Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Data indicate that the velocity of M1 is greater than the velocity of M2.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of a company whose stock showed evidence of a price bubble?

Accepted Answer

A)  Facebook 
B)  Google 
C)  Amazon 
D)  all of the above 
A)  Facebook 
B)  Google 
C)  Amazon 
D)  all of the above

Question 4

Which of the following is the formula for velocity?

Accepted Answer

A)  Velocity = nominal GDP/real GDP 
B)  Velocity = real GDP/M 
C)  Velocity = (P × Y)/(M × V) 
D)  Velocity = nominal GDP/M 
A)  Velocity = nominal GDP/real GDP 
B)  Velocity = real GDP/M 
C)  Velocity = (P × Y)/(M × V) 
D)  Velocity = nominal GDP/M

Question 5

Which of the following is the order of fastest to slowest acting policy,once enacted,in affecting aggregate demand?

Accepted Answer

A)  taxes, money, government spending 
B)  taxes, government spending, money 
C)  government spending, taxes, money 
D)  government spending, money, taxes 
A)  taxes, money, government spending 
B)  taxes, government spending, money 
C)  government spending, taxes, money 
D)  government spending, money, taxes

Question 6

Attempts to keep the economy always within a hair's breadth of full employment is called

Accepted Answer

A)  shock absorption. 
B)  lagging. 
C)  fine tuning. 
D)  crowding out. 
A)  shock absorption. 
B)  lagging. 
C)  fine tuning. 
D)  crowding out.

Question 7

It is often reported by financial news reports that higher interest rates reduce automobile sales.If this is t,we can expect

Accepted Answer

A)  fiscal policy to be more effective. 
B)  both fiscal and monetary policy to be more effective. 
C)  monetary policy to be more effective. 
D)  neither fiscal nor monetary policy to be more effective. 
A)  fiscal policy to be more effective. 
B)  both fiscal and monetary policy to be more effective. 
C)  monetary policy to be more effective. 
D)  neither fiscal nor monetary policy to be more effective.

Question 8

Is the equation of exchange an economic model?

Accepted Answer

A)  Yes, it is a simple but powerful model. 
B)  No, economic models cannot be equations. 
C)  No, it is merely an arithmetic statement. 
D)  Yes, it is a cause-and-effect model. 
A)  Yes, it is a simple but powerful model. 
B)  No, economic models cannot be equations. 
C)  No, it is merely an arithmetic statement. 
D)  Yes, it is a cause-and-effect model.

Question 9

In 2007-2009,the Fed cut interest rates to limit the international financial crisis.What is the effect of this 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 10

Which of the following was not a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

Accepted Answer

A)  The large budget deficit constrained fiscal policy. 
B)  The inflated price of Treasury bills made them too expensive to purchase in open market operations. 
C)  Only the Federal Reserve acting as the central bank can serve as the lender of last resort. 
D)  The Fed was able to act more quickly than Congress. 
A)  The large budget deficit constrained fiscal policy. 
B)  The inflated price of Treasury bills made them too expensive to purchase in open market operations. 
C)  Only the Federal Reserve acting as the central bank can serve as the lender of last resort. 
D)  The Fed was able to act more quickly than Congress.

Question 11

Scatter diagrams of money growth rates and inflation rates between 1982 and 2010 show a clear relationship of cause and effect.

Accepted Answer

A) True 
 B)False

Question 12

Since the 1970s,the velocity of money has

Accepted Answer

A)  behaved in a predictable fashion. 
B)  behaved in an erratic fashion. 
C)  decreased in value. 
D)  increased in a stable and predictable fashion. 
A)  behaved in a predictable fashion. 
B)  behaved in an erratic fashion. 
C)  decreased in value. 
D)  increased in a stable and predictable fashion.

Question 13

As individuals hold more of their financial assets in the form of money market accounts and mutual funds,the velocity of money will decrease.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following was the result of the Federal Reserve's purchase of mortgage-backed securities in 2009?

Accepted Answer

A)  MBS interest rates declined, home mortgage rates declined, and the Fed turned a profit on these operations. 
B)  MBS interest rates declined, home mortgage rates declined, but the Fed had a loss on these operations. 
C)  MBS interest rates increased, home mortgage rates declined, and the Fed turned a profit on these operations 
D)  MBS interest rates increased, home mortgage rates increased, but the Fed had a loss on these operations 
A)  MBS interest rates declined, home mortgage rates declined, and the Fed turned a profit on these operations. 
B)  MBS interest rates declined, home mortgage rates declined, but the Fed had a loss on these operations. 
C)  MBS interest rates increased, home mortgage rates declined, and the Fed turned a profit on these operations 
D)  MBS interest rates increased, home mortgage rates increased, but the Fed had a loss on these operations

Question 15

Which of the following was a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

Accepted Answer

A)  The inflated price of Treasury bills made them too expensive to purchase in open market operations. 
B)  The large budget deficit constrained conventional monetary policy. 
C)  The U.S. Treasury was unable to sell Treasury bills in the primary market. 
D)  The Fed was able to act more quickly than Congress. 
A)  The inflated price of Treasury bills made them too expensive to purchase in open market operations. 
B)  The large budget deficit constrained conventional monetary policy. 
C)  The U.S. Treasury was unable to sell Treasury bills in the primary market. 
D)  The Fed was able to act more quickly than Congress.

