Question 1

If the aggregate supply curve is steep,

Accepted Answer

A)  increased aggregate demand will not lead to higher prices. 
B)  greater demand for labor will not cause significant wage increases. 
C)  business firms are probably producing near capacity. 
D)  All of the above are correct. 
A)  increased aggregate demand will not lead to higher prices. 
B)  greater demand for labor will not cause significant wage increases. 
C)  business firms are probably producing near capacity. 
D)  All of the above are correct.

Question 2

If you assume that the equation of exchange is a dependable economic model,then the Fed can control

Accepted Answer

A)  real GDP. 
B)  aggregate supply. 
C)  nominal GDP. 
D)  economic growth. 
A)  real GDP. 
B)  aggregate supply. 
C)  nominal GDP. 
D)  economic growth.

Question 3

How does the shape of the aggregate supply curve affect macroeconomic analysis and policy making? Illustrate your answer with the appropriate graphs.

Accepted Answer

If the aggregate supply curve is relativ

Question 4

The major difference between the Keynesian approach and the monetarist approach is that

Accepted Answer

A)  Keynesian analysis explains an equilibrium condition and monetarism does not. 
B)  in Keynesian analysis, money affects the economy by first affecting interest rates; monetarist analysis is not limited to working through interest rates. 
C)  monetarism explains an equilibrium condition and Keynesian analysis does not. 
D)  there are no differences. 
A)  Keynesian analysis explains an equilibrium condition and monetarism does not. 
B)  in Keynesian analysis, money affects the economy by first affecting interest rates; monetarist analysis is not limited to working through interest rates. 
C)  monetarism explains an equilibrium condition and Keynesian analysis does not. 
D)  there are no differences.

Question 5

In response to the Great Recession of 2007-2009,when did the Federal Reserve first cut the federal funds rate to zero?

Accepted Answer

A)  December 2007 
B)  June 2008 
C)  December 2008 
D)  January 2010 
A)  December 2007 
B)  June 2008 
C)  December 2008 
D)  January 2010

Question 6

A scatter diagram of money growth rates and inflation rates from 1982 to 2010 indicates

Accepted Answer

A)  a clear direct relationship between money growth and inflation. 
B)  a clear indirect relationship between money growth and inflation. 
C)  no clear relationship between money growth rates and inflation. 
D)  that inflation is always and everywhere a monetary phenomenon. 
A)  a clear direct relationship between money growth and inflation. 
B)  a clear indirect relationship between money growth and inflation. 
C)  no clear relationship between money growth rates and inflation. 
D)  that inflation is always and everywhere a monetary phenomenon.

Question 7

Describe an asset price bubble and give examples.Explain why it is extremely difficult if not impossible for the Federal Reserve to prevent such bubbles.

Accepted Answer

A price bubble is an increase in the pri

Question 8

After September 11,2001,a small group of economists argued that the economy's self-correcting mechanism would work to counteract the recessionary effects of the attack.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The quantity theory of money assumes that

Accepted Answer

A)  velocity varies inversely with interest rates. 
B)  if velocity equals six, the Fed can increase nominal GDP by 30 percent if it increases the money supply by 5 percent. 
C)  changes in the money supply affect output but not prices. 
D)  changes in velocity are so small that velocity can be considered constant. 
A)  velocity varies inversely with interest rates. 
B)  if velocity equals six, the Fed can increase nominal GDP by 30 percent if it increases the money supply by 5 percent. 
C)  changes in the money supply affect output but not prices. 
D)  changes in velocity are so small that velocity can be considered constant.

Question 11

According to the quantity theory of money,a decision on the part of all business firms currently paying employees on a monthly basis to begin paying on a weekly basis would be expected to

Accepted Answer

A)  increase velocity and increase nominal GDP. 
B)  increase velocity and decrease nominal GDP. 
C)  decrease velocity and increase nominal GDP. 
D)  decrease velocity and decrease nominal GDP. 
A)  increase velocity and increase nominal GDP. 
B)  increase velocity and decrease nominal GDP. 
C)  decrease velocity and increase nominal GDP. 
D)  decrease velocity and decrease nominal GDP.

Question 12

Most economists think that it is impossible to prevent asset price bubbles.

Accepted Answer

A) True 
 B)False

Question 13

If credit cards were suddenly ruled illegal and were no longer used,the most likely effect would be a decrease in the

Accepted Answer

A)  demand for money. 
B)  level of cash balances. 
C)  average checking account balance. 
D)  velocity of circulation. 
A)  demand for money. 
B)  level of cash balances. 
C)  average checking account balance. 
D)  velocity of circulation.

