Question 1

A tax cut targeted at ---- people may have a bigger effect because ​

Accepted Answer

A) ​poorer;poorer people tend to spend a higher share of their income. 
B) ​poorer;poorer people tend to spend a lower share of their income. 
C) ​wealthier;wealthier people tend to spend a higher share of their income. 
D) ​wealthier;wealthier people tend to spend a lower share of their income. 
A) ​poorer;poorer people tend to spend a higher share of their income. 
B) ​poorer;poorer people tend to spend a lower share of their income. 
C) ​wealthier;wealthier people tend to spend a higher share of their income. 
D) ​wealthier;wealthier people tend to spend a lower share of their income. A

Question 2

What actions could be taken to stabilize output in response to a large decrease in U.S.net exports?

Accepted Answer

A) increase taxes or increase the money supply 
B) increase taxes or decrease the money supply 
C) decrease taxes or increase the money supply 
D) decrease taxes or decrease the money supply 
A) increase taxes or increase the money supply 
B) increase taxes or decrease the money supply 
C) decrease taxes or increase the money supply 
D) decrease taxes or decrease the money supply C

Question 3

Suppose aggregate demand shifts to the left and policymakers want to stabilize output.What can they do?

Accepted Answer

A) repeal an investment tax credit or increase the money supply 
B) repeal an investment tax credit or decrease the money supply 
C) institute an investment tax credit or increase the money supply 
D) institute an investment tax credit or decrease the money supply 
A) repeal an investment tax credit or increase the money supply 
B) repeal an investment tax credit or decrease the money supply 
C) institute an investment tax credit or increase the money supply 
D) institute an investment tax credit or decrease the money supply C

Question 4

Which of the following statements generates the greatest amount of disagreement among economists?

Accepted Answer

A) Increases in the money supply shift aggregate demand to the right. 
B) In the long run,increases in the money supply increase prices,but not output. 
C) Recessions are associated with decreases in consumption,investment,and employment. 
D) Government should use fiscal policy to try to stabilize the economy. 
A) Increases in the money supply shift aggregate demand to the right. 
B) In the long run,increases in the money supply increase prices,but not output. 
C) Recessions are associated with decreases in consumption,investment,and employment. 
D) Government should use fiscal policy to try to stabilize the economy.

Question 5

Figure 34-9  
-Refer to Figure 34-9.Suppose the economy is currently at point A.To restore full employment,the Federal Reserve should

Accepted Answer

A) purchase government bonds,which will increase the money supply. 
B) purchase government bonds,which will reduce the money supply. 
C) sell government bonds,which will increase the money supply. 
D) sell government bonds,which will reduce the money supply. 
A) purchase government bonds,which will increase the money supply. 
B) purchase government bonds,which will reduce the money supply. 
C) sell government bonds,which will increase the money supply. 
D) sell government bonds,which will reduce the money supply.

Question 6

Macroeconomic forecasts are

Accepted Answer

A) precise;this makes policy lags less relevant. 
B) precise;this makes policy lags more relevant. 
C) imprecise;this makes policy lags less relevant. 
D) imprecise;this makes policy lags more relevant. 
A) precise;this makes policy lags less relevant. 
B) precise;this makes policy lags more relevant. 
C) imprecise;this makes policy lags less relevant. 
D) imprecise;this makes policy lags more relevant.

Question 7

Monetary policy affects the economy with a long lag,in part because

Accepted Answer

A) proposals to change monetary policy must go through both the House and Senate before being sent to the president. 
B) monetary policy works through changes in interest rates,and the Fed does not have the ability to change interest rates quickly. 
C) changes in interest rates primarily influence consumption spending,and households make consumption plans far in advance. 
D) changes in interest rates primarily influence investment spending,and firms make investment plans far in advance. 
A) proposals to change monetary policy must go through both the House and Senate before being sent to the president. 
B) monetary policy works through changes in interest rates,and the Fed does not have the ability to change interest rates quickly. 
C) changes in interest rates primarily influence consumption spending,and households make consumption plans far in advance. 
D) changes in interest rates primarily influence investment spending,and firms make investment plans far in advance.

Question 8

The Employment Act of 1946

Accepted Answer

A) implies that the government should avoid being a cause of economic fluctuations. 
B) implies that the government should respond to changes in the private economy to stabilize aggregate demand. 
C) reflected the ideas promoted in Keynes's influential book,The General Theory of Employment,Interest,and Money. 
D) All of the above are correct 
A) implies that the government should avoid being a cause of economic fluctuations. 
B) implies that the government should respond to changes in the private economy to stabilize aggregate demand. 
C) reflected the ideas promoted in Keynes's influential book,The General Theory of Employment,Interest,and Money. 
D) All of the above are correct

Question 9

Which of the following is not an automatic stabilizer?