Question 16

Treasury securities have ____ risk of default and mortgage-backed securities have ____ risk of default.

Accepted Answer

A)  no; no 
B)  no; some 
C)  some; no 
D)  some; some 
A)  no; no 
B)  no; some 
C)  some; no 
D)  some; some

Question 17

____ is a school of economic thought which uses equation of exchange to analyze the macro economic data.

Accepted Answer

A)  Mercantilism 
B)  Monetarism 
C)  Supply side economics 
D)  Keynesianism 
A)  Mercantilism 
B)  Monetarism 
C)  Supply side economics 
D)  Keynesianism

Question 18

The subprime mortgage bubble featured ____ leverage and the technology stock bubble featured ____ leverage.

Accepted Answer

A)  significant; significant 
B)  significant; limited 
C)  limited; significant 
D)  limited; limited 
A)  significant; significant 
B)  significant; limited 
C)  limited; significant 
D)  limited; limited

Question 19

An employee of Macro.com Corporation is paid $5,000 a month,which she spends regularly throughout the month until she has a zero balance in her checking account at the end of the month.If the corporation changes to a semi-monthly payroll schedule,how will the employee's average cash balance change? Assume she does not change her spending pattern when she is now paid twice a month.

Accepted Answer

A)  It changes from $5,000 to $2,500 per month. 
B)  It changes from $2,500 to $1,250 per month. 
C)  It changes from $1,250 to $625 per month. 
D)  It changes from $500 to $250 per month. 
A)  It changes from $5,000 to $2,500 per month. 
B)  It changes from $2,500 to $1,250 per month. 
C)  It changes from $1,250 to $625 per month. 
D)  It changes from $500 to $250 per month.

Question 20

The rapid speed with which the stimulus bill passed through both houses of Congress and was signed by the President could be used as an argument for

Accepted Answer

A)  activist fiscal policy. 
B)  activist monetary policy. 
C)  expansionary fiscal policy. 
D)  contractionary monetary policy. 
A)  activist fiscal policy. 
B)  activist monetary policy. 
C)  expansionary fiscal policy. 
D)  contractionary monetary policy.

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

Data indicate that the velocity of M1 is greater than the velocity of M2.

Which of the following is an example of a company whose stock showed evidence of a price bubble?

Which of the following is the formula for velocity?

Which of the following is the order of fastest to slowest acting policy,once enacted,in affecting aggregate demand?

Attempts to keep the economy always within a hair's breadth of full employment is called

It is often reported by financial news reports that higher interest rates reduce automobile sales.If this is t,we can expect

Is the equation of exchange an economic model?

In 2007-2009,the Fed cut interest rates to limit the international financial crisis.What is the effect of this on velocity?

Which of the following was not a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

Scatter diagrams of money growth rates and inflation rates between 1982 and 2010 show a clear relationship of cause and effect.

Since the 1970s,the velocity of money has

As individuals hold more of their financial assets in the form of money market accounts and mutual funds,the velocity of money will decrease.

Which of the following was the result of the Federal Reserve's purchase of mortgage-backed securities in 2009?

Which of the following was a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

Treasury securities have risk of default and mortgage-backed securities have risk of default.

____ is a school of economic thought which uses equation of exchange to analyze the macro economic data.

The subprime mortgage bubble featured leverage and the technology stock bubble featured leverage.

The rapid speed with which the stimulus bill passed through both houses of Congress and was signed by the President could be used as an argument for

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

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

Data indicate that the velocity of M1 is greater than the velocity of M2.

Which of the following is an example of a company whose stock showed evidence of a price bubble?

Which of the following is the formula for velocity?

Which of the following is the order of fastest to slowest acting policy,once enacted,in affecting aggregate demand?

Attempts to keep the economy always within a hair's breadth of full employment is called

It is often reported by financial news reports that higher interest rates reduce automobile sales.If this is t,we can expect

Is the equation of exchange an economic model?

In 2007-2009,the Fed cut interest rates to limit the international financial crisis.What is the effect of this on velocity?

Which of the following was not a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

Scatter diagrams of money growth rates and inflation rates between 1982 and 2010 show a clear relationship of cause and effect.

Since the 1970s,the velocity of money has

As individuals hold more of their financial assets in the form of money market accounts and mutual funds,the velocity of money will decrease.

Which of the following was the result of the Federal Reserve's purchase of mortgage-backed securities in 2009?

Which of the following was a reason that the Federal Reserve took on additional risks associated with unconventional policy during the recession of 2007-2009?

Treasury securities have ____ risk of default and mortgage-backed securities have ____ risk of default.

____ is a school of economic thought which uses equation of exchange to analyze the macro economic data.

The subprime mortgage bubble featured ____ leverage and the technology stock bubble featured ____ leverage.

The rapid speed with which the stimulus bill passed through both houses of Congress and was signed by the President could be used as an argument for

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

Treasury securities have risk of default and mortgage-backed securities have risk of default.

The subprime mortgage bubble featured leverage and the technology stock bubble featured leverage.