Question 1

Forecasts of either the inflation or the real GDP growth rate for the year ahead typically err

Accepted Answer

A)  by +1/2 to 1 percentage point. 
B)  by +2 to 4 percentage point. 
C)  by +3 to +5 percentage point. 
D)  None of the above is correct. 
A)  by +1/2 to 1 percentage point. 
B)  by +2 to 4 percentage point. 
C)  by +3 to +5 percentage point. 
D)  None of the above is correct.

Question 2

According to Baumol and Blinder, the lag between the time a policy is implemented and the time it affects aggregate demand is

Accepted Answer

A)  longer for fiscal policy than monetary policy. 
B)  longer for monetary policy than fiscal policy. 
C)  approximately equal for both. 
D)  influenced mainly by the size of the multiplier. 
A)  longer for fiscal policy than monetary policy. 
B)  longer for monetary policy than fiscal policy. 
C)  approximately equal for both. 
D)  influenced mainly by the size of the multiplier.

Question 3

An employee of Macro.com Corporation is paid $5,000 a month, which she spends regularly throughout the month until she has a zero balance in her checking account at the end of the month. If the corporation changes to a semimonthly payroll schedule, how will the employee's average cash balance change? Assume she does not change her spending pattern when she is now paid twice a month.

Accepted Answer

A)  It changes from $5,000 to $2,500 per month. 
B)  It changes from $2,500 to $1,250 per month. 
C)  It changes from $1,250 to $625 per month. 
D)  It changes from $500 to $250 per month. 
A)  It changes from $5,000 to $2,500 per month. 
B)  It changes from $2,500 to $1,250 per month. 
C)  It changes from $1,250 to $625 per month. 
D)  It changes from $500 to $250 per month.

Question 4

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.

Question 5

As we approached the end of the millennium, many economic crackpots advised citizens to hold large quantities of cash in anticipation of Y2K disasters. What effect would this have had on velocity if many people had been foolish enough to follow this advice?

Accepted Answer

A)  Velocity would have decreased. 
B)  Velocity would have increased. 
C)  Velocity would have remained constant. 
D)  Velocity is unrelated to cash balances. 
A)  Velocity would have decreased. 
B)  Velocity would have increased. 
C)  Velocity would have remained constant. 
D)  Velocity is unrelated to cash balances.

Question 6

It is ____ to identify an asset bubble before it bursts ____ to identify an asset bubble after it bursts.

Accepted Answer

A)  simple; and also simple 
B)  simple; but difficult 
C)  difficult; but simple 
D)  difficult; and also difficult 
A)  simple; and also simple 
B)  simple; but difficult 
C)  difficult; but simple 
D)  difficult; and also difficult

Question 7

During normal times, Fed pushes the federal funds down when it wants to give the economy a boost and

Accepted Answer

A)  pushes it up when it wants to restrain the economy. 
B)  pushes it down when it wants to restrain the economy. 
C)  does not tamper with the federal funds when it wants to restrain the economy. 
D)  None of the above is correct. 
A)  pushes it up when it wants to restrain the economy. 
B)  pushes it down when it wants to restrain the economy. 
C)  does not tamper with the federal funds when it wants to restrain the economy. 
D)  None of the above is correct.

Question 8

When analyzing how money affects income, we are analyzing the way in which a

Accepted Answer

A)  stock affects another stock. 
B)  stock affects a flow. 
C)  flow affects another flow. 
D)  flow affects a stock. 
A)  stock affects another stock. 
B)  stock affects a flow. 
C)  flow affects another flow. 
D)  flow affects a stock.

Question 9

Some economists believe that policymakers should avoid stabilization policy because

Accepted Answer

A)  lags make the policy impact unpredictable. 
B)  no tax cut ever stimulated demand. 
C)  stabilization policies are rarely signed into law. 
D)  it never works. 
A)  lags make the policy impact unpredictable. 
B)  no tax cut ever stimulated demand. 
C)  stabilization policies are rarely signed into law. 
D)  it never works.

Question 10

In the second quarter of 1995, the following values were observed: real GDP = 4,359.3 billion; GDP deflator = 325.1; and M1 = 989.5. What is the value of velocity?

Accepted Answer

A)  32.51 
B)  24.31 
C)  14.32 
D)  2.31 
A)  32.51 
B)  24.31 
C)  14.32 
D)  2.31

Question 11

Monetarists use the equation of exchange to predict the effects of changes in M on

Accepted Answer

A)  velocity. 
B)  nominal GDP. 
C)  real GDP. 
D)  the price level. 
A)  velocity. 
B)  nominal GDP. 
C)  real GDP. 
D)  the price level.

