Question 1

Which of the following responded to an economic downturn with a shift to a more expansionary monetary policy?

Accepted Answer

A) Japan in the 1990s 
B) the U.S.during the Great Depression 
C) the U.S.in response to the recession of 2008-2009 
D) none of the above 
A) Japan in the 1990s 
B) the U.S.during the Great Depression 
C) the U.S.in response to the recession of 2008-2009 
D) none of the above

Question 2

How did the fiscal policy response of Japan during the 1990s compare with that of the U.S.during the recession of 2008-2009?

Accepted Answer

A) Both countries responded with permanent tax cuts in an effort to stimulate supply-side effects. 
B) Both countries responded with government spending programs financed by borrowing. 
C) Japan's fiscal policy was restrictive,while U.S.fiscal policy was expansionary. 
D) Japan continued to maintain budget surpluses,while the U.S.increased its budget deficits. 
A) Both countries responded with permanent tax cuts in an effort to stimulate supply-side effects. 
B) Both countries responded with government spending programs financed by borrowing. 
C) Japan's fiscal policy was restrictive,while U.S.fiscal policy was expansionary. 
D) Japan continued to maintain budget surpluses,while the U.S.increased its budget deficits.

Question 3

Like the U.S.during 2002-2004,Japan increased the money supply significantly and pushed interest rates to low levels during the late 1980s.This policy contributed to

Accepted Answer

A) deflation during the late 1980s. 
B) a high rate of unemployment. 
C) upward pressure on asset prices,such as real estate. 
D) a decline in stock prices during the late 1980s. 
A) deflation during the late 1980s. 
B) a high rate of unemployment. 
C) upward pressure on asset prices,such as real estate. 
D) a decline in stock prices during the late 1980s.

Question 4

The Japanese experience of the 1990s indicates that increases in government spending financed through borrowing will generate

Accepted Answer

A) an increase in aggregate demand and real output,just as the Keynesian model predicts. 
B) secondary effects that retard private sector spending and thereby reduce the expansionary impact of fiscal policy. 
C) a recovery of stock market and asset prices within 12 to 18 months. 
D) a decrease in tax rates but an increase in tax revenues,just as the supply-side model predicts. 
A) an increase in aggregate demand and real output,just as the Keynesian model predicts. 
B) secondary effects that retard private sector spending and thereby reduce the expansionary impact of fiscal policy. 
C) a recovery of stock market and asset prices within 12 to 18 months. 
D) a decrease in tax rates but an increase in tax revenues,just as the supply-side model predicts.

Question 5

Why might Japan have been misled into believing it was following an expansionary monetary policy during the 1990s?

Accepted Answer

A) The M1 money supply was expanding at a rapid rate during the 1990s. 
B) The general level of prices continued to rise in Japan throughout the 1990s. 
C) When decision-makers expect inflationary conditions,nominal interest rates will be low,as they were in Japan during the 1990s. 
D) Low interest rates are often indicative of expansionary monetary policy,but if deflation is expected,this will not be the case. 
A) The M1 money supply was expanding at a rapid rate during the 1990s. 
B) The general level of prices continued to rise in Japan throughout the 1990s. 
C) When decision-makers expect inflationary conditions,nominal interest rates will be low,as they were in Japan during the 1990s. 
D) Low interest rates are often indicative of expansionary monetary policy,but if deflation is expected,this will not be the case.

Question 6

Which of the following most accurately describes Japan's fiscal and monetary policies during the 1990s?

Accepted Answer

A) Both fiscal and monetary policy were expansionary. 
B) Both fiscal and monetary policy were restrictive. 
C) Fiscal policy was restrictive,but monetary policy was expansionary. 
D) Fiscal policy was expansionary,but monetary policy was restrictive. 
A) Both fiscal and monetary policy were expansionary. 
B) Both fiscal and monetary policy were restrictive. 
C) Fiscal policy was restrictive,but monetary policy was expansionary. 
D) Fiscal policy was expansionary,but monetary policy was restrictive.

