Question 1

If nominal GDP is $7,700 billion and M1 is $1,000 billion, then velocity is

Accepted Answer

A) 10.7. 
B) 7.7. 
C) 7.1. 
D) 7.0. 
A) 10.7. 
B) 7.7. 
C) 7.1. 
D) 7.0.

Question 2

In order to consider the equation of exchange an economic model, what must we assume?

Accepted Answer

A) Real GDP is a constant value. 
B) Changes in GDP cause changes in the money supply. 
C) The money supply is constant. 
D) Changes in velocity are small and predictable. 
A) Real GDP is a constant value. 
B) Changes in GDP cause changes in the money supply. 
C) The money supply is constant. 
D) Changes in velocity are small and predictable.

Question 3

The alternatives of the active versus passive view of stabilization policy are usually expressed as

Accepted Answer

A) fiscal policy versus monetary policy. 
B) internal versus external. 
C) present value versus future value. 
D) discretion versus rules. 
A) fiscal policy versus monetary policy. 
B) internal versus external. 
C) present value versus future value. 
D) discretion versus rules.

Question 4

In terms of the price-real GDP diagram, a given expansion of the money supply will have a greater effect on prices the

Accepted Answer

A) steeper the aggregate supply curve. 
B) flatter the aggregate supply curve. 
C) higher the initial price level. 
D) lower the initial price level. 
A) steeper the aggregate supply curve. 
B) flatter the aggregate supply curve. 
C) higher the initial price level. 
D) lower the initial price level.

Question 5

Attempts to keep the economy always within a hair's breadth of full employment is called

Accepted Answer

A) shock absorption. 
B) lagging. 
C) fine tuning. 
D) crowding out. 
A) shock absorption. 
B) lagging. 
C) fine tuning. 
D) crowding out.

Question 6

Contractionary fiscal policy would be most effective in decreasing inflation when

Accepted Answer

A) the marginal propensity to consume is low. 
B) investment spending is insensitive to interest rates. 
C) the economy has a high marginal tax rate. 
D) investment spending is sensitive to interest rates. 
A) the marginal propensity to consume is low. 
B) investment spending is insensitive to interest rates. 
C) the economy has a high marginal tax rate. 
D) investment spending is sensitive to interest rates.

Question 7

If nominal GDP is 8,100 billion florins and the money supply is 900 billion florins, the velocity of circulation is

Accepted Answer

A) 900.0. 
B) 90.0. 
C) 81.0. 
D) 9.0. 
E) 8.1. 
A) 900.0. 
B) 90.0. 
C) 81.0. 
D) 9.0. 
E) 8.1.

Question 8

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 these responses are correct. 
A) Facebook 
B) Google 
C) Amazon 
D) All of these responses are correct.

Question 9

Which of the following was not a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

Accepted Answer

A) The large budget deficit constrained fiscal policy. 
B) The inflated price of Treasury bills made them too expensive to purchase in open market operations. 
C) Only the Federal Reserve acting as the central bank can serve as the lender of last resort. 
D) The Fed was able to act more quickly than Congress. 
A) The large budget deficit constrained fiscal policy. 
B) The inflated price of Treasury bills made them too expensive to purchase in open market operations. 
C) Only the Federal Reserve acting as the central bank can serve as the lender of last resort. 
D) The Fed was able to act more quickly than Congress.

Question 10

In 2007-2009, the Fed cut interest rates to limit the international financial crisis.What is the effect of this on velocity?

Accepted Answer

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

Question 11

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) fear of budget deficits and growing federal debt. 
D) 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) fear of budget deficits and growing federal debt. 
D) predictable behavior of velocity until about 1980.

Question 12

Some examples of unconventional monetary policies are massive lending as the lender of last resort and large-scale purchases of atypical assets.

Accepted Answer

A) True 
 B)False

Question 13

If you divide the amount of nominal GDP by the stock of money, you have computed the

Accepted Answer

A) multiplier. 
B) price level. 
C) velocity of circulation. 
D) inflation rate. 
A) multiplier. 
B) price level. 
C) velocity of circulation. 
D) inflation rate.

Question 14

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 15

The "Taylor rule" for monetary policy provides the Fed with a

Accepted Answer

A) mechanical prescription for monetary policy. 
B) benchmark to guide policy decisions. 
C) time frame for discount rate changes. 
D) rule for changing the M1 money supply. 
A) mechanical prescription for monetary policy. 
B) benchmark to guide policy decisions. 
C) time frame for discount rate changes. 
D) rule for changing the M1 money supply.

Question 16

President George W.Bush's tax cut in 2001 was a rare example of

Accepted Answer

A) timely monetary policy. 
B) timely fiscal policy. 
C) the slow response of policy to events. 
D) the inability of Congress to react to policy needs. 
A) timely monetary policy. 
B) timely fiscal policy. 
C) the slow response of policy to events. 
D) the inability of Congress to react to policy needs.

Exam 31: The Debate Over Monetary and Fiscal Policy

If nominal GDP is $7,700 billion and M1 is $1,000 billion, then velocity is

In order to consider the equation of exchange an economic model, what must we assume?

The alternatives of the active versus passive view of stabilization policy are usually expressed as

In terms of the price-real GDP diagram, a given expansion of the money supply will have a greater effect on prices the

Attempts to keep the economy always within a hair's breadth of full employment is called

Contractionary fiscal policy would be most effective in decreasing inflation when

If nominal GDP is 8,100 billion florins and the money supply is 900 billion florins, the velocity of circulation is

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

Which of the following was not a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

In 2007-2009, the Fed cut interest rates to limit the international financial crisis.What is the effect of this on velocity?

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

Some examples of unconventional monetary policies are massive lending as the lender of last resort and large-scale purchases of atypical assets.

If you divide the amount of nominal GDP by the stock of money, you have computed the

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

The "Taylor rule" for monetary policy provides the Fed with a

President George W.Bush's tax cut in 2001 was a rare example of

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

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

Contemporary Issues in the Useconomy

Filters

If nominal GDP is $7,700 billion and M₁ is $1,000 billion, then velocity is

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