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 15: The Debate Over Monetary and Fiscal Policy

A scatter diagram of money growth rates and inflation rates from 1982 to 2010 indicates

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had

The speed with which money circulates through the economy is called the

Which of the following is an example of a company whose stock showed evidence of a price bubble?

Advocates of fixed rules believe that politicians focus more on re-election than on sound policy.

More economists adopted monetarism in the early 1990s.

If the velocity of circulation is 10 and the money supply is $250,the value of transactions will be $25.

In the second quarter of 1995,the following values were observed: real GDP = 4,359.3 billion; GDP Deflator = 325.1; and M1 = 989.5.What is the value of velocity?

Which of the following policies would a Keynesian expect to produce the largest decrease in income?

During the financial crisis of 2007-2009,both fiscal and monetary policy turned more expansionary.

The subprime mortgage bubble featured ____ leverage and the technology stock bubble featured ____ leverage.

When something happens to the economy,monetarists ask two questions:

What is the effect on velocity if payments are made more often?

As we approached the end of the millennium,many economic crackpots advised citizens to hold large quantities of cash in anticipation of Y2K disasters.What effect would this have had on velocity if many people had been foolish enough to follow this advice?

The velocity of circulation is the number of times per year a dollar is spent.

The differences between monetarist and Keynesian theories are more apparent than real.

Which of the following best describes the assumption that monetarists make regarding velocity?

It is ____ to identify an asset bubble before it bursts ____ to identify an asset bubble after it bursts.

Although asset price bubbles seem obvious after the fact,it is much more difficult to draw such a conclusion before the fact.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

In the second quarter of 1995,the following values were observed: real GDP = 4,359.3 billion; GDP Deflator = 325.1; and M₁ = 989.5.What is the value of velocity?

The subprime mortgage bubble featured leverage and the technology stock bubble featured leverage.

It is to identify an asset bubble before it bursts to identify an asset bubble after it bursts.