Question 1

What do most economists think is the most accurate statement about velocity?

Accepted Answer

A)  It is fairly constant in the short run,but varies considerably in the long run,complicating predictions about nominal GDP. 
B)  M1 velocity is more stable in the short run than M2 velocity,and it has been a superior tool in predicting changes in nominal GDP. 
C)  It is not constant in the short run,and predictions about nominal GDP have not fared well. 
D)  M2 velocity has been less stable than M1 velocity,but both are reliable enough to make accurate predictions about changes in nominal GDP. 
A)  It is fairly constant in the short run,but varies considerably in the long run,complicating predictions about nominal GDP. 
B)  M1 velocity is more stable in the short run than M2 velocity,and it has been a superior tool in predicting changes in nominal GDP. 
C)  It is not constant in the short run,and predictions about nominal GDP have not fared well. 
D)  M2 velocity has been less stable than M1 velocity,but both are reliable enough to make accurate predictions about changes in nominal GDP.

Question 2

During the financial crisis of 2007-2009,why did the Federal Reserve begin to utilize various types of unconventional monetary policy?

Accepted Answer

A)  the federal funds rate had already been increased as much as possible 
B)  the discount rate had already been increased as much as possible 
C)  the federal funds rate had already been reduced to zero 
D)  the discount rate had already been reduced to zero 
A)  the federal funds rate had already been increased as much as possible 
B)  the discount rate had already been increased as much as possible 
C)  the federal funds rate had already been reduced to zero 
D)  the discount rate had already been reduced to zero

Question 3

Once the federal funds rate is reduced to zero,conventional restrictive monetary policy is no longer an option.

Accepted Answer

A) True 
 B)False

Question 4

The question of whether the government should intervene at all in economic matters is entirely political.

Accepted Answer

A) True 
 B)False

Question 5

Many economists maintain that

Accepted Answer

A)  the aggregate supply curve is nearly horizontal at low levels of real GDP. 
B)  the aggregate supply curve is nearly vertical at very high levels of real GDP. 
C)  any change in aggregate demand will have most of its effect on output when economic activity is low but on prices when the economy is near full employment. 
D)  All of the above are correct. 
A)  the aggregate supply curve is nearly horizontal at low levels of real GDP. 
B)  the aggregate supply curve is nearly vertical at very high levels of real GDP. 
C)  any change in aggregate demand will have most of its effect on output when economic activity is low but on prices when the economy is near full employment. 
D)  All of the above are correct.

Question 6

The relationship between money growth rates and inflation between 1982 and 2010 helps explain why,by the 1990s,most economists had

Accepted Answer

A)  adopted the monetarist explanation of inflation. 
B)  adopted a rules-only approach to monetary policy. 
C)  become more convinced of the monetary causes of inflation. 
D)  abandoned monetarism as the primary explanation of inflation. 
A)  adopted the monetarist explanation of inflation. 
B)  adopted a rules-only approach to monetary policy. 
C)  become more convinced of the monetary causes of inflation. 
D)  abandoned monetarism as the primary explanation of inflation.

Question 7

Which of the following was the result of the Federal Reserve's purchase of mortgage-backed securities in 2009?

Accepted Answer

A)  MBS interest rates declined,home mortgage rates declined,and the Fed turned a profit on these operations. 
B)  MBS interest rates declined,home mortgage rates declined,but the Fed had a loss on these operations. 
C)  MBS interest rates increased,home mortgage rates declined,and the Fed turned a profit on these operations 
D)  MBS interest rates increased,home mortgage rates increased,but the Fed had a loss on these operations 
A)  MBS interest rates declined,home mortgage rates declined,and the Fed turned a profit on these operations. 
B)  MBS interest rates declined,home mortgage rates declined,but the Fed had a loss on these operations. 
C)  MBS interest rates increased,home mortgage rates declined,and the Fed turned a profit on these operations 
D)  MBS interest rates increased,home mortgage rates increased,but the Fed had a loss on these operations

Question 8

The inflation rate in January of 2009 as measured by the CPI was zero.If inflation were to remain at zero for a long period,what would be the effect on velocity?

