Question 1

Advocates of discretionary policy make these criticisms of the economy's "self-correcting" mechanism:

Accepted Answer

A)  ​it is slow 
B)  ​it is not very reliable 
C)  ​it works only when supplemented by automatic stabilizers 
D)  ​All of the above are correct. 
E)  ​a and b only are correct. 
A)  ​it is slow 
B)  ​it is not very reliable 
C)  ​it works only when supplemented by automatic stabilizers 
D)  ​All of the above are correct. 
E)  ​a and b only are correct.

Question 2

In utilizing unconventional monetary policy in 2009,the Federal Reserve purchased

Accepted Answer

A)  real estate worth more than $2 trillion. 
B)  $800 billion in Treasury bills. 
C)  over $1 trillion in mortgage backed securities. 
D)  $600 billion in long-term Treasury bonds. 
A)  real estate worth more than $2 trillion. 
B)  $800 billion in Treasury bills. 
C)  over $1 trillion in mortgage backed securities. 
D)  $600 billion in long-term Treasury bonds.

Question 3

The equation of exchange can be written as

Accepted Answer

A)  Velocity × Nominal GDP = Price Index 
B)  Real GDP × Price Index = Money supply 
C)  Money supply × Price Index = Real GDP 
D)  Money supply × Velocity = Nominal GDP 
A)  Velocity × Nominal GDP = Price Index 
B)  Real GDP × Price Index = Money supply 
C)  Money supply × Price Index = Real GDP 
D)  Money supply × Velocity = Nominal GDP

Question 4

During the financial crisis of 2007-2009,the proper policy response was

Accepted Answer

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

Question 5

Believers in fixed rules maintain that

Accepted Answer

A)  with accurate forecasts,we can see inflation coming at least one year ahead of time. 
B)  the length of stabilization lags is not important because fiscal policy actions are taken quickly and the economy feels the effect on aggregate demand quickly. 
C)  we should forget about discretionary policy and put the economy on autopilot,relying instead on automatic stabilizers and the economy's self-correcting mechanism. 
D)  the economy's self-correcting mechanism is slow and not very reliable,even with automatic stabilizers. 
A)  with accurate forecasts,we can see inflation coming at least one year ahead of time. 
B)  the length of stabilization lags is not important because fiscal policy actions are taken quickly and the economy feels the effect on aggregate demand quickly. 
C)  we should forget about discretionary policy and put the economy on autopilot,relying instead on automatic stabilizers and the economy's self-correcting mechanism. 
D)  the economy's self-correcting mechanism is slow and not very reliable,even with automatic stabilizers.

Question 6

The principal factor determining velocity is the

Accepted Answer

A)  level of income. 
B)  frequency with which paychecks are distributed. 
C)  frequency with which taxes are paid. 
D)  growth rate of real output. 
A)  level of income. 
B)  frequency with which paychecks are distributed. 
C)  frequency with which taxes are paid. 
D)  growth rate of real output.

Question 7

If financial news broadcasts reported that inflation was likely to rise significantly next year,what would most likely happen to the velocity of circulation?

Accepted Answer

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

Question 8

As the interest rate increases,the velocity of money will increase as well.

Accepted Answer

A) True 
 B)False

Question 9

Policy lags are typically much shorter for monetary policy than for fiscal policy.

Accepted Answer

A) True 
 B)False

Question 10

Whether prices or real GDP exhibit the greater response to increased aggregate demand depends on the degree of capacity utilization in the economy.

Accepted Answer

A) True 
 B)False

Question 11

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 actions could do more harm than good. 
B)  It is nearly impossible to determine if a bubble exists before it bursts. 
C)  The Fed's policies cannot be targeted at only one sector of the economy. 
D)  all of the above 
A)  The Fed's actions could do more harm than good. 
B)  It is nearly impossible to determine if a bubble exists before it bursts. 
C)  The Fed's policies cannot be targeted at only one sector of the economy. 
D)  all of the above

Question 12

The "Taylor rule" is an example of a fixed rule for making monetary policy.

Accepted Answer

A) True 
 B)False

Question 13

How do critics of stabilization policy view the "political business cycle"?

Accepted Answer

A)  They suggest shorter election cycles would improve stabilization. 
B)  They believe that politicians cause economic instability,due mainly to the election schedule. 
C)  They believe that the Fed can resist political pressure and stabilize the economy. 
D)  They believe that politicians do not know enough economics in order to stabilize the economy. 
A)  They suggest shorter election cycles would improve stabilization. 
B)  They believe that politicians cause economic instability,due mainly to the election schedule. 
C)  They believe that the Fed can resist political pressure and stabilize the economy. 
D)  They believe that politicians do not know enough economics in order to stabilize the economy.

Question 14

The increased use of PayPal will decrease the velocity of money.

Accepted Answer

A) True 
 B)False

Question 15

How do critics of discretionary stabilization policy view frequent changes in spending and tax policy?

