Question 1

In the equation of exchange,velocity of money increases when

Accepted Answer

A)  Y increases without any changes in P and M. 
B)  Y falls without any changes in P. 
C)  M increases without any changes in P and Y. 
D)  P falls without any changes in Y and M. 
A)  Y increases without any changes in P and M. 
B)  Y falls without any changes in P. 
C)  M increases without any changes in P and Y. 
D)  P falls without any changes in Y and M.

Question 2

Which of the following will tend to increase velocity?

Accepted Answer

A)  a decrease in the number of payments 
B)  a decrease in inflation 
C)  an increase in interest rates 
D)  an increase in the money supply 
E)  All of the above. 
A)  a decrease in the number of payments 
B)  a decrease in inflation 
C)  an increase in interest rates 
D)  an increase in the money supply 
E)  All of the above.

Question 3

The objective of the Fed and the government is to

Accepted Answer

A)  prevent asset bubbles by recognizing them in real time. 
B)  mitigate the consequences of asset bubbles by recognizing them in real time. 
C)  prevent asset bubbles by recognizing bad lending practices. 
D)  mitigate the consequences of asset bubbles by recognizing bad lending practices. 
A)  prevent asset bubbles by recognizing them in real time. 
B)  mitigate the consequences of asset bubbles by recognizing them in real time. 
C)  prevent asset bubbles by recognizing bad lending practices. 
D)  mitigate the consequences of asset bubbles by recognizing bad lending practices.

Question 4

Velocity is calculated as nominal GDP/money stock.

Accepted Answer

A) True 
 B)False

Question 5

A factor increasing the popularity of monetarism in the late 1970s was the

Accepted Answer

A)  ease with which the Fed controlled the money supply. 
B)  excellent performance of the economy in the 1970s. 
C)  the fear of budget deficits and growing federal debt. 
D)  the predictable behavior of velocity until about 1980. 
A)  ease with which the Fed controlled the money supply. 
B)  excellent performance of the economy in the 1970s. 
C)  the fear of budget deficits and growing federal debt. 
D)  the predictable behavior of velocity until about 1980.

Question 6

The equation of exchange states that the money value of GDP must be equal to the product of the money stock times its velocity.

Accepted Answer

A) True 
 B)False

Question 7

The equation of exchange is M × Y = P × V.

Accepted Answer

A) True 
 B)False

Question 8

Economists who focus their analyses on the effects of a change in the money supply and velocity are called

Accepted Answer

A)  realists. 
B)  Keynesians. 
C)  supply-siders. 
D)  monetarists. 
A)  realists. 
B)  Keynesians. 
C)  supply-siders. 
D)  monetarists.

Question 9

As the price level rises,the demand for money

Accepted Answer

A)  decreases because interest rates also increase. 
B)  decreases because consumers buy fewer goods and services. 
C)  increases because more money is needed for each transaction. 
D)  increases because investment spending will also increase. 
A)  decreases because interest rates also increase. 
B)  decreases because consumers buy fewer goods and services. 
C)  increases because more money is needed for each transaction. 
D)  increases because investment spending will also increase.

Question 10

If the aggregate supply curve is flat,

Accepted Answer

A)  contractionary fiscal or monetary policy will reduce inflation with little effect on real GDP. 
B)  contractionary fiscal or monetary policy will cause significantly less inflation. 
C)  expansionary fiscal or monetary policy will add significantly to real GDP will little effect on inflation. 
D)  expansionary fiscal or monetary policy will add little to real GDP but will increase inflation significantly. 
A)  contractionary fiscal or monetary policy will reduce inflation with little effect on real GDP. 
B)  contractionary fiscal or monetary policy will cause significantly less inflation. 
C)  expansionary fiscal or monetary policy will add significantly to real GDP will little effect on inflation. 
D)  expansionary fiscal or monetary policy will add little to real GDP but will increase inflation significantly.

Question 11

The rapid speed with which the stimulus bill passed through both houses of Congress and was signed by the President could be used as an argument for

Accepted Answer

A)  activist fiscal policy. 
B)  activist monetary policy. 
C)  expansionary fiscal policy. 
D)  contractionary monetary policy. 
A)  activist fiscal policy. 
B)  activist monetary policy. 
C)  expansionary fiscal policy. 
D)  contractionary monetary policy.

Question 12

​Regarding government intervention in the economy,which of the following statements is not true?

Accepted Answer

A)  ​Liberals tend to favor intervention. 
B)  ​Conservatives are inclined to adhere to fixed rules. 
C)  ​There is no guarantee that government intervention will have the desired effect. 
D)  ​The effect of government actions on interest rates and spending is unknown. 
E)  ​All of the above are true. 
A)  ​Liberals tend to favor intervention. 
B)  ​Conservatives are inclined to adhere to fixed rules. 
C)  ​There is no guarantee that government intervention will have the desired effect. 
D)  ​The effect of government actions on interest rates and spending is unknown. 
E)  ​All of the above are true.

Question 13

The fiscal stimulus bills of 2001,2008,and 2009 were unusual examples of rapid implementation of fiscal policy.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is correct?

