Question 1

Which year is often described as the worst year of the Great Depression?

Accepted Answer

A)  1913 
B)  1933 
C)  1953 
D)  1973 
A)  1913 
B)  1933 
C)  1953 
D)  1973

Question 2

The beginning of a recession is declared by the:

Accepted Answer

A)  National Bureau of Economic Research. 
B)  Treasury Department. 
C)  Fed. 
D)  president. 
A)  National Bureau of Economic Research. 
B)  Treasury Department. 
C)  Fed. 
D)  president.

Question 3

According to supply-side economics, tax cuts:

Accepted Answer

A)  cause dangerous budget deficits. 
B)  unfairly sacrifice equity to efficiency. 
C)  increase incentives to work and save and cause increases in potential output. 
D)  increase output by directly increasing aggregate demand. 
A)  cause dangerous budget deficits. 
B)  unfairly sacrifice equity to efficiency. 
C)  increase incentives to work and save and cause increases in potential output. 
D)  increase output by directly increasing aggregate demand.

Question 4

Use the following to answer questions:  
-(Figure: Fiscal Policy and the End of the Great Depression) Refer to Figure: Fiscal Policy and the End of the Great Depression. The period from 1933 through 1936 would seem to indicate that in the short run a moderate level of government deficit spending can _____ the unemployment rate.

Accepted Answer

A)  reduce 
B)  increase 
C)  not affect 
D)  eliminate 
A)  reduce 
B)  increase 
C)  not affect 
D)  eliminate

Question 5

According to the classical model of the price level, the short-run aggregate supply curve is:

Accepted Answer

A)  flat. 
B)  negatively sloped. 
C)  vertical. 
D)  unstable. 
A)  flat. 
B)  negatively sloped. 
C)  vertical. 
D)  unstable.

Question 6

The recommendation that a decrease in taxes will alleviate a recessionary gap is consistent with _____ macroeconomics.

Accepted Answer

A)  classical 
B)  Keynesian 
C)  monetarist 
D)  Great Moderation consensus 
A)  classical 
B)  Keynesian 
C)  monetarist 
D)  Great Moderation consensus

Question 7

Opponents of quantitative easing argued that the _____ monetary policy would cause _____.

Accepted Answer

A)  contractionary; unemployment 
B)  expansionary; inflation 
C)  contractionary; inflation 
D)  expansionary; unemployment 
A)  contractionary; unemployment 
B)  expansionary; inflation 
C)  contractionary; inflation 
D)  expansionary; unemployment

Question 8

According to the theory of rational expectations, individuals will respond to expansionary monetary policy by predicting:

Accepted Answer

A)  a lower rate of inflation. 
B)  a higher rate of inflation. 
C)  no change in the rate of inflation. 
D)  incorrectly what will happen to the price level and employment. 
A)  a lower rate of inflation. 
B)  a higher rate of inflation. 
C)  no change in the rate of inflation. 
D)  incorrectly what will happen to the price level and employment.

Question 9

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

Accepted Answer

A) True 
 B)False

Question 10

Classical economics is based primarily on the works of John Maynard Keynes.

Accepted Answer

A) True 
 B)False

Question 11

The monetary policy rule suggests that:

Accepted Answer

A)  we should follow the rules set by the Fed. 
B)  the Fed should follow the rules set by Congress. 
C)  the interest rate should grow at a slow and steady pace. 
D)  the money supply should grow at a slow and steady pace. 
A)  we should follow the rules set by the Fed. 
B)  the Fed should follow the rules set by Congress. 
C)  the interest rate should grow at a slow and steady pace. 
D)  the money supply should grow at a slow and steady pace.

Question 12

Economists today generally believe that fiscal policy should be the primary tool for stabilizing the economy.

Accepted Answer

A) True 
 B)False

Question 13

The measurement of business cycles was pioneered by:

Accepted Answer

A)  Ragnar Frisch. 
B)  John Maynard Keynes. 
C)  Wesley Mitchell. 
D)  Andrew Mellon. 
A)  Ragnar Frisch. 
B)  John Maynard Keynes. 
C)  Wesley Mitchell. 
D)  Andrew Mellon.

Question 14

During the Great Recession, policy makers were not as worried as usual about the lags associated with discretionary fiscal policy because:

Accepted Answer

A)  the severity of the recession led Congress to pledge to pass a bipartisan spending package immediately. 
B)  businesses had pledged to respond quickly to the lower interest rates. 
C)  the economy was likely to be depressed for a long time, so the lags were not likely to be as destabilizing as usual. 
D)  the financial sector of the economy was not affected by the recession and was ready to make loans to consumers and businesses. 
A)  the severity of the recession led Congress to pledge to pass a bipartisan spending package immediately. 
B)  businesses had pledged to respond quickly to the lower interest rates. 
C)  the economy was likely to be depressed for a long time, so the lags were not likely to be as destabilizing as usual. 
D)  the financial sector of the economy was not affected by the recession and was ready to make loans to consumers and businesses.