Question 14

According to the quantity theory of money currently used by monetarists,assuming velocity is constant (at a value of 5),a 10 percent increase in the money supply will raise

Accepted Answer

A)  nominal GDP by 50 percent. 
B)  real GDP by 10 percent. 
C)  nominal GDP by 10 percent. 
D)  real GDP by 50 percent. 
A)  nominal GDP by 50 percent. 
B)  real GDP by 10 percent. 
C)  nominal GDP by 10 percent. 
D)  real GDP by 50 percent.

Question 15

When salaries are paid more frequently,the velocity of money speeds up because individuals hold more cash.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Once the federal funds rate is reduced to zero,conventional expansionary monetary policy is no longer an option.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

If you believe that velocity is constant and that the aggregate supply curve is horizontal,then the quantity theory of money would predict that a doubling of the money supply would cause a doubling of the

Accepted Answer

A)  price level and real output. 
B)  price level. 
C)  price level and no change in real output. 
D)  real output. 
A)  price level and real output. 
B)  price level. 
C)  price level and no change in real output. 
D)  real output.

Question 20

Which of the following was not a criticism of the unconventional monetary policy used by the Fed in 2009 and 2010?

Accepted Answer

A)  tendency towards higher unemployment 
B)  tendency towards higher inflation 
C)  usurping authority which should be allocated to Congress 
D)  determining which banks would be allowed to fail 
A)  tendency towards higher unemployment 
B)  tendency towards higher inflation 
C)  usurping authority which should be allocated to Congress 
D)  determining which banks would be allowed to fail

If the aggregate supply curve is steep,

If you assume that the equation of exchange is a dependable economic model,then the Fed can control

How does the shape of the aggregate supply curve affect macroeconomic analysis and policy making? Illustrate your answer with the appropriate graphs.

The major difference between the Keynesian approach and the monetarist approach is that

In response to the Great Recession of 2007-2009,when did the Federal Reserve first cut the federal funds rate to zero?

A scatter diagram of money growth rates and inflation rates from 1982 to 2010 indicates

Describe an asset price bubble and give examples.Explain why it is extremely difficult if not impossible for the Federal Reserve to prevent such bubbles.

After September 11,2001,a small group of economists argued that the economy's self-correcting mechanism would work to counteract the recessionary effects of the attack.

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

The quantity theory of money assumes that

According to the quantity theory of money,a decision on the part of all business firms currently paying employees on a monthly basis to begin paying on a weekly basis would be expected to

Most economists think that it is impossible to prevent asset price bubbles.

If credit cards were suddenly ruled illegal and were no longer used,the most likely effect would be a decrease in the

According to the quantity theory of money currently used by monetarists,assuming velocity is constant (at a value of 5),a 10 percent increase in the money supply will raise

When salaries are paid more frequently,the velocity of money speeds up because individuals hold more cash.

What is inflation targeting?

Once the federal funds rate is reduced to zero,conventional expansionary monetary policy is no longer an option.

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

If you believe that velocity is constant and that the aggregate supply curve is horizontal,then the quantity theory of money would predict that a doubling of the money supply would cause a doubling of the

Which of the following was not a criticism of the unconventional monetary policy used by the Fed in 2009 and 2010?

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

If the aggregate supply curve is steep,

If you assume that the equation of exchange is a dependable economic model,then the Fed can control

How does the shape of the aggregate supply curve affect macroeconomic analysis and policy making? Illustrate your answer with the appropriate graphs.

The major difference between the Keynesian approach and the monetarist approach is that

In response to the Great Recession of 2007-2009,when did the Federal Reserve first cut the federal funds rate to zero?

A scatter diagram of money growth rates and inflation rates from 1982 to 2010 indicates

Describe an asset price bubble and give examples.Explain why it is extremely difficult if not impossible for the Federal Reserve to prevent such bubbles.

After September 11,2001,a small group of economists argued that the economy's self-correcting mechanism would work to counteract the recessionary effects of the attack.

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

The quantity theory of money assumes that

According to the quantity theory of money,a decision on the part of all business firms currently paying employees on a monthly basis to begin paying on a weekly basis would be expected to

Most economists think that it is impossible to prevent asset price bubbles.

If credit cards were suddenly ruled illegal and were no longer used,the most likely effect would be a decrease in the

According to the quantity theory of money currently used by monetarists,assuming velocity is constant (at a value of 5),a 10 percent increase in the money supply will raise

When salaries are paid more frequently,the velocity of money speeds up because individuals hold more cash.

What is inflation targeting?

Once the federal funds rate is reduced to zero,conventional expansionary monetary policy is no longer an option.

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

If you believe that velocity is constant and that the aggregate supply curve is horizontal,then the quantity theory of money would predict that a doubling of the money supply would cause a doubling of the

Which of the following was not a criticism of the unconventional monetary policy used by the Fed in 2009 and 2010?

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