Question 1

In the insider-outsider theory:

Accepted Answer

A)  outsiders are workers who retain employment during recession. 
B)  insiders are managers who have more information about their firms' performance than outsiders. 
C)  insiders are "principals" and outsiders are "agents." 
D)  outsiders are laid-off workers and other qualified unemployed workers. 
A)  outsiders are workers who retain employment during recession. 
B)  insiders are managers who have more information about their firms' performance than outsiders. 
C)  insiders are "principals" and outsiders are "agents." 
D)  outsiders are laid-off workers and other qualified unemployed workers.

Question 2

The traditional monetary rule is the idea that:

Accepted Answer

A)  the annual rate of increase in the money supply should be equal to the potential annual growth rate of real GDP. 
B)  the annual rate of increase in the money supply should be equal to the long-term increase in the price level. 
C)  an expansionary fiscal policy should always be accompanied by an easy monetary policy. 
D)  monetary policy only affects the economy 6 to 9 months after the money supply is changed. 
A)  the annual rate of increase in the money supply should be equal to the potential annual growth rate of real GDP. 
B)  the annual rate of increase in the money supply should be equal to the long-term increase in the price level. 
C)  an expansionary fiscal policy should always be accompanied by an easy monetary policy. 
D)  monetary policy only affects the economy 6 to 9 months after the money supply is changed.

Question 3

If a certain household earns and spends $24,000 per year and,on the average,holds a money balance of $6,000,then the velocity of money for this household is:

Accepted Answer

A)  6. 
B)  1/6. 
C)  4. 
D)  1/4. 
A)  6. 
B)  1/6. 
C)  4. 
D)  1/4.

Question 4

In the equation of exchange,the nominal GDP is designated by:

Accepted Answer

A)  PQ/M. 
B)  MV/P. 
C)  PQ. 
D)  MV. 
A)  PQ/M. 
B)  MV/P. 
C)  PQ. 
D)  MV.

Question 5

The velocity of money is equal to:

Accepted Answer

A)  1/MPS. 
B)  1/reserve ratio. 
C)  M/GDP. 
D)  none of these. 
A)  1/MPS. 
B)  1/reserve ratio. 
C)  M/GDP. 
D)  none of these.

Question 6

Which of the following groups of economists believe that cost-push inflation is impossible in the long run without excessive monetary growth?

Accepted Answer

A)  Mainstream economists and monetarists. 
B)  Mainstream economists and rational expectations economists. 
C)  Monetarists and rational expectations economists. 
D)  Mainstream economists,monetarists,and rational expectations economists. 
A)  Mainstream economists and monetarists. 
B)  Mainstream economists and rational expectations economists. 
C)  Monetarists and rational expectations economists. 
D)  Mainstream economists,monetarists,and rational expectations economists.

Question 7

In the equation of exchange,V indicates the:

Accepted Answer

A)  value or purchasing power of the dollar. 
B)  number of times per year the average dollar is spent. 
C)  quantity of real output. 
D)  reciprocal of the price level. 
A)  value or purchasing power of the dollar. 
B)  number of times per year the average dollar is spent. 
C)  quantity of real output. 
D)  reciprocal of the price level.

Question 8

According to mainstream macroeconomists,U.S.macro instability has resulted from:

Accepted Answer

A)  investment "booms" and "busts" and,occasionally,adverse aggregate supply shocks. 
B)  adherence by the Fed to a monetary rule. 
C)  government's attempts to balance its budget. 
D)  wide fluctuations in net exports. 
A)  investment "booms" and "busts" and,occasionally,adverse aggregate supply shocks. 
B)  adherence by the Fed to a monetary rule. 
C)  government's attempts to balance its budget. 
D)  wide fluctuations in net exports.

Question 9

Monetarists say that the relationship between the amount of money that households and businesses want to hold and the level of national output and income:

Accepted Answer

A)  has decreased historically because of increased accessibility to credit. 
B)  rises during recession and falls during periods of full employment. 
C)  falls during recession and rises during periods of full employment. 
D)  is relatively stable. 
A)  has decreased historically because of increased accessibility to credit. 
B)  rises during recession and falls during periods of full employment. 
C)  falls during recession and rises during periods of full employment. 
D)  is relatively stable.

Question 10

According to monetarists,a change in the money supply changes:

Accepted Answer

A)  the velocity of money,which in turn changes the nominal GDP. 
B)  investment spending,which in turn changes the nominal GDP. 
C)  the interest rate,which in turn changes the nominal GDP. 
D)  aggregate demand,which in turn changes the nominal GDP. 
A)  the velocity of money,which in turn changes the nominal GDP. 
B)  investment spending,which in turn changes the nominal GDP. 
C)  the interest rate,which in turn changes the nominal GDP. 
D)  aggregate demand,which in turn changes the nominal GDP.

Question 11

Which of the following groups of economists is most likely to favor annually balanced federal budgets?

Accepted Answer

A)  Mainstream economists. 
B)  Supply-side economists. 
C)  Rational expectations economists. 
D)  Functional finance economists. 
A)  Mainstream economists. 
B)  Supply-side economists. 
C)  Rational expectations economists. 
D)  Functional finance economists.

