Question 1

If the reserve requirement is 5%, and households' and businesses' desired holding ratio of currency-to-deposits is .2, the money multiplier is

Accepted Answer

A)  4. 
B)  40. 
C)  24. 
D)  4.8. 
A)  4. 
B)  40. 
C)  24. 
D)  4.8.

Question 2

An activist central bank concerned with _________ would

Accepted Answer

A)  inflation; raise real interest rates if real GDP was above its potential level. 
B)  real GDP; raise real interest rates if real GDP was below its target level. 
C)  unemployment; lower real interest rates if unemployment was below the natural rate. 
D)  unemployment; raise real interest rates if unemployment was above the natural rate. 
A)  inflation; raise real interest rates if real GDP was above its potential level. 
B)  real GDP; raise real interest rates if real GDP was below its target level. 
C)  unemployment; lower real interest rates if unemployment was below the natural rate. 
D)  unemployment; raise real interest rates if unemployment was above the natural rate.

Question 3

The Taylor rule for the operation of monetary policy is for the central bank

Accepted Answer

A)  to target the growth rate of real GDP and raise or lower real interest rates as necessary to achieve the target. 
B)  to target the unemployment rate and raise or lower real interest rates as necessary to achieve the target. 
C)  to target the inflation rate and raise or lower real interest rates as necessary to achieve the target. 
D)  to target the exchange rate and raise or lower real interest rates as necessary to achieve the target. 
A)  to target the growth rate of real GDP and raise or lower real interest rates as necessary to achieve the target. 
B)  to target the unemployment rate and raise or lower real interest rates as necessary to achieve the target. 
C)  to target the inflation rate and raise or lower real interest rates as necessary to achieve the target. 
D)  to target the exchange rate and raise or lower real interest rates as necessary to achieve the target.

Question 4

If the principal instability in the economy is due to shifts in the IS curve,

Accepted Answer

A)  targeting interest rates will stabilize the magnitude of shocks to the economy. 
B)  targeting the exchange rate will stabilize the magnitude of shocks to the economy. 
C)  it would be better to have a monetary policy reaction function that reacts to leading indicators and outcomes. 
D)  the Federal Reserve should take monetary policy action to shift the IS curve in the opposite direction of the shock. 
A)  targeting interest rates will stabilize the magnitude of shocks to the economy. 
B)  targeting the exchange rate will stabilize the magnitude of shocks to the economy. 
C)  it would be better to have a monetary policy reaction function that reacts to leading indicators and outcomes. 
D)  the Federal Reserve should take monetary policy action to shift the IS curve in the opposite direction of the shock.

Question 5

Each of the following is a method by which central banks can acquire credibility about their determination to maintain price stability except

Accepted Answer

A)  complaining that inflation may be rising. 
B)  refusing to admit even the possibility that monetary expansion might reduce unemployment. 
C)  refusing to raise interest rates no matter what the level of planned expenditure may be. 
D)  repeatedly declaring that price stability is the primary objective. 
A)  complaining that inflation may be rising. 
B)  refusing to admit even the possibility that monetary expansion might reduce unemployment. 
C)  refusing to raise interest rates no matter what the level of planned expenditure may be. 
D)  repeatedly declaring that price stability is the primary objective.

Question 6

The central bank serves as a lender of last resort

Accepted Answer

A)  to loan to individuals which are basically solvent but are temporarily insolvent. 
B)  to loan to businesses which are basically solvent but are temporarily insolvent. 
C)  to loan to banks which are basically solvent but are temporarily insolvent. 
D)  so that bankruptcy will never occur. 
A)  to loan to individuals which are basically solvent but are temporarily insolvent. 
B)  to loan to businesses which are basically solvent but are temporarily insolvent. 
C)  to loan to banks which are basically solvent but are temporarily insolvent. 
D)  so that bankruptcy will never occur.

Question 7

In recent years instability

Accepted Answer

A)  has been primarily due to adverse supply shocks. 
B)  has been primarily in the velocity of money and the sign of the money multiplier. 
C)  has been primarily in shifts in the IS curve. 
D)  has been primarily slope changes in the IS curve. 
A)  has been primarily due to adverse supply shocks. 
B)  has been primarily in the velocity of money and the sign of the money multiplier. 
C)  has been primarily in shifts in the IS curve. 
D)  has been primarily slope changes in the IS curve.

Question 8

Evidence of a politics-influenced component to the business cycle has led some economist to think that Democrats and Republican have different macroeconomic objectives; namely that

Accepted Answer

A)  Republicans have less tolerance for unemployment and more tolerance for inflation than do Democrats. 
B)  Republicans have less tolerance for economic growth and more tolerance for inflation than do Democrats. 
C)  Republicans have less tolerance for unemployment and more tolerance for high interest rates than do Democrats. 
D)  Republicans have less tolerance for inflation and more tolerance for unemployment than do Democrats. 
A)  Republicans have less tolerance for unemployment and more tolerance for inflation than do Democrats. 
B)  Republicans have less tolerance for economic growth and more tolerance for inflation than do Democrats. 
C)  Republicans have less tolerance for unemployment and more tolerance for high interest rates than do Democrats. 
D)  Republicans have less tolerance for inflation and more tolerance for unemployment than do Democrats.