Question 7

In response to high rates of unemployment and a large and growing debt as a share of the economy,in the latter half of the 1990s,Canada

Accepted Answer

A) increased government spending and shifted the federal budget toward a deficit. 
B) reduced government spending and shifted the federal budget toward a surplus. 
C) cut taxes and increased government spending. 
D) held government spending constant as a share of the economy and increased taxes in order to balance the budget. 
A) increased government spending and shifted the federal budget toward a deficit. 
B) reduced government spending and shifted the federal budget toward a surplus. 
C) cut taxes and increased government spending. 
D) held government spending constant as a share of the economy and increased taxes in order to balance the budget.

Question 8

The Japanese experience of the 1990s indicates that increases in government spending financed by borrowing will

Accepted Answer

A) stimulate aggregate demand and generate a strong recovery. 
B) lead to inflation. 
C) sometimes fail to stimulate aggregate demand and the growth of real output. 
D) push real interest rates up quickly. 
A) stimulate aggregate demand and generate a strong recovery. 
B) lead to inflation. 
C) sometimes fail to stimulate aggregate demand and the growth of real output. 
D) push real interest rates up quickly.

Question 9

During the mid-1990s,the Canadian economy was characterized by

Accepted Answer

A) large budget deficits as a share of the economy. 
B) government expenditures in excess of 50 percent of GDP. 
C) a down-grading of Canadian bonds by the bond rating agencies. 
D) all of the above. 
A) large budget deficits as a share of the economy. 
B) government expenditures in excess of 50 percent of GDP. 
C) a down-grading of Canadian bonds by the bond rating agencies. 
D) all of the above.

Question 10

Which of the following is a characteristic of Japan's labor market?

Accepted Answer

A) high labor mobility 
B) a labor force that is getting younger 
C) high rates of unemployment 
D) low rates of labor mobility and business start-ups 
A) high labor mobility 
B) a labor force that is getting younger 
C) high rates of unemployment 
D) low rates of labor mobility and business start-ups

Question 11

A lesson the U.S.might learn from the Canadian experience of the late 1990s is that

Accepted Answer

A) it is possible to reduce government spending and the results can be positive. 
B) reductions in government spending when an economy is sluggish will lead to a disastrous outcome. 
C) budget deficits stimulate aggregate demand and reduce unemployment just as the Keynesian model implies. 
D) a country can continue to expand its debt as a share of the economy without experiencing higher interest rates. 
A) it is possible to reduce government spending and the results can be positive. 
B) reductions in government spending when an economy is sluggish will lead to a disastrous outcome. 
C) budget deficits stimulate aggregate demand and reduce unemployment just as the Keynesian model implies. 
D) a country can continue to expand its debt as a share of the economy without experiencing higher interest rates.

Question 12

After two decades of increasing government spending financed by borrowing,Canada reversed the direction of fiscal policy in the latter half of the 1990s.This reversal was followed by

Accepted Answer

A) an increase in the unemployment rate to historically high levels. 
B) sluggish growth of real GDP compared to the earlier era. 
C) solid growth of real GDP and a declining rate of unemployment. 
D) a massive political defeat of the Liberal Party in the next election and reversal of the policy. 
A) an increase in the unemployment rate to historically high levels. 
B) sluggish growth of real GDP compared to the earlier era. 
C) solid growth of real GDP and a declining rate of unemployment. 
D) a massive political defeat of the Liberal Party in the next election and reversal of the policy.

Question 13

Based on Japan's experience during the 1990s,are fiscal stimulus packages effective in promoting a quick and sustainable recovery?