Accepted Answer

A)  The changes make the economy smoother,although it may not look that way to individual firms. 
B)  The changes make life more difficult and hectic for Congress and the Fed. 
C)  The changes smooth out the business cycle,making planning easier. 
D)  The changes cause more instability in the economy and make planning more difficult. 
A)  The changes make the economy smoother,although it may not look that way to individual firms. 
B)  The changes make life more difficult and hectic for Congress and the Fed. 
C)  The changes smooth out the business cycle,making planning easier. 
D)  The changes cause more instability in the economy and make planning more difficult.

Question 16

The velocity of circulation is the

Accepted Answer

A)  speed at which the multiplier takes effect. 
B)  speed at which money circulates. 
C)  speed at which tax cuts get spent. 
D)  rate at which money creation takes place. 
A)  speed at which the multiplier takes effect. 
B)  speed at which money circulates. 
C)  speed at which tax cuts get spent. 
D)  rate at which money creation takes place.

Question 17

What is the shape of the AS in the short run and the long run?

Accepted Answer

A)  AS is relatively flat in both the short and long run. 
B)  AS is relatively flat in the short run,but steeper in the long run. 
C)  AS is relatively steep in both the short and long run. 
D)  AS is relatively steep in the short run,but flatter in the long run. 
A)  AS is relatively flat in both the short and long run. 
B)  AS is relatively flat in the short run,but steeper in the long run. 
C)  AS is relatively steep in both the short and long run. 
D)  AS is relatively steep in the short run,but flatter in the long run.

Question 18

Explain the importance of the shape of supply curve for undertaking stabilization policies.

Accepted Answer

If the aggregate supply curve is flat,ex

Question 19

On a steeply sloped aggregate supply curve,monetary policy will affect primarily output.

Accepted Answer

A) True 
 B)False

Question 20

The difference between the equation of exchange and the quantity theory of money is that the

Accepted Answer

A)  equation of exchange assumes that the level of real GDP is constant. 
B)  quantity theory of money assumes that the Fed has no control over the money supply. 
C)  equation of exchange assumes that the level of nominal GDP is constant. 
D)  quantity theory of money assumes that velocity is virtually constant. 
A)  equation of exchange assumes that the level of real GDP is constant. 
B)  quantity theory of money assumes that the Fed has no control over the money supply. 
C)  equation of exchange assumes that the level of nominal GDP is constant. 
D)  quantity theory of money assumes that velocity is virtually constant.

Advocates of discretionary policy make these criticisms of the economy's "self-correcting" mechanism:

In utilizing unconventional monetary policy in 2009,the Federal Reserve purchased

The equation of exchange can be written as

During the financial crisis of 2007-2009,the proper policy response was

Believers in fixed rules maintain that

The principal factor determining velocity is the

If financial news broadcasts reported that inflation was likely to rise significantly next year,what would most likely happen to the velocity of circulation?

As the interest rate increases,the velocity of money will increase as well.

Policy lags are typically much shorter for monetary policy than for fiscal policy.

Whether prices or real GDP exhibit the greater response to increased aggregate demand depends on the degree of capacity utilization in the economy.

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

The "Taylor rule" is an example of a fixed rule for making monetary policy.

How do critics of stabilization policy view the "political business cycle"?

The increased use of PayPal will decrease the velocity of money.

How do critics of discretionary stabilization policy view frequent changes in spending and tax policy?

The velocity of circulation is the

What is the shape of the AS in the short run and the long run?

Explain the importance of the shape of supply curve for undertaking stabilization policies.

On a steeply sloped aggregate supply curve,monetary policy will affect primarily output.

The difference between the equation of exchange and the quantity theory of money is that 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

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Exam 15: The Debate Over Monetary and Fiscal Policy

Advocates of discretionary policy make these criticisms of the economy's "self-correcting" mechanism:

In utilizing unconventional monetary policy in 2009,the Federal Reserve purchased

The equation of exchange can be written as

During the financial crisis of 2007-2009,the proper policy response was

Believers in fixed rules maintain that

The principal factor determining velocity is the

If financial news broadcasts reported that inflation was likely to rise significantly next year,what would most likely happen to the velocity of circulation?

As the interest rate increases,the velocity of money will increase as well.

Policy lags are typically much shorter for monetary policy than for fiscal policy.

Whether prices or real GDP exhibit the greater response to increased aggregate demand depends on the degree of capacity utilization in the economy.

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

The "Taylor rule" is an example of a fixed rule for making monetary policy.

How do critics of stabilization policy view the "political business cycle"?

The increased use of PayPal will decrease the velocity of money.

How do critics of discretionary stabilization policy view frequent changes in spending and tax policy?

The velocity of circulation is the

What is the shape of the AS in the short run and the long run?

Explain the importance of the shape of supply curve for undertaking stabilization policies.

On a steeply sloped aggregate supply curve,monetary policy will affect primarily output.

The difference between the equation of exchange and the quantity theory of money is that 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