Question 1

Which of the following policies would a Keynesian expect to produce the largest decrease in income?

Accepted Answer

A)  a reduction in government spending of $100 billion 
B)  a decrease in transfer payments of $100 billion 
C)  an increase in government spending of $100 billion 
D)  a tax increase of $100 billion 
A)  a reduction in government spending of $100 billion 
B)  a decrease in transfer payments of $100 billion 
C)  an increase in government spending of $100 billion 
D)  a tax increase of $100 billion

Question 2

The equation of exchange is written as

Accepted Answer

A)  M × V = P × Y. 
B)  M × P = V × Y. 
C)  M × Y = P × V. 
D)  M × Y = Y × P. 
A)  M × V = P × Y. 
B)  M × P = V × Y. 
C)  M × Y = P × V. 
D)  M × Y = Y × P.

Question 3

During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had

Accepted Answer

A)  increased and the Treasury interest rate had risen. 
B)  increased and the Treasury interest rate had fallen. 
C)  decreased and the Treasury interest rate had risen. 
D)  decreased and the Treasury interest rate had fallen. 
A)  increased and the Treasury interest rate had risen. 
B)  increased and the Treasury interest rate had fallen. 
C)  decreased and the Treasury interest rate had risen. 
D)  decreased and the Treasury interest rate had fallen.

Question 4

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

Accepted Answer

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

Question 5

Which of the following lags makes stabilization policy more problematic?

Accepted Answer

A)  expenditure lags 
B)  recognition lags 
C)  policy lags 
D)  All of the above. 
A)  expenditure lags 
B)  recognition lags 
C)  policy lags 
D)  All of the above.

Question 6

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 7

The longer and more unpredictable that the policy lags are,the stronger the case for active stabilization policy.

Accepted Answer

A) True 
 B)False

Question 8

Contractionary fiscal policy would be most effective in decreasing inflation when

Accepted Answer

A)  the marginal propensity to consume 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 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 9

Both M1 and M2 are monetary values much larger than nominal GDP.

Accepted Answer

A) True 
 B)False

Question 10

The optimal time for the implementation of contractionary fiscal policy would be

Accepted Answer

A)  before inflation accelerated. 
B)  after inflation accelerated. 
C)  after unemployment increased. 
D)  after the price level had risen significantly. 
A)  before inflation accelerated. 
B)  after inflation accelerated. 
C)  after unemployment increased. 
D)  after the price level had risen significantly.

Question 11

The principal factor determining velocity is the

Accepted Answer

A)  level of income. 
B)  frequency with which paychecks are distributed. 
C)  frequency with which taxes are paid. 
D)  growth rate of real output. 
A)  level of income. 
B)  frequency with which paychecks are distributed. 
C)  frequency with which taxes are paid. 
D)  growth rate of real output.

Question 12

Which of the following will tend to increase velocity?

Accepted Answer

A)  a decrease in the number of payments 
B)  a decrease in inflation 
C)  an increase in interest rates 
D)  an increase in the money supply 
E)  All of the above. 
A)  a decrease in the number of payments 
B)  a decrease in inflation 
C)  an increase in interest rates 
D)  an increase in the money supply 
E)  All of the above.

Question 13

In what year did the housing bubble burst?

Accepted Answer

A)  2000 
B)  2006 
C)  2008 
D)  There was no such event. 
A)  2000 
B)  2006 
C)  2008 
D)  There was no such event.

Question 14

As the interest rate increases,the velocity of money will increase as well.

Accepted Answer

A) True 
 B)False

Question 15

The historical data on velocity shows that velocity for

Accepted Answer

A)  M1 has fallen since 1929 and has become more stable since 1981. 
B)  M1 has risen since 1949 and has become more volatile since 1981. 
C)  both M1 and M2 have increased since 1949 but have become more stable since 1979. 
D)  both M1 and M2 have declined since 1949. 
A)  M1 has fallen since 1929 and has become more stable since 1981. 
B)  M1 has risen since 1949 and has become more volatile since 1981. 
C)  both M1 and M2 have increased since 1949 but have become more stable since 1979. 
D)  both M1 and M2 have declined since 1949.

Question 16

Which of the following is correct?

