Question 1

A contractionary monetary policy is most likely to reduce output with little impact on inflation when the economy

Accepted Answer

A)  is near full employment and the aggregate supply curve is horizontal. 
B)  is near full employment and the aggregate supply curve is vertical. 
C)  has substantial unemployment and the aggregate supply curve is vertical. 
D)  has substantial unemployment and the aggregate supply curve is horizontal. 
A)  is near full employment and the aggregate supply curve is horizontal. 
B)  is near full employment and the aggregate supply curve is vertical. 
C)  has substantial unemployment and the aggregate supply curve is vertical. 
D)  has substantial unemployment and the aggregate supply curve is horizontal.

Question 2

If the aggregate supply curve is flat,

Accepted Answer

A)  contractionary fiscal or monetary policy will reduce inflation with little effect on real GDP. 
B)  contractionary fiscal or monetary policy will cause significantly less inflation. 
C)  expansionary fiscal or monetary policy will add significantly to real GDP will little effect on inflation. 
D)  expansionary fiscal or monetary policy will add little to real GDP but will increase inflation significantly. 
A)  contractionary fiscal or monetary policy will reduce inflation with little effect on real GDP. 
B)  contractionary fiscal or monetary policy will cause significantly less inflation. 
C)  expansionary fiscal or monetary policy will add significantly to real GDP will little effect on inflation. 
D)  expansionary fiscal or monetary policy will add little to real GDP but will increase inflation significantly.

Question 3

The Fed's quick response to the threat to the economy after September 11,2001,makes a strong case for

Accepted Answer

A)  a rules-based monetary policy regime. 
B)  a discretionary-based monetary policy regime. 
C)  the superiority of fiscal policy. 
D)  the dominant role of Congress in activist policy. 
A)  a rules-based monetary policy regime. 
B)  a discretionary-based monetary policy regime. 
C)  the superiority of fiscal policy. 
D)  the dominant role of Congress in activist policy.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following best describes the assumption that monetarists make regarding velocity?

Accepted Answer

A)  It is fairly predictable in the short run and certainly in the long run. 
B)  It is not possible to predict velocity in the short or long run. 
C)  It is variable in the long run but predictable in the short run. 
D)  It is constant in the long run but variable in the short run. 
A)  It is fairly predictable in the short run and certainly in the long run. 
B)  It is not possible to predict velocity in the short or long run. 
C)  It is variable in the long run but predictable in the short run. 
D)  It is constant in the long run but variable in the short run.

Question 6

The substantial fluctuations in velocity make the equation of exchange more useful in predicting changes in nominal GDP.

Accepted Answer

A) True 
 B)False

Question 7

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 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

Advocates of activist policy making point to the swift response of the Fed after September 11,2001,as an example of effective policy making.

Accepted Answer

A) True 
 B)False

Question 10

The Federal Reserve has policy instruments that it can aim directly at a specific category of asset price bubble.

Accepted Answer

A) True 
 B)False

Question 11

Are forecasts of economic activity accurate enough to permit "fine-tuning" of the economy?

Accepted Answer

A)  No, forecasting is so inaccurate that it should be abandoned. 
B)  No, forecasts are not accurate enough for this. 
C)  Yes, forecasts are accurate and reliable enough for this. 
D)  Yes, at least most of the time. 
A)  No, forecasting is so inaccurate that it should be abandoned. 
B)  No, forecasts are not accurate enough for this. 
C)  Yes, forecasts are accurate and reliable enough for this. 
D)  Yes, at least most of the time.

Question 12

Which one of the following will cause velocity to increase?

Accepted Answer

A)  a decrease in interest rates 
B)  increasing the efficiency of the payments system 
C)  switching from weekly to monthly payroll checks 
D)  an increase in the money supply 
A)  a decrease in interest rates 
B)  increasing the efficiency of the payments system 
C)  switching from weekly to monthly payroll checks 
D)  an increase in the money supply

Question 13

Velocity can be computed with the formula

Accepted Answer

A)  (Annual spending)/(Money supply). 
B)  (Annual income)/(Annual spending). 
C)  (Average income)/(Average spending). 
D)  (Money supply)/(Average income). 
A)  (Annual spending)/(Money supply). 
B)  (Annual income)/(Annual spending). 
C)  (Average income)/(Average spending). 
D)  (Money supply)/(Average income).

