Question 1

Which of the following should be increased during a recession?

Accepted Answer

A)  Real interest rates 
B)  Government spending 
C)  Income taxes 
D)  Nominal interest rates 
A)  Real interest rates 
B)  Government spending 
C)  Income taxes 
D)  Nominal interest rates

Question 2

Which of the following statements is true?

Accepted Answer

A)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor demand curve to the left. 
B)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor supply curve to the right. 
C)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor demand curve to the right. 
D)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor supply curve to the left. 
A)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor demand curve to the left. 
B)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor supply curve to the right. 
C)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor demand curve to the right. 
D)  Countercyclical monetary policy slows down the growth rate of an economy during an expansion by shifting the labor supply curve to the left.

Question 3

The government of Montesia is planning a cut in income tax rates.If implemented,what could be a possible effect of such a change in policy on Montesia's economy?

Accepted Answer

A cut in income tax rates in Montesia wi

Question 4

How do specialized lending channels created by central banks affect the economy during a recession?

Accepted Answer

Central banks occasionally invent additi

Question 5

The ultimate goal of an expansionary monetary policy is to ________.

Accepted Answer

A)  lower short-term interest rates 
B)  lower long-term interest rates 
C)  shift the labor demand curve to the right 
D)  shift the labor demand curve to the left 
A)  lower short-term interest rates 
B)  lower long-term interest rates 
C)  shift the labor demand curve to the right 
D)  shift the labor demand curve to the left

Question 6

Which of the following is likely to happen if the government of a country introduces a subsidy on job creation?

Accepted Answer

A)  The labor demand curve will shift to the left. 
B)  The labor supply curve will shift to the left. 
C)  The labor demand curve will shift to the right. 
D)  The labor supply curve will shift to the right. 
A)  The labor demand curve will shift to the left. 
B)  The labor supply curve will shift to the left. 
C)  The labor demand curve will shift to the right. 
D)  The labor supply curve will shift to the right.

Question 7

Give an example on how an expansionary policy can cause a recession.

Accepted Answer

During 2002-2005,the Fed lowered the fed

Question 8

A countercyclical fiscal policy is conducted by ________ by acting to change ________.

Accepted Answer

A)  the government; taxes and interest rates 
B)  the central bank; interest rates and taxes 
C)  the government; taxes and government expenditures 
D)  the government; government expenditures and interest rates 
A)  the government; taxes and interest rates 
B)  the central bank; interest rates and taxes 
C)  the government; taxes and government expenditures 
D)  the government; government expenditures and interest rates

Question 9

If the federal funds rate is set by the Taylor rule and the output gap increases by 5 percentage points,everything else remaining unchanged,the federal funds rate should ________.

Accepted Answer

A)  increase by 5 percentage points 
B)  increase by 2.5 percentage points 
C)  decrease by 5 percentage points 
D)  decrease by 2.5 percentage points 
A)  increase by 5 percentage points 
B)  increase by 2.5 percentage points 
C)  decrease by 5 percentage points 
D)  decrease by 2.5 percentage points

Question 10

If a $15 billion reduction in taxation produces a change of $20 billion in output,the value of the government taxation multiplier is ________.

Accepted Answer

A)  0.75 
B)  1.3 
C)  5 
D)  35 
A)  0.75 
B)  1.3 
C)  5 
D)  35

Question 11

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A.
  
-Refer to the scenario above.After this transaction,Bank A's bonds equal ________.

Accepted Answer

A)  $90 million 
B)  $100 million 
C)  $110 million 
D)  $120 million 
A)  $90 million 
B)  $100 million 
C)  $110 million 
D)  $120 million

Question 12

If reserves held at the Fed by the private banks decrease,________.

Accepted Answer

A)  banks will make more loans 
B)  bank deposits will decrease 
C)  demand for labor will increase 
D)  the nominal interest rate will decrease 
A)  banks will make more loans 
B)  bank deposits will decrease 
C)  demand for labor will increase 
D)  the nominal interest rate will decrease

Question 13

Scenario: The following figure shows the federal funds market. Assume that the market of reserves is in equilibrium at $500 billion in reserves and a 3 percent federal funds rate.
  
-Refer to the scenario above.Suppose the Fed wants to lower the federal funds rate by 2 percent.To do this,the Fed will have to ________.

Accepted Answer

A)  sell $400 billion worth of bonds to a private bank 
B)  sell less than $400 billion worth of bonds to a private bank 
C)  buy $400 billion worth of bonds from a private bank 
D)  buy less than $400 billion worth of bonds from a private bank 
A)  sell $400 billion worth of bonds to a private bank 
B)  sell less than $400 billion worth of bonds to a private bank 
C)  buy $400 billion worth of bonds from a private bank 
D)  buy less than $400 billion worth of bonds from a private bank

Question 14

Which of the following is an example of an automatic stabilizer during a recession?

Accepted Answer

A)  A decrease in tax revenue due to an increase in unemployment 
B)  A decrease in inflation due to an increase in consumption 
C)  An increase in interest rates due to a decrease in investment 
D)  An increase in money supply due to a decrease in bank deposits 
A)  A decrease in tax revenue due to an increase in unemployment 
B)  A decrease in inflation due to an increase in consumption 
C)  An increase in interest rates due to a decrease in investment 
D)  An increase in money supply due to a decrease in bank deposits

Question 15

A countercyclical fiscal policy is conducted by ________ with the overall goal of ________.