Accepted Answer

A)  Policy lags are normally much shorter for fiscal policy than for monetary policy. 
B)  Congress usually makes major fiscal policy changes in a fairly short period of time. 
C)  Expenditure lags are much longer for investment, the main way in which monetary policy affects aggregate demand. 
D)  Monetary policy affects aggregate demand more quickly than fiscal policy, such as tax or government spending changes. 
A)  Policy lags are normally much shorter for fiscal policy than for monetary policy. 
B)  Congress usually makes major fiscal policy changes in a fairly short period of time. 
C)  Expenditure lags are much longer for investment, the main way in which monetary policy affects aggregate demand. 
D)  Monetary policy affects aggregate demand more quickly than fiscal policy, such as tax or government spending changes.

Question 17

During the financial crisis of 2007-2009,both fiscal and monetary policy turned more expansionary.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

Accepted Answer

A)  The Fed's actions could do more harm than good. 
B)  It is nearly impossible to determine if a bubble exists before it bursts. 
C)  The Fed's policies cannot be targeted at only one sector of the economy. 
D)  all of the above 
A)  The Fed's actions could do more harm than good. 
B)  It is nearly impossible to determine if a bubble exists before it bursts. 
C)  The Fed's policies cannot be targeted at only one sector of the economy. 
D)  all of the above

Question 19

Monetarists believe that the aggregate supply curve is relatively steep in the short and long runs.This means they expect

Accepted Answer

A)  inflation with no change in output. 
B)  increases in output to bring much inflation. 
C)  increases in output to bring little inflation. 
D)  decreases in output to bring much inflation. 
A)  inflation with no change in output. 
B)  increases in output to bring much inflation. 
C)  increases in output to bring little inflation. 
D)  decreases in output to bring much inflation.

Question 20

Advocates of stabilization policy prefer quick medicine for economic ills.This leads some observers to favor fiscal policy while others endorse monetary policy.Describe the positions of each side in the debate and what seems to be the current consensus.

Accepted Answer

Fiscal policy advocates argue that fisca

Which of the following policies would a Keynesian expect to produce the largest decrease in income?

The equation of exchange is written as

During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had

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

Which of the following lags makes stabilization policy more problematic?

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

The longer and more unpredictable that the policy lags are,the stronger the case for active stabilization policy.

Contractionary fiscal policy would be most effective in decreasing inflation when

Both M1 and M2 are monetary values much larger than nominal GDP.

The optimal time for the implementation of contractionary fiscal policy would be

The principal factor determining velocity is the

Which of the following will tend to increase velocity?

In what year did the housing bubble burst?

As the interest rate increases,the velocity of money will increase as well.

The historical data on velocity shows that velocity for

Which of the following is correct?

During the financial crisis of 2007-2009,both fiscal and monetary policy turned more expansionary.

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

Monetarists believe that the aggregate supply curve is relatively steep in the short and long runs.This means they expect

Advocates of stabilization policy prefer quick medicine for economic ills.This leads some observers to favor fiscal policy while others endorse monetary policy.Describe the positions of each side in the debate and what seems to be the current consensus.

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

Which of the following policies would a Keynesian expect to produce the largest decrease in income?

The equation of exchange is written as

During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had

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

Which of the following lags makes stabilization policy more problematic?

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

The longer and more unpredictable that the policy lags are,the stronger the case for active stabilization policy.

Contractionary fiscal policy would be most effective in decreasing inflation when

Both M1 and M2 are monetary values much larger than nominal GDP.

The optimal time for the implementation of contractionary fiscal policy would be

The principal factor determining velocity is the

Which of the following will tend to increase velocity?

In what year did the housing bubble burst?

As the interest rate increases,the velocity of money will increase as well.

The historical data on velocity shows that velocity for

Which of the following is correct?

During the financial crisis of 2007-2009,both fiscal and monetary policy turned more expansionary.

Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?

Monetarists believe that the aggregate supply curve is relatively steep in the short and long runs.This means they expect

Advocates of stabilization policy prefer quick medicine for economic ills.This leads some observers to favor fiscal policy while others endorse monetary policy.Describe the positions of each side in the debate and what seems to be the current consensus.

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