Question 14

The equation M × V = P × Y is called the

Accepted Answer

A)  multiplier formula. 
B)  transactions formula. 
C)  equation of exchange. 
D)  balanced exchange formula. 
A)  multiplier formula. 
B)  transactions formula. 
C)  equation of exchange. 
D)  balanced exchange formula.

Question 15

Monetarists maintain that

Accepted Answer

A)  the best way to study the economy is with the expenditure schedule. 
B)  control over the money supply implies control over real GDP. 
C)  velocity is not constant, but is fairly predictable. 
D)  All of the above are correct. 
A)  the best way to study the economy is with the expenditure schedule. 
B)  control over the money supply implies control over real GDP. 
C)  velocity is not constant, but is fairly predictable. 
D)  All of the above are correct.

Question 16

What is the shape of the AS in the short run and the long run?

Accepted Answer

A)  AS is relatively flat in both the short and long run. 
B)  AS is relatively flat in the short run, but steeper in the long run. 
C)  AS is relatively steep in both the short and long run. 
D)  AS is relatively steep in the short run, but flatter in the long run. 
A)  AS is relatively flat in both the short and long run. 
B)  AS is relatively flat in the short run, but steeper in the long run. 
C)  AS is relatively steep in both the short and long run. 
D)  AS is relatively steep in the short run, but flatter in the long run.

Question 17

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

Question 18

Monetarism resembles Keynesian thinking in that they both

Accepted Answer

A)  emphasize supply and ignore demand. 
B)  integrate supply-side analysis into their models. 
C)  emphasize demand side effects. 
D)  emphasize the importance of fiscal policy. 
A)  emphasize supply and ignore demand. 
B)  integrate supply-side analysis into their models. 
C)  emphasize demand side effects. 
D)  emphasize the importance of fiscal policy.

Question 19

Nominal GDP is proportional to money stock when

Accepted Answer

A)  velocity of money is volatile. 
B)  velocity of money is constant. 
C)  there are major changes in the value of velocity of money. 
D)  velocity of money is zero. 
A)  velocity of money is volatile. 
B)  velocity of money is constant. 
C)  there are major changes in the value of velocity of money. 
D)  velocity of money is zero.

Question 20

Whether prices or real GDP exhibit the greater response to increased aggregate demand depends on the degree of capacity utilization in the economy.

Accepted Answer

A) True 
 B)False

A contractionary monetary policy is most likely to reduce output with little impact on inflation when the economy

If the aggregate supply curve is flat,

The Fed's quick response to the threat to the economy after September 11,2001,makes a strong case for

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

Which of the following best describes the assumption that monetarists make regarding velocity?

The substantial fluctuations in velocity make the equation of exchange more useful in predicting changes in nominal GDP.

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

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

Advocates of activist policy making point to the swift response of the Fed after September 11,2001,as an example of effective policy making.

The Federal Reserve has policy instruments that it can aim directly at a specific category of asset price bubble.

Are forecasts of economic activity accurate enough to permit "fine-tuning" of the economy?

Which one of the following will cause velocity to increase?

Velocity can be computed with the formula

The equation M × V = P × Y is called the

Monetarists maintain that

What is the shape of the AS in the short run and the long run?

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

Monetarism resembles Keynesian thinking in that they both

Nominal GDP is proportional to money stock when

Whether prices or real GDP exhibit the greater response to increased aggregate demand depends on the degree of capacity utilization in the economy.

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

A contractionary monetary policy is most likely to reduce output with little impact on inflation when the economy

If the aggregate supply curve is flat,

The Fed's quick response to the threat to the economy after September 11,2001,makes a strong case for

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

Which of the following best describes the assumption that monetarists make regarding velocity?

The substantial fluctuations in velocity make the equation of exchange more useful in predicting changes in nominal GDP.

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

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

Advocates of activist policy making point to the swift response of the Fed after September 11,2001,as an example of effective policy making.

The Federal Reserve has policy instruments that it can aim directly at a specific category of asset price bubble.

Are forecasts of economic activity accurate enough to permit "fine-tuning" of the economy?

Which one of the following will cause velocity to increase?

Velocity can be computed with the formula

The equation M × V = P × Y is called the

Monetarists maintain that

What is the shape of the AS in the short run and the long run?

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

Monetarism resembles Keynesian thinking in that they both

Nominal GDP is proportional to money stock when

Whether prices or real GDP exhibit the greater response to increased aggregate demand depends on the degree of capacity utilization in the economy.

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