Question 9

Each of the following is a reason why macroeconomic policy should be conducted by automatic rules rather than discretion by authorities except

Accepted Answer

A)  the fear that people appointed to authorities will be incompetent. 
B)  the fear that the appointed authorities might not have the right objectives. 
C)  the fear that the appointed authorities will use good judgment and make the correct decisions. 
D)  the fear that short-run political objectives will outweigh longer-run economic objectives. 
A)  the fear that people appointed to authorities will be incompetent. 
B)  the fear that the appointed authorities might not have the right objectives. 
C)  the fear that the appointed authorities will use good judgment and make the correct decisions. 
D)  the fear that short-run political objectives will outweigh longer-run economic objectives.

Question 10

Each of the following is a component of the Conference Board's Index of Leading Indicators except

Accepted Answer

A)  average weekly hours, manufacturing. 
B)  interest rate spread, 10-year Treasury bonds minus federal funds. 
C)  bond prices, 500 common bonds. 
D)  index of consumer expectations. 
A)  average weekly hours, manufacturing. 
B)  interest rate spread, 10-year Treasury bonds minus federal funds. 
C)  bond prices, 500 common bonds. 
D)  index of consumer expectations.

Question 11

If households' and businesses' desired holding ratio of currency-to-deposits decreases,

Accepted Answer

A)  the value of the autonomous spending multiplier will decrease. 
B)  the value of the money multiplier will increase. 
C)  the value of the money multiplier will decrease. 
D)  the value of the money multiplier will not change. 
A)  the value of the autonomous spending multiplier will decrease. 
B)  the value of the money multiplier will increase. 
C)  the value of the money multiplier will decrease. 
D)  the value of the money multiplier will not change.

Question 12

If the Federal Reserve increases the reserve requirement,

Accepted Answer

A)  the value of the money multiplier will increase. 
B)  the value of the money multiplier will decrease. 
C)  the value of the autonomous spending multiplier will increase. 
D)  the value of the autonomous spending multiplier will decrease. 
A)  the value of the money multiplier will increase. 
B)  the value of the money multiplier will decrease. 
C)  the value of the autonomous spending multiplier will increase. 
D)  the value of the autonomous spending multiplier will decrease.

Question 13

Government tries to manage the macroeconomy by attempting to

Accepted Answer

A)  stabilize the macroeconomy by maximizing the impact of the shocks that cause business cycles. 
B)  decrease the unemployment rate to zero percent. 
C)  stabilize the macroeconomy by minimizing the impact of the shocks that cause business cycles. 
D)  eliminate inflation. 
A)  stabilize the macroeconomy by maximizing the impact of the shocks that cause business cycles. 
B)  decrease the unemployment rate to zero percent. 
C)  stabilize the macroeconomy by minimizing the impact of the shocks that cause business cycles. 
D)  eliminate inflation.

Question 14

Each of the following is a component of the Conference Board's Index of Leading Indicators except

Accepted Answer

A)  average weekly hours, manufacturing. 
B)  average weekly initial claims for unemployment insurance. 
C)  manufacturers' new orders, consumer goods and materials. 
D)  building permits, new public housing units. 
A)  average weekly hours, manufacturing. 
B)  average weekly initial claims for unemployment insurance. 
C)  manufacturers' new orders, consumer goods and materials. 
D)  building permits, new public housing units.

Question 15

The past forty years have seen the level of Federal Government spending

Accepted Answer

A)  as a share of GDP increase significantly, with the share of mandatory spending decreasing and discretionary spending increasing. 
B)  as a share of GDP remain roughly constant, with the share of mandatory spending decreasing and discretionary spending increasing. 
C)  as a share of GDP remain roughly constant, with the share of mandatory spending increasing and discretionary spending decreasing. 
D)  as a share of GDP has decreased, with the share of mandatory spending increasing and discretionary spending decreasing. 
A)  as a share of GDP increase significantly, with the share of mandatory spending decreasing and discretionary spending increasing. 
B)  as a share of GDP remain roughly constant, with the share of mandatory spending decreasing and discretionary spending increasing. 
C)  as a share of GDP remain roughly constant, with the share of mandatory spending increasing and discretionary spending decreasing. 
D)  as a share of GDP has decreased, with the share of mandatory spending increasing and discretionary spending decreasing.

Question 16

The making of fiscal policy in the United States is ______________ while the making of monetary policy tends to be_____________.