Question 15

Use the following to answer questions:  
-(Figure: Classical Versus Keynesian Macroeconomics) Refer to Figure: Classical Versus Keynesian Macroeconomics. According to the Keynesian view, if this economy shifts from AD1 to AD2 because of a large decline in investment spending by businesses, the price level will _____, and real GDP will _____.

Accepted Answer

A)  increase; decrease 
B)  not change; increase 
C)  increase; not change 
D)  decrease; decrease 
A)  increase; decrease 
B)  not change; increase 
C)  increase; not change 
D)  decrease; decrease

Question 16

The Great Moderation consensus among macroeconomists is that fiscal policy should be used sparingly because:

Accepted Answer

A)  monetary policy is always more effective. 
B)  it always requires higher taxes. 
C)  lags in adjusting to fiscal policy can make it counterproductive. 
D)  of the risk of government waste. 
A)  monetary policy is always more effective. 
B)  it always requires higher taxes. 
C)  lags in adjusting to fiscal policy can make it counterproductive. 
D)  of the risk of government waste.

Question 17

The school of economics that predominated prior to the Great Depression was the:

Accepted Answer

A)  business cycle theorists. 
B)  classical school. 
C)  post-Keynesian school. 
D)  Marxists. 
A)  business cycle theorists. 
B)  classical school. 
C)  post-Keynesian school. 
D)  Marxists.

Question 18

Which statement about new classical macroeconomics is FALSE?

Accepted Answer

A)  It returned to the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output. 
B)  It challenged traditional arguments about the slope of the short-run aggregate supply curve based on the concept of rational expectations. 
C)  It suggested that changes in productivity cause economic fluctuations. 
D)  It embraced the Keynesian notion that changes in aggregate demand may affect aggregate output in the short run. 
A)  It returned to the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output. 
B)  It challenged traditional arguments about the slope of the short-run aggregate supply curve based on the concept of rational expectations. 
C)  It suggested that changes in productivity cause economic fluctuations. 
D)  It embraced the Keynesian notion that changes in aggregate demand may affect aggregate output in the short run.

Question 19

A stimulus is an expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 20

Keynesian theory argued that monetary policy could be very effective during a depression.

Accepted Answer

A) True 
 B)False

Which year is often described as the worst year of the Great Depression?

The beginning of a recession is declared by the:

According to supply-side economics, tax cuts:

According to the classical model of the price level, the short-run aggregate supply curve is:

The recommendation that a decrease in taxes will alleviate a recessionary gap is consistent with _____ macroeconomics.

Opponents of quantitative easing argued that the _ monetary policy would cause _.

According to the theory of rational expectations, individuals will respond to expansionary monetary policy by predicting:

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

Classical economics is based primarily on the works of John Maynard Keynes.

The monetary policy rule suggests that:

Economists today generally believe that fiscal policy should be the primary tool for stabilizing the economy.

The measurement of business cycles was pioneered by:

During the Great Recession, policy makers were not as worried as usual about the lags associated with discretionary fiscal policy because:

The Great Moderation consensus among macroeconomists is that fiscal policy should be used sparingly because:

The school of economics that predominated prior to the Great Depression was the:

Which statement about new classical macroeconomics is FALSE?

A stimulus is an expansionary fiscal policy.

Keynesian theory argued that monetary policy could be very effective during a depression.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Filters

Exam 17: Macroeconomics: Events and Ideas

Which year is often described as the worst year of the Great Depression?

The beginning of a recession is declared by the:

According to supply-side economics, tax cuts:

According to the classical model of the price level, the short-run aggregate supply curve is:

The recommendation that a decrease in taxes will alleviate a recessionary gap is consistent with _____ macroeconomics.

Opponents of quantitative easing argued that the _____ monetary policy would cause _____.

According to the theory of rational expectations, individuals will respond to expansionary monetary policy by predicting:

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

Classical economics is based primarily on the works of John Maynard Keynes.

The monetary policy rule suggests that:

Economists today generally believe that fiscal policy should be the primary tool for stabilizing the economy.

The measurement of business cycles was pioneered by:

During the Great Recession, policy makers were not as worried as usual about the lags associated with discretionary fiscal policy because:

The Great Moderation consensus among macroeconomists is that fiscal policy should be used sparingly because:

The school of economics that predominated prior to the Great Depression was the:

Which statement about new classical macroeconomics is FALSE?

A stimulus is an expansionary fiscal policy.

Keynesian theory argued that monetary policy could be very effective during a depression.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

International Macroeconomics

Filters

Opponents of quantitative easing argued that the _ monetary policy would cause _.