Question 1

If you assume that the equation of exchange is a dependable economic model, then the Fed can control

Accepted Answer

A) real GDP. 
B) aggregate supply. 
C) nominal GDP. 
D) economic growth. 
A) real GDP. 
B) aggregate supply. 
C) nominal GDP. 
D) economic growth.

Question 2

What are some examples of the unconventional monetary policy from the Federal Reserve in response to the 2007-2009?
 Why were opponents concerned about these measures?

Accepted Answer

The unconventional monetary policy used

Question 3

The most common estimate of the value of transactions used to estimate velocity is

Accepted Answer

A) real GDP. 
B) total sales. 
C) nominal GDP. 
D) cash balances. 
A) real GDP. 
B) total sales. 
C) nominal GDP. 
D) cash balances.

Question 4

The question of whether the government should intervene at all in economic matters is entirely political.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Critics of the Fed's unconventional policies in 2009 and 2010 argued that determining which financial institutions would be bailed out and which would be allowed to fail was a political decision that rightfully belonged to Congress.

Accepted Answer

A) True 
 B)False

Question 7

It is often reported by financial news reports that higher interest rates reduce automobile sales.If this is true, 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

In utilizing unconventional monetary policy in 2009, 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.

Question 9

The major difference between the Keynesian approach and the monetarist approach is that

Accepted Answer

A) Keynesian analysis explains an equilibrium condition and monetarism does not. 
B) in Keynesian analysis, money affects the economy by first affecting interest rates; monetarist analysis is not limited to working through interest rates. 
C) monetarism explains an equilibrium condition and Keynesian analysis does not. 
D) there are no differences. 
A) Keynesian analysis explains an equilibrium condition and monetarism does not. 
B) in Keynesian analysis, money affects the economy by first affecting interest rates; monetarist analysis is not limited to working through interest rates. 
C) monetarism explains an equilibrium condition and Keynesian analysis does not. 
D) there are no differences.

Question 10

Which of the following would tend to decrease velocity?

Accepted Answer

A) an increase in interest rates 
B) more frequent paychecks 
C) expected decreases in inflation 
D) more efficient payment systems 
A) an increase in interest rates 
B) more frequent paychecks 
C) expected decreases in inflation 
D) more efficient payment systems

Question 11

If velocity is a constant, then the equation of exchange is an economic model.

Accepted Answer

A) True 
 B)False

Question 12

In the equation of exchange, velocity of money increases when

Accepted Answer

A) Y increases without any changes in P and M. 
B) Y falls without any changes in P. 
C) M increases without any changes in P and Y. 
D) P falls without any changes in Y and M. 
A) Y increases without any changes in P and M. 
B) Y falls without any changes in P. 
C) M increases without any changes in P and Y. 
D) P falls without any changes in Y and M.

Question 13

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 14

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 15

Which of the following was not a criticism of the unconventional monetary policy used by the Fed in 2009 and 2010?

Accepted Answer

A) tendency towards higher unemployment 
B) tendency towards higher inflation 
C) usurping authority which should be allocated to Congress 
D) determining which banks would be allowed to fail 
A) tendency towards higher unemployment 
B) tendency towards higher inflation 
C) usurping authority which should be allocated to Congress 
D) determining which banks would be allowed to fail

Question 16

President George W.Bush's tax cut in 2001 was a rare example of

Accepted Answer

A) timely monetary policy. 
B) timely fiscal policy. 
C) the slow response of policy to events. 
D) the inability of Congress to react to policy needs. 
A) timely monetary policy. 
B) timely fiscal policy. 
C) the slow response of policy to events. 
D) the inability of Congress to react to policy needs.

Question 17

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 18

The objective of the Fed and the government is to

Accepted Answer

A) prevent asset bubbles by recognizing them in real time. 
B) mitigate the consequences of asset bubbles by recognizing them in real time. 
C) prevent asset bubbles by recognizing bad lending practices. 
D) mitigate the consequences of asset bubbles by recognizing bad lending practices. 
A) prevent asset bubbles by recognizing them in real time. 
B) mitigate the consequences of asset bubbles by recognizing them in real time. 
C) prevent asset bubbles by recognizing bad lending practices. 
D) mitigate the consequences of asset bubbles by recognizing bad lending practices.

Question 19

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 20

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

Exam 32: The Debate Over Monetary and Fiscal Policy

If you assume that the equation of exchange is a dependable economic model, then the Fed can control

What are some examples of the unconventional monetary policy from the Federal Reserve in response to the 2007-2009? Why were opponents concerned about these measures?

The most common estimate of the value of transactions used to estimate velocity is

The question of whether the government should intervene at all in economic matters is entirely political.

Is the equation of exchange an economic model?

Critics of the Fed's unconventional policies in 2009 and 2010 argued that determining which financial institutions would be bailed out and which would be allowed to fail was a political decision that rightfully belonged to Congress.

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

In utilizing unconventional monetary policy in 2009, the Federal Reserve purchased

The major difference between the Keynesian approach and the monetarist approach is that

Which of the following would tend to decrease velocity?

If velocity is a constant, then the equation of exchange is an economic model.

In the equation of exchange, velocity of money increases when

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

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

Which of the following was not a criticism of the unconventional monetary policy used by the Fed in 2009 and 2010?

President George W.Bush's tax cut in 2001 was a rare example of

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

The objective of the Fed and the government is to

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?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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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