Accepted Answer

A)  quick and easy; complicated and time-consuming. 
B)  complicated and time-consuming; much quicker and easier. 
C)  a waste of time; not usually worthwhile. 
D)  quick and easy; not quite as quick and easy. 
A)  quick and easy; complicated and time-consuming. 
B)  complicated and time-consuming; much quicker and easier. 
C)  a waste of time; not usually worthwhile. 
D)  quick and easy; not quite as quick and easy.

Question 17

The steps in the Budget Process include each of the following except

Accepted Answer

A)  President adds his priorities and submits a budget to the Congress. 
B)  negotiations between the Congress the Federal Reserve. 
C)  negotiations between departments and the President's Office of Management and Budget. 
D)  Congressional committees accept, amend, and reject Presidential budget proposals. 
A)  President adds his priorities and submits a budget to the Congress. 
B)  negotiations between the Congress the Federal Reserve. 
C)  negotiations between departments and the President's Office of Management and Budget. 
D)  Congressional committees accept, amend, and reject Presidential budget proposals.

Question 18

If the Federal Open Market Committee wishes to decrease interest rates,

Accepted Answer

A)  it would buy U.S. government bonds. 
B)  it would buy stocks. 
C)  it would sell U.S. government bonds. 
D)  it would buy municipal bonds. 
A)  it would buy U.S. government bonds. 
B)  it would buy stocks. 
C)  it would sell U.S. government bonds. 
D)  it would buy municipal bonds.

Question 19

Changes in fiscal policy

Accepted Answer

A)  shift the LM curve. 
B)  shift the Phillips curve. 
C)  shift the MPRF curve out and back. 
D)  move the economy along the MPRF curve. 
A)  shift the LM curve. 
B)  shift the Phillips curve. 
C)  shift the MPRF curve out and back. 
D)  move the economy along the MPRF curve.

Question 20

If prices are expected to decrease, and the nominal interest rate is close to zero,

Accepted Answer

A)  the real interest rate will be less than zero. 
B)  the real interest rate could still be rather high. 
C)  the real interest rate is unaffected. 
D)  the real interest rate is no longer important. 
A)  the real interest rate will be less than zero. 
B)  the real interest rate could still be rather high. 
C)  the real interest rate is unaffected. 
D)  the real interest rate is no longer important.

If the reserve requirement is 5%, and households' and businesses' desired holding ratio of currency-to-deposits is .2, the money multiplier is

An activist central bank concerned with _________ would

The Taylor rule for the operation of monetary policy is for the central bank

If the principal instability in the economy is due to shifts in the IS curve,

Each of the following is a method by which central banks can acquire credibility about their determination to maintain price stability except

The central bank serves as a lender of last resort

In recent years instability

Evidence of a politics-influenced component to the business cycle has led some economist to think that Democrats and Republican have different macroeconomic objectives; namely that

Each of the following is a reason why macroeconomic policy should be conducted by automatic rules rather than discretion by authorities except

Each of the following is a component of the Conference Board's Index of Leading Indicators except

If households' and businesses' desired holding ratio of currency-to-deposits decreases,

If the Federal Reserve increases the reserve requirement,

Government tries to manage the macroeconomy by attempting to

Each of the following is a component of the Conference Board's Index of Leading Indicators except

The past forty years have seen the level of Federal Government spending

The making of fiscal policy in the United States is __ while the making of monetary policy tends to be_.

The steps in the Budget Process include each of the following except

If the Federal Open Market Committee wishes to decrease interest rates,

Changes in fiscal policy

If prices are expected to decrease, and the nominal interest rate is close to zero,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 13: Stabilization Policy

If the reserve requirement is 5%, and households' and businesses' desired holding ratio of currency-to-deposits is .2, the money multiplier is

An activist central bank concerned with _________ would

The Taylor rule for the operation of monetary policy is for the central bank

If the principal instability in the economy is due to shifts in the IS curve,

Each of the following is a method by which central banks can acquire credibility about their determination to maintain price stability except

The central bank serves as a lender of last resort

In recent years instability

Evidence of a politics-influenced component to the business cycle has led some economist to think that Democrats and Republican have different macroeconomic objectives; namely that

Each of the following is a reason why macroeconomic policy should be conducted by automatic rules rather than discretion by authorities except

Each of the following is a component of the Conference Board's Index of Leading Indicators except

If households' and businesses' desired holding ratio of currency-to-deposits decreases,

If the Federal Reserve increases the reserve requirement,

Government tries to manage the macroeconomy by attempting to

Each of the following is a component of the Conference Board's Index of Leading Indicators except

The past forty years have seen the level of Federal Government spending

The making of fiscal policy in the United States is ______________ while the making of monetary policy tends to be_____________.

The steps in the Budget Process include each of the following except

If the Federal Open Market Committee wishes to decrease interest rates,

Changes in fiscal policy

If prices are expected to decrease, and the nominal interest rate is close to zero,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

The making of fiscal policy in the United States is __ while the making of monetary policy tends to be_.