Question 12

Mainstream macroeconomists see two main sources of macroeconomic instability: changes in investment spending and,occasionally,adverse aggregate supply shocks.

Accepted Answer

A) True 
 B)False

Question 13

Monetarists believe that:

Accepted Answer

A)  prices and wages are inflexible or sticky. 
B)  both product and resource markets are monopolistic. 
C)  velocity is relatively stable. 
D)  the economy is more stable when active fiscal and monetary policy are used. 
A)  prices and wages are inflexible or sticky. 
B)  both product and resource markets are monopolistic. 
C)  velocity is relatively stable. 
D)  the economy is more stable when active fiscal and monetary policy are used.

Question 14

In new classical economics,"a price-level surprise":

Accepted Answer

A)  has no effect on the economy. 
B)  causes a temporary change in real output. 
C)  causes a permanent change in real output. 
D)  can never occur since people correctly anticipate the future. 
A)  has no effect on the economy. 
B)  causes a temporary change in real output. 
C)  causes a permanent change in real output. 
D)  can never occur since people correctly anticipate the future.

Question 15

According to mainstream economists,a restrictive monetary policy might be frustrated,wholly or in part,by:

Accepted Answer

A)  Treasury sales of gold bullion. 
B)  a Treasury surplus. 
C)  the desire of households and businesses to hold smaller money balances. 
D)  a decrease in V. 
A)  Treasury sales of gold bullion. 
B)  a Treasury surplus. 
C)  the desire of households and businesses to hold smaller money balances. 
D)  a decrease in V.

Question 16

Suppose that,as expected,aggregate demand in the economy sharply declines.New classical economists say that the price level will _____________ and real output will ____________.

Accepted Answer

A)  fall;remain constant 
B)  fall;fall 
C)  remain constant;fall 
D)  remain constant;rise 
A)  fall;remain constant 
B)  fall;fall 
C)  remain constant;fall 
D)  remain constant;rise

Question 17

The real-business-cycle theory holds that business fluctuations are caused by:

Accepted Answer

A)  factors affecting aggregate demand. 
B)  incorrectly anticipated government stabilization policies. 
C)  significant changes in technology and resource availability. 
D)  "stop-and-go" monetary policies. 
A)  factors affecting aggregate demand. 
B)  incorrectly anticipated government stabilization policies. 
C)  significant changes in technology and resource availability. 
D)  "stop-and-go" monetary policies.

Question 18

Modern mainstream macroeconomists agree with the monetarists that:

Accepted Answer

A)  the Fed should increase the money supply at a fixed annual rate. 
B)  velocity is highly stable. 
C)  fiscal policy is largely ineffective. 
D)  "money matters" in the macroeconomy. 
A)  the Fed should increase the money supply at a fixed annual rate. 
B)  velocity is highly stable. 
C)  fiscal policy is largely ineffective. 
D)  "money matters" in the macroeconomy.

Question 19

The real-business-cycle theory:

Accepted Answer

A)  is a monetarist view of the business cycle. 
B)  is the mainstream view of the business cycle. 
C)  assumes that the supply of money is constant. 
D)  says that macro instability results from shifts in the long-run aggregate supply curve. 
A)  is a monetarist view of the business cycle. 
B)  is the mainstream view of the business cycle. 
C)  assumes that the supply of money is constant. 
D)  says that macro instability results from shifts in the long-run aggregate supply curve.

Question 20

At the equilibrium level of GDP:

Accepted Answer

A)  MV = nominal GDP. 
B)  MV = real GDP. 
C)  M = nominal GDP. 
D)  V = 1/MPS. 
A)  MV = nominal GDP. 
B)  MV = real GDP. 
C)  M = nominal GDP. 
D)  V = 1/MPS.

Exam 38: Current Issues in Macro Theory and Policy

In the insider-outsider theory:

The traditional monetary rule is the idea that:

If a certain household earns and spends $24,000 per year and,on the average,holds a money balance of $6,000,then the velocity of money for this household is:

In the equation of exchange,the nominal GDP is designated by:

The velocity of money is equal to:

Which of the following groups of economists believe that cost-push inflation is impossible in the long run without excessive monetary growth?

In the equation of exchange,V indicates the:

According to mainstream macroeconomists,U.S.macro instability has resulted from:

Monetarists say that the relationship between the amount of money that households and businesses want to hold and the level of national output and income:

According to monetarists,a change in the money supply changes:

Which of the following groups of economists is most likely to favor annually balanced federal budgets?

Mainstream macroeconomists see two main sources of macroeconomic instability: changes in investment spending and,occasionally,adverse aggregate supply shocks.

Monetarists believe that:

In new classical economics,"a price-level surprise":

According to mainstream economists,a restrictive monetary policy might be frustrated,wholly or in part,by:

Suppose that,as expected,aggregate demand in the economy sharply declines.New classical economists say that the price level will _____________ and real output will ____________.

The real-business-cycle theory holds that business fluctuations are caused by:

Modern mainstream macroeconomists agree with the monetarists that:

The real-business-cycle theory:

At the equilibrium level of GDP:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters

Suppose that,as expected,aggregate demand in the economy sharply declines.New classical economists say that the price level will _ and real output will .