Accepted Answer

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

Question 9

Which is likely to be larger,the velocity of M1 or M2?

Accepted Answer

A)  M1,because M2 is a larger number. 
B)  M2,because M1 is a larger number. 
C)  The velocities of both are approximately equal. 
D)  The numbers of velocity switch in relative size. 
A)  M1,because M2 is a larger number. 
B)  M2,because M1 is a larger number. 
C)  The velocities of both are approximately equal. 
D)  The numbers of velocity switch in relative size.

Question 10

Historically,most harmful bubbles are characterized by

Accepted Answer

A)  investment in stocks. 
B)  the sale of Treasury bills. 
C)  heaving borrowing. 
D)  reliance on technology. 
A)  investment in stocks. 
B)  the sale of Treasury bills. 
C)  heaving borrowing. 
D)  reliance on technology.

Question 11

Keynesian belief that the aggregate supply curve is relatively flat in the short run means that they expect their policies to cause

Accepted Answer

A)  small increases in output and much inflation. 
B)  small increases in output and little inflation. 
C)  large increases in output and little inflation. 
D)  large increases in output and much inflation. 
A)  small increases in output and much inflation. 
B)  small increases in output and little inflation. 
C)  large increases in output and little inflation. 
D)  large increases in output and much inflation.

Question 12

Which of the following is an example of active fiscal policy?

Accepted Answer

A)  Income tax revenues rise in an inflationary period. 
B)  Income tax revenues fall in a recession. 
C)  Congress passes a major tax increase in an inflationary period. 
D)  Unemployment benefits increase in a recession. 
A)  Income tax revenues rise in an inflationary period. 
B)  Income tax revenues fall in a recession. 
C)  Congress passes a major tax increase in an inflationary period. 
D)  Unemployment benefits increase in a recession.

Question 13

Treasury securities have ____ risk of default and mortgage-backed securities have ____ risk of default.

Accepted Answer

A)  no; no 
B)  no; some 
C)  some; no 
D)  some; some 
A)  no; no 
B)  no; some 
C)  some; no 
D)  some; some

Question 14

When the Fed increases the money supply,interest rates

Accepted Answer

A)  rise,causing velocity to fall. 
B)  fall,causing velocity to fall. 
C)  rise,causing velocity to rise. 
D)  fall,causing velocity to rise. 
A)  rise,causing velocity to fall. 
B)  fall,causing velocity to fall. 
C)  rise,causing velocity to rise. 
D)  fall,causing velocity to rise.

Question 15

The Fed's quick response to the threat to the economy after September 11,2001,makes a strong case for

Accepted Answer

A)  a rules-based monetary policy regime. 
B)  a discretionary-based monetary policy regime. 
C)  the superiority of fiscal policy. 
D)  the dominant role of Congress in activist policy. 
A)  a rules-based monetary policy regime. 
B)  a discretionary-based monetary policy regime. 
C)  the superiority of fiscal policy. 
D)  the dominant role of Congress in activist policy.

Question 16

A look at the historical data indicates that velocity for M1

Accepted Answer

A)  has been more variable than the velocity for M2,but both have been fairly constant for the past 65 years. 
B)  and M2 have both trended downward,but velocity for M2 has been more erratic than velocity for M11. 
C)  has been fairly constant for the past 65 years,but velocity for M2 has trended downward. 
D)  has trended upward in the past 65 years,but velocity for M2 has been more constant. 
A)  has been more variable than the velocity for M2,but both have been fairly constant for the past 65 years. 
B)  and M2 have both trended downward,but velocity for M2 has been more erratic than velocity for M11. 
C)  has been fairly constant for the past 65 years,but velocity for M2 has trended downward. 
D)  has trended upward in the past 65 years,but velocity for M2 has been more constant.