Accepted Answer

A) No,Japan's fiscal stimulus did not result in strong aggregate demand and output,and the secondary effects may well have retarded recovery. 
B) No,Japan's fiscal stimulus was not large enough to exert an impact on aggregate demand or real output. 
C) Yes,Japan's fiscal stimulus resulted in increases in aggregate demand and real output,but higher inflation rates slowed the recovery. 
D) Yes,Japan's increases in government spending resulted in corresponding increases in GDP,but high interest rates offset much of the stimulus. 
A) No,Japan's fiscal stimulus did not result in strong aggregate demand and output,and the secondary effects may well have retarded recovery. 
B) No,Japan's fiscal stimulus was not large enough to exert an impact on aggregate demand or real output. 
C) Yes,Japan's fiscal stimulus resulted in increases in aggregate demand and real output,but higher inflation rates slowed the recovery. 
D) Yes,Japan's increases in government spending resulted in corresponding increases in GDP,but high interest rates offset much of the stimulus.

Question 14

Following World War II,the Japanese economy

Accepted Answer

A) grew slowly and experienced frequent recessions. 
B) grew at about the same rate as the United States prior to 1990. 
C) achieved a remarkable growth rate of about 6 percent for nearly four decades prior to 1990. 
D) was strong and prosperous for nearly two decades,but growth fell sharply beginning in the 1970s. 
A) grew slowly and experienced frequent recessions. 
B) grew at about the same rate as the United States prior to 1990. 
C) achieved a remarkable growth rate of about 6 percent for nearly four decades prior to 1990. 
D) was strong and prosperous for nearly two decades,but growth fell sharply beginning in the 1970s.

Question 15

Which of the following describes the relationship between the decline in asset prices and the recession for both Japan in the 1990s and the United States in 2008-2009?

Accepted Answer

A) A recession was responsible for the decline in stock market and real estate prices. 
B) The decline in stock market and real estate prices preceded the recession and was a major cause of an economic downturn. 
C) Both the decrease in real estate prices and an economic recession were the result of a stock market crash. 
D) The decline in stock market and real estate prices,and the economic recession were separate events and there was no relationship between the two. 
A) A recession was responsible for the decline in stock market and real estate prices. 
B) The decline in stock market and real estate prices preceded the recession and was a major cause of an economic downturn. 
C) Both the decrease in real estate prices and an economic recession were the result of a stock market crash. 
D) The decline in stock market and real estate prices,and the economic recession were separate events and there was no relationship between the two.

Question 16

Which of the following is a potentially important difference between the U.S.economy today and the Japanese economy of the 1990s?

Accepted Answer

A) The fiscal policy response of the United States has been less expansionary. 
B) The rate of saving is higher in the United States. 
C) The elderly will not increase as a share of the population in the United States. 
D) The U.S.labor market is more flexible. 
A) The fiscal policy response of the United States has been less expansionary. 
B) The rate of saving is higher in the United States. 
C) The elderly will not increase as a share of the population in the United States. 
D) The U.S.labor market is more flexible.

Question 17

As Japan shifted from budget surpluses to budget deficits in response to the economic slowdown of the 1990s,this resulted in

Accepted Answer

A) an increase in aggregate demand and strong economic growth. 
B) a sharp increase in Japanese stock prices. 
C) a substantial increase in the inflation rate. 
D) a substantial increase in government debt as a share of the economy. 
A) an increase in aggregate demand and strong economic growth. 
B) a sharp increase in Japanese stock prices. 
C) a substantial increase in the inflation rate. 
D) a substantial increase in government debt as a share of the economy.

Question 18

What is the relationship between monetary policy and interest rates?

Accepted Answer

A) Expansionary monetary policy will always result in an increase in interest rates. 
B) Restrictive monetary policy will tend to push interest rates up,unless people expect deflation to occur,in which case interest rates will decline to low levels. 
C) Expansionary monetary policy will tend to push interest rates up,unless people expect inflation to occur,in which case interest rates will remain low. 
D) Restrictive monetary policy will always result in a decrease in interest rates. 
A) Expansionary monetary policy will always result in an increase in interest rates. 
B) Restrictive monetary policy will tend to push interest rates up,unless people expect deflation to occur,in which case interest rates will decline to low levels. 
C) Expansionary monetary policy will tend to push interest rates up,unless people expect inflation to occur,in which case interest rates will remain low. 
D) Restrictive monetary policy will always result in a decrease in interest rates.