Question 12

What is inflation targeting?

Accepted Answer

A)  Making sure inflation is reduced to zero. 
B)  Increasing the required reserve ratio when there is inflation. 
C)  Increasing the supply of money in the economy. 
D)  Aiming for a particular inflation level. 
A)  Making sure inflation is reduced to zero. 
B)  Increasing the required reserve ratio when there is inflation. 
C)  Increasing the supply of money in the economy. 
D)  Aiming for a particular inflation level.

Question 13

Which one of the following will cause velocity to increase?

Accepted Answer

A)  Decreasing the interest rates 
B)  Increasing the efficiency of the payments system 
C)  Switching from weekly to monthly payroll checks 
D)  Increasing the money supply 
A)  Decreasing the interest rates 
B)  Increasing the efficiency of the payments system 
C)  Switching from weekly to monthly payroll checks 
D)  Increasing the money supply

Question 14

Define the following terms and explain their importance to the study of macroeconomics. 
a. velocity 
b. equation of exchange 
c. monetarism 
d. automatic stabilizer

Accepted Answer

a. Velocity is the number of times per y

Question 15

The aggregate supply curve is likely to be relatively flat in the short run

Accepted Answer

A)  but relatively steep in the long run. 
B)  and relatively flat in the long run. 
C)  but vertical in the long run. 
D)  None of the above is correct. 
A)  but relatively steep in the long run. 
B)  and relatively flat in the long run. 
C)  but vertical in the long run. 
D)  None of the above is correct.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Define the following terms and explain their importance to the study of macroeconomics. 
a. the relationship between interest rates and velocity 
b. lags in stabilization policy 
c. rules versus discretion

Accepted Answer

a. A change in interest rates changes th

Question 18

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 19

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.

Question 20

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.

Forecasts of either the inflation or the real GDP growth rate for the year ahead typically err

According to Baumol and Blinder, the lag between the time a policy is implemented and the time it affects aggregate demand is

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

As we approached the end of the millennium, many economic crackpots advised citizens to hold large quantities of cash in anticipation of Y2K disasters. What effect would this have had on velocity if many people had been foolish enough to follow this advice?

It is to identify an asset bubble before it bursts to identify an asset bubble after it bursts.

During normal times, Fed pushes the federal funds down when it wants to give the economy a boost and

When analyzing how money affects income, we are analyzing the way in which a

Some economists believe that policymakers should avoid stabilization policy because

In the second quarter of 1995, the following values were observed: real GDP = 4,359.3 billion; GDP deflator = 325.1; and M1 = 989.5. What is the value of velocity?

Monetarists use the equation of exchange to predict the effects of changes in M on

What is inflation targeting?

Which one of the following will cause velocity to increase?

Define the following terms and explain their importance to the study of macroeconomics. a. velocity b. equation of exchange c. monetarism d. automatic stabilizer

The aggregate supply curve is likely to be relatively flat in the short run

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

Define the following terms and explain their importance to the study of macroeconomics. a. the relationship between interest rates and velocity b. lags in stabilization policy c. rules versus discretion

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

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

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

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

Contemporary Issues in the Us Economy

Filters

Exam 31: The Debate Over Monetary and Fiscal Policy

Forecasts of either the inflation or the real GDP growth rate for the year ahead typically err

According to Baumol and Blinder, the lag between the time a policy is implemented and the time it affects aggregate demand is

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

As we approached the end of the millennium, many economic crackpots advised citizens to hold large quantities of cash in anticipation of Y2K disasters. What effect would this have had on velocity if many people had been foolish enough to follow this advice?

It is ____ to identify an asset bubble before it bursts ____ to identify an asset bubble after it bursts.

During normal times, Fed pushes the federal funds down when it wants to give the economy a boost and

When analyzing how money affects income, we are analyzing the way in which a

Some economists believe that policymakers should avoid stabilization policy because

In the second quarter of 1995, the following values were observed: real GDP = 4,359.3 billion; GDP deflator = 325.1; and M1 = 989.5. What is the value of velocity?

Monetarists use the equation of exchange to predict the effects of changes in M on

What is inflation targeting?

Which one of the following will cause velocity to increase?

Define the following terms and explain their importance to the study of macroeconomics. a. velocity b. equation of exchange c. monetarism d. automatic stabilizer

The aggregate supply curve is likely to be relatively flat in the short run

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

Define the following terms and explain their importance to the study of macroeconomics. a. the relationship between interest rates and velocity b. lags in stabilization policy c. rules versus discretion

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

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

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

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

Contemporary Issues in the Us Economy

Filters

It is to identify an asset bubble before it bursts to identify an asset bubble after it bursts.