Question 1

According to the NBER, a severe decline in economic activity that lasted less than two quarters:

Accepted Answer

A) Could not be considered a recession 
B) Could still be considered a recession 
C) Would not be called a recession until more than two years had passed 
D) Would immediately be called a recession 
A) Could not be considered a recession 
B) Could still be considered a recession 
C) Would not be called a recession until more than two years had passed 
D) Would immediately be called a recession

Question 2

Fiscal policy can act just like monetary policy to offset shifts in the dynamic aggregate demand curve and stabilize inflation and output.Explain how the two policies could have the same effect.

Accepted Answer

Fiscal policy consists of changes in tax

Question 3

Globalization and trade:

Accepted Answer

A) Reduce inflation in the short run but not in the long run 
B) Reduce inflation in the short run and in the long run 
C) Increase inflation in the short run but not in the long run 
D) Reduce inflation in the short run but increase inflation in the long run 
A) Reduce inflation in the short run but not in the long run 
B) Reduce inflation in the short run and in the long run 
C) Increase inflation in the short run but not in the long run 
D) Reduce inflation in the short run but increase inflation in the long run

Question 4

What explanations have been offered to account for the Great Moderation of the 1990s?

Accepted Answer

Three possible explanations have been of

Question 5

A review of economic data suggests that:

Accepted Answer

A) Expansions are shorter than recessions 
B) Business cycles are recurrent and periodic 
C) Over the last fifty years, recessions are becoming more common 
D) Recessions are shorter in duration than expansions 
A) Expansions are shorter than recessions 
B) Business cycles are recurrent and periodic 
C) Over the last fifty years, recessions are becoming more common 
D) Recessions are shorter in duration than expansions

Question 6

The U.S.economy has likely experienced:

Accepted Answer

A) More periods of deflation than disinflation 
B) More periods of disinflation than deflation 
C) An equal number of periods of deflation and disinflation since they are synonymous 
D) None of the answers provided is correct 
A) More periods of deflation than disinflation 
B) More periods of disinflation than deflation 
C) An equal number of periods of deflation and disinflation since they are synonymous 
D) None of the answers provided is correct

Question 7

If a negative supply shock is associated with a decline in potential output, keeping inflation at its target requires:

Accepted Answer

A) A leftward shift in the monetary policy reaction curve because there is an expansionary gap 
B) A rightward shift in the monetary policy reaction curve because there is an expansionary gap 
C) A leftward shift in the monetary policy reaction curve because there is a recessionary gap 
D) A rightward shift in the monetary policy reaction curve because there is an recessionary gap 
A) A leftward shift in the monetary policy reaction curve because there is an expansionary gap 
B) A rightward shift in the monetary policy reaction curve because there is an expansionary gap 
C) A leftward shift in the monetary policy reaction curve because there is a recessionary gap 
D) A rightward shift in the monetary policy reaction curve because there is an recessionary gap

Question 8

If inflation increases, this could be illustrated as a:

Accepted Answer

A) Rightward shift of the long-run aggregate supply curve 
B) Leftward shift of the long-run aggregate supply curve 
C) Rightward shift of the short-run aggregate supply curve 
D) Movement down along the short-run aggregate supply curve 
A) Rightward shift of the long-run aggregate supply curve 
B) Leftward shift of the long-run aggregate supply curve 
C) Rightward shift of the short-run aggregate supply curve 
D) Movement down along the short-run aggregate supply curve

Question 9

Which of the following is true?

Accepted Answer

A) A flat dynamic aggregate demand curve corresponds to a steep monetary policy reaction curve and means that supply shocks will create large changes in current output 
B) A flat dynamic aggregate demand curve corresponds to a flat monetary policy reaction curve and means that supply shocks will create large changes in current output 
C) A flat dynamic aggregate demand curve corresponds to a steep monetary policy reaction curve and means that supply shocks will create small changes in current output 
D) A flat dynamic aggregate demand curve corresponds to a flat monetary policy reaction curve and means that supply shocks will create small changes in current output 
A) A flat dynamic aggregate demand curve corresponds to a steep monetary policy reaction curve and means that supply shocks will create large changes in current output 
B) A flat dynamic aggregate demand curve corresponds to a flat monetary policy reaction curve and means that supply shocks will create large changes in current output 
C) A flat dynamic aggregate demand curve corresponds to a steep monetary policy reaction curve and means that supply shocks will create small changes in current output 
D) A flat dynamic aggregate demand curve corresponds to a flat monetary policy reaction curve and means that supply shocks will create small changes in current output

Question 10

Comparing monetary and fiscal policy:

Accepted Answer

A) Fiscal policy has an advantage because it is faster to implement than monetary policy 
B) Fiscal policy is easier to implement 
C) Monetary policy is easier to implement 
D) History has shown fiscal policy to be more effective at stabilization 
A) Fiscal policy has an advantage because it is faster to implement than monetary policy 
B) Fiscal policy is easier to implement 
C) Monetary policy is easier to implement 
D) History has shown fiscal policy to be more effective at stabilization