Question 19

Which of the following best describes Japan's monetary policy leading up to and during the recession of the 1990s?

Accepted Answer

A) Japan's monetary policy was expansionary during the 1980s,but it shifted toward restriction during the 1990s. 
B) Japan's monetary policy was restrictive during the 1980s,but it was much more expansionary during the 1990s. 
C) Japan's monetary policy was expansionary during the 1980s and remained expansionary in the 1990s. 
D) Japan's monetary policy was restrictive during the 1980s and remained restrictive in the 1990s in order to combat inflation. 
A) Japan's monetary policy was expansionary during the 1980s,but it shifted toward restriction during the 1990s. 
B) Japan's monetary policy was restrictive during the 1980s,but it was much more expansionary during the 1990s. 
C) Japan's monetary policy was expansionary during the 1980s and remained expansionary in the 1990s. 
D) Japan's monetary policy was restrictive during the 1980s and remained restrictive in the 1990s in order to combat inflation.

Question 20

Which of the following was a similarity between the Japanese recession of the early 1990s and the U.S.recession of 2008-2009?

Accepted Answer

A) Following the recession,there was a sizeable increase in the population over 65 in both countries. 
B) Balancing the budget was the focus of fiscal policy during the recessions in both countries. 
C) Both countries followed a restrictive monetary policy in response to the recessions. 
D) Neither country increased government expenditures in response to the recessions. 
A) Following the recession,there was a sizeable increase in the population over 65 in both countries. 
B) Balancing the budget was the focus of fiscal policy during the recessions in both countries. 
C) Both countries followed a restrictive monetary policy in response to the recessions. 
D) Neither country increased government expenditures in response to the recessions.

Exam 35: Lessons From Japan and Canada

Which of the following responded to an economic downturn with a shift to a more expansionary monetary policy?

How did the fiscal policy response of Japan during the 1990s compare with that of the U.S.during the recession of 2008-2009?

Like the U.S.during 2002-2004,Japan increased the money supply significantly and pushed interest rates to low levels during the late 1980s.This policy contributed to

The Japanese experience of the 1990s indicates that increases in government spending financed through borrowing will generate

Why might Japan have been misled into believing it was following an expansionary monetary policy during the 1990s?

Which of the following most accurately describes Japan's fiscal and monetary policies during the 1990s?

In response to high rates of unemployment and a large and growing debt as a share of the economy,in the latter half of the 1990s,Canada

The Japanese experience of the 1990s indicates that increases in government spending financed by borrowing will

During the mid-1990s,the Canadian economy was characterized by

Which of the following is a characteristic of Japan's labor market?

A lesson the U.S.might learn from the Canadian experience of the late 1990s is that

After two decades of increasing government spending financed by borrowing,Canada reversed the direction of fiscal policy in the latter half of the 1990s.This reversal was followed by

Based on Japan's experience during the 1990s,are fiscal stimulus packages effective in promoting a quick and sustainable recovery?

Following World War II,the Japanese economy

Which of the following describes the relationship between the decline in asset prices and the recession for both Japan in the 1990s and the United States in 2008-2009?

Which of the following is a potentially important difference between the U.S.economy today and the Japanese economy of the 1990s?

As Japan shifted from budget surpluses to budget deficits in response to the economic slowdown of the 1990s,this resulted in

What is the relationship between monetary policy and interest rates?

Which of the following best describes Japan's monetary policy leading up to and during the recession of the 1990s?

Which of the following was a similarity between the Japanese recession of the early 1990s and the U.S.recession of 2008-2009?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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