Question 1

How do critics of discretionary stabilization policy view frequent changes in spending and tax policy?

Accepted Answer

A)  The changes make the economy smoother, although it may not look that way to individual firms. 
B)  The changes make life more difficult and hectic for Congress and the Fed. 
C)  The changes smooth out the business cycle, making planning easier. 
D)  The changes cause more instability in the economy and make planning more difficult. 
A)  The changes make the economy smoother, although it may not look that way to individual firms. 
B)  The changes make life more difficult and hectic for Congress and the Fed. 
C)  The changes smooth out the business cycle, making planning easier. 
D)  The changes cause more instability in the economy and make planning more difficult.

Question 2

More economists adopted monetarism in the early 1990s.

Accepted Answer

A) True 
 B)False

Question 3

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 4

The equation of exchange is M × Y = P × V.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following leads to a fundamental difficulty for stabilization policy?

Accepted Answer

A)  Time lags in policy decisions 
B)  Presence of shock absorbers in the economy 
C)  Absence of data on the effectiveness of policy measures 
D)  Existence of self-correcting mechanism 
A)  Time lags in policy decisions 
B)  Presence of shock absorbers in the economy 
C)  Absence of data on the effectiveness of policy measures 
D)  Existence of self-correcting mechanism

Question 6

If the Fed's monetary policy causes a substantial increase in interest rates,what is the most likely impact on velocity?

Accepted Answer

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

Question 7

The equation of exchange is an accounting identity,not an economic theory.

Accepted Answer

A) True 
 B)False

Question 8

Keynesian belief that the aggregate supply curve is relatively flat in the short run means that they expect their policies to cause

Accepted Answer

A)  small increases in output and much inflation. 
B)  small increases in output and little inflation. 
C)  large increases in output and little inflation. 
D)  large increases in output and much inflation. 
A)  small increases in output and much inflation. 
B)  small increases in output and little inflation. 
C)  large increases in output and little inflation. 
D)  large increases in output and much inflation.

Question 9

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 10

If the velocity of circulation is 10 and the money supply is $250,the value of transactions will be $25.

Accepted Answer

A) True 
 B)False

Question 11

The current debate about fiscal and monetary policy tends to focus on

Accepted Answer

A)  which policy is less destabilizing. 
B)  which policy is more effective. 
C)  whether the Fed can control the money supply. 
D)  which policy works more quickly. 
A)  which policy is less destabilizing. 
B)  which policy is more effective. 
C)  whether the Fed can control the money supply. 
D)  which policy works more quickly.

Question 12

Which of the following was an argument for using fiscal policy in situations like the Great Recession?

Accepted Answer

A)  Congress can act quickly. 
B)  The size of a recessionary gap may require the use of both fiscal and monetary policy. 
C)  Once the federal funds rate is reduced to zero, monetary policy is less effective. 
D)  all of the above 
A)  Congress can act quickly. 
B)  The size of a recessionary gap may require the use of both fiscal and monetary policy. 
C)  Once the federal funds rate is reduced to zero, monetary policy is less effective. 
D)  all of the above

Question 13

In what year did the technology stock bubble burst?

Accepted Answer

A)  2000 
B)  2006 
C)  2007 
D)  2008 
A)  2000 
B)  2006 
C)  2007 
D)  2008

Question 14

The equation of exchange can be written as

Accepted Answer

A)  Velocity × Nominal GDP = Price Index 
B)  Real GDP × Price Index = Money supply 
C)  Money supply × Price Index = Real GDP 
D)  Money supply × Velocity = Nominal GDP 
A)  Velocity × Nominal GDP = Price Index 
B)  Real GDP × Price Index = Money supply 
C)  Money supply × Price Index = Real GDP 
D)  Money supply × Velocity = Nominal GDP

Question 15

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 16

For both Keynesians and monetarists to predict accurately the effects of a change in the money supply on the price level,they need to add ____ to their analysis.

Accepted Answer

A)  aggregate demand 
B)  nominal GDP 
C)  real GDP 
D)  aggregate supply 
E)  government spending 
A)  aggregate demand 
B)  nominal GDP 
C)  real GDP 
D)  aggregate supply 
E)  government spending

Question 17

The velocity of circulation has remained constant over long periods of time.

Accepted Answer

A) True 
 B)False

Question 18

Over long periods of time,M2 velocity has been relatively constant.

Accepted Answer

A) True 
 B)False

Question 19

How will an increase in the efficiency of the payments mechanism effect velocity?

Accepted Answer

A)  It will decrease. 
B)  It will increase. 
C)  It will remain constant. 
D)  Velocity is unrelated to payments. 
A)  It will decrease. 
B)  It will increase. 
C)  It will remain constant. 
D)  Velocity is unrelated to payments.

Question 20

In utilizing unconventional monetary policy in 2010,the Federal Reserve purchased

Accepted Answer

A)  real estate worth more than $2 trillion. 
B)  $800 billion in Treasury bills. 
C)  over $1 trillion in mortgage backed securities. 
D)  $600 billion in long-term Treasury bonds. 
A)  real estate worth more than $2 trillion. 
B)  $800 billion in Treasury bills. 
C)  over $1 trillion in mortgage backed securities. 
D)  $600 billion in long-term Treasury bonds.

How do critics of discretionary stabilization policy view frequent changes in spending and tax policy?

More economists adopted monetarism in the early 1990s.

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

The equation of exchange is M × Y = P × V.

Which of the following leads to a fundamental difficulty for stabilization policy?

If the Fed's monetary policy causes a substantial increase in interest rates,what is the most likely impact on velocity?

The equation of exchange is an accounting identity,not an economic theory.

Keynesian belief that the aggregate supply curve is relatively flat in the short run means that they expect their policies to cause

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

If the velocity of circulation is 10 and the money supply is $250,the value of transactions will be $25.

The current debate about fiscal and monetary policy tends to focus on

Which of the following was an argument for using fiscal policy in situations like the Great Recession?

In what year did the technology stock bubble burst?

The equation of exchange can be written as

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

For both Keynesians and monetarists to predict accurately the effects of a change in the money supply on the price level,they need to add ____ to their analysis.

The velocity of circulation has remained constant over long periods of time.

Over long periods of time,M2 velocity has been relatively constant.

How will an increase in the efficiency of the payments mechanism effect velocity?

In utilizing unconventional monetary policy in 2010,the Federal Reserve purchased

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

Exam 15: The Debate over Monetary and Fiscal Policy

How do critics of discretionary stabilization policy view frequent changes in spending and tax policy?

More economists adopted monetarism in the early 1990s.

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

The equation of exchange is M × Y = P × V.

Which of the following leads to a fundamental difficulty for stabilization policy?

If the Fed's monetary policy causes a substantial increase in interest rates,what is the most likely impact on velocity?

The equation of exchange is an accounting identity,not an economic theory.

Keynesian belief that the aggregate supply curve is relatively flat in the short run means that they expect their policies to cause

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

If the velocity of circulation is 10 and the money supply is $250,the value of transactions will be $25.

The current debate about fiscal and monetary policy tends to focus on

Which of the following was an argument for using fiscal policy in situations like the Great Recession?

In what year did the technology stock bubble burst?

The equation of exchange can be written as

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

For both Keynesians and monetarists to predict accurately the effects of a change in the money supply on the price level,they need to add ____ to their analysis.

The velocity of circulation has remained constant over long periods of time.

Over long periods of time,M2 velocity has been relatively constant.

How will an increase in the efficiency of the payments mechanism effect velocity?

In utilizing unconventional monetary policy in 2010,the Federal Reserve purchased

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

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