Accepted Answer

A)  Policy lags are normally much shorter for fiscal policy than for monetary policy. 
B)  Congress usually makes major fiscal policy changes in a fairly short period of time. 
C)  Expenditure lags are much longer for investment,the main way in which monetary policy affects aggregate demand. 
D)  Monetary policy affects aggregate demand more quickly than fiscal policy,such as tax or government spending changes. 
A)  Policy lags are normally much shorter for fiscal policy than for monetary policy. 
B)  Congress usually makes major fiscal policy changes in a fairly short period of time. 
C)  Expenditure lags are much longer for investment,the main way in which monetary policy affects aggregate demand. 
D)  Monetary policy affects aggregate demand more quickly than fiscal policy,such as tax or government spending changes.

Question 15

The inability of Congress to pass a stimulus package after September 11,2001,could be used as an argument for

Accepted Answer

A)  activist fiscal policy. 
B)  activist monetary policy. 
C)  expansionary fiscal policy. 
D)  contractionary monetary policy. 
A)  activist fiscal policy. 
B)  activist monetary policy. 
C)  expansionary fiscal policy. 
D)  contractionary monetary policy.

Question 16

Expansionary monetary policy will decrease interest rates and decrease the velocity of money.

Accepted Answer

A) True 
 B)False

Question 17

The substantial fluctuations in velocity make the equation of exchange more useful in predicting changes in nominal GDP.

Accepted Answer

A) True 
 B)False

Question 18

The quantity theory of money assumes that

Accepted Answer

A)  velocity varies inversely with interest rates. 
B)  if velocity equals six,the Fed can increase nominal GDP by 30 percent if it increases the money supply by 5 percent. 
C)  changes in the money supply affect output but not prices. 
D)  changes in velocity are so small that velocity can be considered constant. 
A)  velocity varies inversely with interest rates. 
B)  if velocity equals six,the Fed can increase nominal GDP by 30 percent if it increases the money supply by 5 percent. 
C)  changes in the money supply affect output but not prices. 
D)  changes in velocity are so small that velocity can be considered constant.

Question 19

In a typical year,how accurate are forecasts of inflation and real GDP?

Accepted Answer

A)  within 8-10 percentage points 
B)  within 2-3 percentage points 
C)  within 3/4 of 1 percentage point 
D)  within 1/4 of 1 percentage point 
A)  within 8-10 percentage points 
B)  within 2-3 percentage points 
C)  within 3/4 of 1 percentage point 
D)  within 1/4 of 1 percentage point

Question 20

If credit cards were suddenly ruled illegal and were no longer used,the most likely effect would be a decrease in the

Accepted Answer

A)  demand for money. 
B)  level of cash balances. 
C)  average checking account balance. 
D)  velocity of circulation. 
A)  demand for money. 
B)  level of cash balances. 
C)  average checking account balance. 
D)  velocity of circulation.

In the equation of exchange,velocity of money increases when

Which of the following will tend to increase velocity?

The objective of the Fed and the government is to

Velocity is calculated as nominal GDP/money stock.

A factor increasing the popularity of monetarism in the late 1970s was the

The equation of exchange states that the money value of GDP must be equal to the product of the money stock times its velocity.

The equation of exchange is M × Y = P × V.

Economists who focus their analyses on the effects of a change in the money supply and velocity are called

As the price level rises,the demand for money

If the aggregate supply curve is flat,

The rapid speed with which the stimulus bill passed through both houses of Congress and was signed by the President could be used as an argument for

Regarding government intervention in the economy,which of the following statements is not true?

The fiscal stimulus bills of 2001,2008,and 2009 were unusual examples of rapid implementation of fiscal policy.

Which of the following is correct?

The inability of Congress to pass a stimulus package after September 11,2001,could be used as an argument for

Expansionary monetary policy will decrease interest rates and decrease the velocity of money.

The substantial fluctuations in velocity make the equation of exchange more useful in predicting changes in nominal GDP.

The quantity theory of money assumes that

In a typical year,how accurate are forecasts of inflation and real GDP?

If credit cards were suddenly ruled illegal and were no longer used,the most likely effect would be a decrease in the

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

In the equation of exchange,velocity of money increases when

Which of the following will tend to increase velocity?

The objective of the Fed and the government is to

Velocity is calculated as nominal GDP/money stock.

A factor increasing the popularity of monetarism in the late 1970s was the

The equation of exchange states that the money value of GDP must be equal to the product of the money stock times its velocity.

The equation of exchange is M × Y = P × V.

Economists who focus their analyses on the effects of a change in the money supply and velocity are called

As the price level rises,the demand for money

If the aggregate supply curve is flat,

The rapid speed with which the stimulus bill passed through both houses of Congress and was signed by the President could be used as an argument for

​Regarding government intervention in the economy,which of the following statements is not true?

The fiscal stimulus bills of 2001,2008,and 2009 were unusual examples of rapid implementation of fiscal policy.

Which of the following is correct?

The inability of Congress to pass a stimulus package after September 11,2001,could be used as an argument for

Expansionary monetary policy will decrease interest rates and decrease the velocity of money.

The substantial fluctuations in velocity make the equation of exchange more useful in predicting changes in nominal GDP.

The quantity theory of money assumes that

In a typical year,how accurate are forecasts of inflation and real GDP?

If credit cards were suddenly ruled illegal and were no longer used,the most likely effect would be a decrease in the

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

Regarding government intervention in the economy,which of the following statements is not true?