Accepted Answer

A)  the government; reducing economic fluctuations 
B)  the central bank; increasing economic activity 
C)  the central bank; reducing economic fluctuations 
D)  the government; increasing economic activity 
A)  the government; reducing economic fluctuations 
B)  the central bank; increasing economic activity 
C)  the central bank; reducing economic fluctuations 
D)  the government; increasing economic activity

Question 16

Suppose the inflation rate target is zero and the long-run federal funds target is also zero.If the federal funds rate set using the Taylor rule is 2 percent and output exceeds the trend output level by 1 percent,the inflation rate is ________.

Accepted Answer

A)  ‒0.5 percent 
B)  1 percent 
C)  2.5 percent 
D)  3 percent 
A)  ‒0.5 percent 
B)  1 percent 
C)  2.5 percent 
D)  3 percent

Question 17

What is the disadvantage of using an expenditure-based fiscal policy?

Accepted Answer

Rising government expenditures lead to m

Question 18

Government funding of socially valuable projects always represents efficient public spending.

Accepted Answer

A) True 
 B)False

Question 19

If the Fed wants to decrease the federal funds rate,it can ________.

Accepted Answer

A)  increase the quantity of required reserves 
B)  decrease the quantity of required reserves 
C)  increase the quantity of excess reserves 
D)  decrease the quantity of excess reserves 
A)  increase the quantity of required reserves 
B)  decrease the quantity of required reserves 
C)  increase the quantity of excess reserves 
D)  decrease the quantity of excess reserves

Question 20

Which of the following economic variables is affected when the central bank adopts a countercyclical monetary policy?

Accepted Answer

A)  Government spending 
B)  Transfer payments 
C)  Tax rates 
D)  Interest rates 
A)  Government spending 
B)  Transfer payments 
C)  Tax rates 
D)  Interest rates

Which of the following should be increased during a recession?

Which of the following statements is true?

The government of Montesia is planning a cut in income tax rates.If implemented,what could be a possible effect of such a change in policy on Montesia's economy?

How do specialized lending channels created by central banks affect the economy during a recession?

The ultimate goal of an expansionary monetary policy is to ________.

Which of the following is likely to happen if the government of a country introduces a subsidy on job creation?

Give an example on how an expansionary policy can cause a recession.

A countercyclical fiscal policy is conducted by by acting to change .

If the federal funds rate is set by the Taylor rule and the output gap increases by 5 percentage points,everything else remaining unchanged,the federal funds rate should ________.

If a $15 billion reduction in taxation produces a change of $20 billion in output,the value of the government taxation multiplier is ________.

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.After this transaction,Bank A's bonds equal ________.

If reserves held at the Fed by the private banks decrease,________.

Which of the following is an example of an automatic stabilizer during a recession?

A countercyclical fiscal policy is conducted by with the overall goal of .

Suppose the inflation rate target is zero and the long-run federal funds target is also zero.If the federal funds rate set using the Taylor rule is 2 percent and output exceeds the trend output level by 1 percent,the inflation rate is ________.

What is the disadvantage of using an expenditure-based fiscal policy?

Government funding of socially valuable projects always represents efficient public spending.

If the Fed wants to decrease the federal funds rate,it can ________.

Which of the following economic variables is affected when the central bank adopts a countercyclical monetary policy?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

The Monetary System

Short-Run Fluctuations

Macroeconomics and International Trade

Open Economy Macroeconomics

Filters

Exam 13: Countercyclical Macroeconomic Policy

Which of the following should be increased during a recession?

Which of the following statements is true?

The government of Montesia is planning a cut in income tax rates.If implemented,what could be a possible effect of such a change in policy on Montesia's economy?

How do specialized lending channels created by central banks affect the economy during a recession?

The ultimate goal of an expansionary monetary policy is to ________.

Which of the following is likely to happen if the government of a country introduces a subsidy on job creation?

Give an example on how an expansionary policy can cause a recession.

A countercyclical fiscal policy is conducted by ________ by acting to change ________.

If the federal funds rate is set by the Taylor rule and the output gap increases by 5 percentage points,everything else remaining unchanged,the federal funds rate should ________.

If a $15 billion reduction in taxation produces a change of $20 billion in output,the value of the government taxation multiplier is ________.

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.After this transaction,Bank A's bonds equal ________.

If reserves held at the Fed by the private banks decrease,________.

Which of the following is an example of an automatic stabilizer during a recession?

A countercyclical fiscal policy is conducted by ________ with the overall goal of ________.

Suppose the inflation rate target is zero and the long-run federal funds target is also zero.If the federal funds rate set using the Taylor rule is 2 percent and output exceeds the trend output level by 1 percent,the inflation rate is ________.

What is the disadvantage of using an expenditure-based fiscal policy?

Government funding of socially valuable projects always represents efficient public spending.

If the Fed wants to decrease the federal funds rate,it can ________.

Which of the following economic variables is affected when the central bank adopts a countercyclical monetary policy?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

The Monetary System

Short-Run Fluctuations

Macroeconomics and International Trade

Open Economy Macroeconomics

Filters

A countercyclical fiscal policy is conducted by by acting to change .

A countercyclical fiscal policy is conducted by with the overall goal of .