Question 17

If velocity is a constant,then the equation of exchange is an economic model.

Accepted Answer

A) True 
 B)False

Question 18

Monetarists maintain that

Accepted Answer

A)  the best way to study the economy is with the expenditure schedule. 
B)  control over the money supply implies control over real GDP. 
C)  velocity is not constant,but is fairly predictable. 
D)  All of the above are correct. 
A)  the best way to study the economy is with the expenditure schedule. 
B)  control over the money supply implies control over real GDP. 
C)  velocity is not constant,but is fairly predictable. 
D)  All of the above are correct.

Question 19

If the Fed's monetary policy causes a substantial decrease in interest rates,what is the most likely impact on velocity?

Accepted Answer

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

Question 20

Velocity can be calculated as the ratio of the value of transactions to

Accepted Answer

A)  the price level. 
B)  level of real GDP. 
C)  the money stock. 
D)  the inflation rate. 
A)  the price level. 
B)  level of real GDP. 
C)  the money stock. 
D)  the inflation rate.

What do most economists think is the most accurate statement about velocity?

During the financial crisis of 2007-2009,why did the Federal Reserve begin to utilize various types of unconventional monetary policy?

Once the federal funds rate is reduced to zero,conventional restrictive monetary policy is no longer an option.

The question of whether the government should intervene at all in economic matters is entirely political.

Many economists maintain that

The relationship between money growth rates and inflation between 1982 and 2010 helps explain why,by the 1990s,most economists had

Which of the following was the result of the Federal Reserve's purchase of mortgage-backed securities in 2009?

The inflation rate in January of 2009 as measured by the CPI was zero.If inflation were to remain at zero for a long period,what would be the effect on velocity?

Which is likely to be larger,the velocity of M1 or M2?

Historically,most harmful bubbles are characterized by

Keynesian belief that the aggregate supply curve is relatively flat in the short run means that they expect their policies to cause

Which of the following is an example of active fiscal policy?

Treasury securities have risk of default and mortgage-backed securities have risk of default.

When the Fed increases the money supply,interest rates

The Fed's quick response to the threat to the economy after September 11,2001,makes a strong case for

A look at the historical data indicates that velocity for M1

If velocity is a constant,then the equation of exchange is an economic model.

Monetarists maintain that

If the Fed's monetary policy causes a substantial decrease in interest rates,what is the most likely impact on velocity?

Velocity can be calculated as the ratio of the value of transactions to

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

What do most economists think is the most accurate statement about velocity?

During the financial crisis of 2007-2009,why did the Federal Reserve begin to utilize various types of unconventional monetary policy?

Once the federal funds rate is reduced to zero,conventional restrictive monetary policy is no longer an option.

The question of whether the government should intervene at all in economic matters is entirely political.

Many economists maintain that

The relationship between money growth rates and inflation between 1982 and 2010 helps explain why,by the 1990s,most economists had

Which of the following was the result of the Federal Reserve's purchase of mortgage-backed securities in 2009?

The inflation rate in January of 2009 as measured by the CPI was zero.If inflation were to remain at zero for a long period,what would be the effect on velocity?

Which is likely to be larger,the velocity of M1 or M2?

Historically,most harmful bubbles are characterized by

Keynesian belief that the aggregate supply curve is relatively flat in the short run means that they expect their policies to cause

Which of the following is an example of active fiscal policy?

Treasury securities have ____ risk of default and mortgage-backed securities have ____ risk of default.

When the Fed increases the money supply,interest rates

The Fed's quick response to the threat to the economy after September 11,2001,makes a strong case for

A look at the historical data indicates that velocity for M1

If velocity is a constant,then the equation of exchange is an economic model.

Monetarists maintain that

If the Fed's monetary policy causes a substantial decrease in interest rates,what is the most likely impact on velocity?

Velocity can be calculated as the ratio of the value of transactions to

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

Treasury securities have risk of default and mortgage-backed securities have risk of default.