Question 11

"Official" recessions in the United States are declared by:

Accepted Answer

A) The Federal Reserve 
B) The U.S.department of the Treasury 
C) The National Bureau of Economic Research 
D) Congress 
A) The Federal Reserve 
B) The U.S.department of the Treasury 
C) The National Bureau of Economic Research 
D) Congress

Question 12

Policymakers could neutralize all of the following except:

Accepted Answer

A) An increase in federal government spending on defense 
B) An increase in the price of oil 
C) A trade deficit 
D) A decrease in business confidence 
A) An increase in federal government spending on defense 
B) An increase in the price of oil 
C) A trade deficit 
D) A decrease in business confidence

Question 13

The assumption that prices and wages are flexible implies that the:

Accepted Answer

A) Short-run aggregate supply curve is irrelevant 
B) Short-run aggregate supply curve shifts slowly in response to deviations of current output from potential output 
C) Long-run aggregate supply curve is irrelevant 
D) Long-run aggregate supply curve could not shift 
A) Short-run aggregate supply curve is irrelevant 
B) Short-run aggregate supply curve shifts slowly in response to deviations of current output from potential output 
C) Long-run aggregate supply curve is irrelevant 
D) Long-run aggregate supply curve could not shift

Question 14

What is meant by saying that automatic fiscal policy is countercyclical?

Accepted Answer

Automatic fiscal policy includes unemplo

Question 15

Which of the following would be classified as a negative supply shock?

Accepted Answer

A) An increase in the legal minimum wage 
B) A decrease in the price of oil 
C) An increase in government purchases 
D) An increase in demand for exports 
A) An increase in the legal minimum wage 
B) A decrease in the price of oil 
C) An increase in government purchases 
D) An increase in demand for exports

Question 16

Consider the period from 1995 to 1999.The U.S.economy:

Accepted Answer

A) Experienced the great productivity slowdown 
B) Experienced increases in productivity that allowed the Fed the opportunity to raise the inflation rate 
C) Experienced increases in productivity that allowed the Fed the opportunity to let the inflation rate fall 
D) Saw its potential level of output decrease 
A) Experienced the great productivity slowdown 
B) Experienced increases in productivity that allowed the Fed the opportunity to raise the inflation rate 
C) Experienced increases in productivity that allowed the Fed the opportunity to let the inflation rate fall 
D) Saw its potential level of output decrease

Question 17

Why does it take so long for the declaration of the beginning and end of recessions in the U.S.and why is there a lack of clarity as to what is and is not a recession?

Accepted Answer

There is no official definition of a rec

Question 18

Why would most economists default first to monetary policy for stabilization before using fiscal policy?

Accepted Answer

Monetary policy offers a lot of advantag

Question 19

Real business cycle theory seeks to explain business cycle fluctuations by focusing on:

Accepted Answer

A) Shifts in potential output 
B) The inflexibility of prices and wages 
C) Aggregate demand 
D) Changes in monetary policy 
A) Shifts in potential output 
B) The inflexibility of prices and wages 
C) Aggregate demand 
D) Changes in monetary policy

Question 20

Fiscal policy suffers from the problem of:

Accepted Answer

A) Being formulated and implemented by politicians 
B) Being slow to implement 
C) Being influenced by special interest groups 
D) All of the answers given are correct 
A) Being formulated and implemented by politicians 
B) Being slow to implement 
C) Being influenced by special interest groups 
D) All of the answers given are correct

Exam 22: Understanding Business Cycle Fluctuations

According to the NBER, a severe decline in economic activity that lasted less than two quarters:

Fiscal policy can act just like monetary policy to offset shifts in the dynamic aggregate demand curve and stabilize inflation and output.Explain how the two policies could have the same effect.

Globalization and trade:

What explanations have been offered to account for the Great Moderation of the 1990s?

A review of economic data suggests that:

The U.S.economy has likely experienced:

If a negative supply shock is associated with a decline in potential output, keeping inflation at its target requires:

If inflation increases, this could be illustrated as a:

Which of the following is true?

Comparing monetary and fiscal policy:

"Official" recessions in the United States are declared by:

Policymakers could neutralize all of the following except:

The assumption that prices and wages are flexible implies that the:

What is meant by saying that automatic fiscal policy is countercyclical?

Which of the following would be classified as a negative supply shock?

Consider the period from 1995 to 1999.The U.S.economy:

Why does it take so long for the declaration of the beginning and end of recessions in the U.S.and why is there a lack of clarity as to what is and is not a recession?

Why would most economists default first to monetary policy for stabilization before using fiscal policy?

Real business cycle theory seeks to explain business cycle fluctuations by focusing on:

Fiscal policy suffers from the problem of:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: the Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Modern Monetary Policy and the Challenges Facing Central Bankers

Filters