Accepted Answer

A) the minimum wage 
B) the unemployment compensation system 
C) the federal income tax 
D) the welfare system 
A) the minimum wage 
B) the unemployment compensation system 
C) the federal income tax 
D) the welfare system

Question 10

Keynes argued that

Accepted Answer

A) irrational waves of pessimism cause decreases in aggregate demand and increases in unemployment. 
B) irrational waves of optimism cause decreases in aggregate demand and decreases in aggregate supply. 
C) changes in business and consumer expectations generally stabilize the economy. 
D) All of the above are correct. 
A) irrational waves of pessimism cause decreases in aggregate demand and increases in unemployment. 
B) irrational waves of optimism cause decreases in aggregate demand and decreases in aggregate supply. 
C) changes in business and consumer expectations generally stabilize the economy. 
D) All of the above are correct.

Question 11

Suppose there is a tax increase.To stabilize output,the Federal Reserve will

Accepted Answer

A) increase government spending. 
B) increase the money supply. 
C) decrease government spending. 
D) decrease the money supply. 
A) increase government spending. 
B) increase the money supply. 
C) decrease government spending. 
D) decrease the money supply.

Question 12

Keynes argued that aggregate demand is

Accepted Answer

A) stable,because the economy tends to return to its long-run equilibrium quickly after any disturbance to aggregate demand. 
B) stable,because changes in consumption are mostly offset by changes in investment and vice versa. 
C) unstable,because waves of pessimism and optimism create fluctuations in aggregate demand. 
D) unstable,because of long and variable policy lags that worsen economic fluctuations. 
A) stable,because the economy tends to return to its long-run equilibrium quickly after any disturbance to aggregate demand. 
B) stable,because changes in consumption are mostly offset by changes in investment and vice versa. 
C) unstable,because waves of pessimism and optimism create fluctuations in aggregate demand. 
D) unstable,because of long and variable policy lags that worsen economic fluctuations.

Question 13

Other things the same,automatic stabilizers tend to

Accepted Answer

A) raise expenditures during expansions and recessions. 
B) lower expenditures during expansions and recessions. 
C) raise expenditures during recessions and lower expenditures during expansions. 
D) raise expenditures during expansions and lower expenditures during recessions. 
A) raise expenditures during expansions and recessions. 
B) lower expenditures during expansions and recessions. 
C) raise expenditures during recessions and lower expenditures during expansions. 
D) raise expenditures during expansions and lower expenditures during recessions.

Question 14

Keynes used the term "animal spirits" to refer to

Accepted Answer

A) policy makers harming the economy in the pursuit of self interest. 
B) arbitrary changes in attitudes of household and firms. 
C) mean-spirited economists who believed in the classical dichotomy. 
D) firms' relentless efforts to maximize profits. 
A) policy makers harming the economy in the pursuit of self interest. 
B) arbitrary changes in attitudes of household and firms. 
C) mean-spirited economists who believed in the classical dichotomy. 
D) firms' relentless efforts to maximize profits.

Question 15

Most recessions and depressions

Accepted Answer

A) are accurately forecasted. 
B) usually occur with ample advance warning. 
C) cause falling unemployment. 
D) occur with little advance warning. 
A) are accurately forecasted. 
B) usually occur with ample advance warning. 
C) cause falling unemployment. 
D) occur with little advance warning.

Question 16

The Employment Act of 1946 states that

Accepted Answer

A) the Fed should use monetary policy only to control the rate of inflation. 
B) the government should promote full employment and production. 
C) the government should periodically increase the minimum wage and unemployment insurance benefits. 
D) All of the above are correct. 
A) the Fed should use monetary policy only to control the rate of inflation. 
B) the government should promote full employment and production. 
C) the government should periodically increase the minimum wage and unemployment insurance benefits. 
D) All of the above are correct.

Question 17

Figure 34-9  
-Refer to Figure 34-9.Suppose the economy is currently at point A.To restore full employment,the appropriate fiscal response

Accepted Answer

A) requires the central bank to purchase government bonds,which will increase the money supply. 
B) is a reduction in government purchases. 
C) is a reduction in taxes. 
D) requires the central bank to sell government bonds,which will reduce the money supply. 
A) requires the central bank to purchase government bonds,which will increase the money supply. 
B) is a reduction in government purchases. 
C) is a reduction in taxes. 
D) requires the central bank to sell government bonds,which will reduce the money supply.

Question 18

If businesses and consumers become pessimistic,the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

Accepted Answer

A) increasing the money supply,which raises interest rates. 
B) increasing the money supply,which lowers interest rates. 
C) decreasing the money supply,which raises interest rates. 
D) decreasing the money supply,which lowers interest rates. 
A) increasing the money supply,which raises interest rates. 
B) increasing the money supply,which lowers interest rates. 
C) decreasing the money supply,which raises interest rates. 
D) decreasing the money supply,which lowers interest rates.

Question 19

Which of the following policies would be advocated by proponents of stabilization policy when the economy is experiencing severe unemployment?

Accepted Answer

A) a decrease in the money supply 
B) an increase in tax rates 
C) an increase in government purchases 
D) an increase in interest rates. 
A) a decrease in the money supply 
B) an increase in tax rates 
C) an increase in government purchases 
D) an increase in interest rates.

Question 20

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009.At that time,the president's economists estimated the multiplier to be

Accepted Answer

A) 3.2 for government purchases and 2.0 for tax cuts. 
B) 2.4 for government purchases and 1.4 for tax cuts. 
C) 1.6 for government purchases and 1.0 for tax cuts. 
D) 1.6 for government purchases and 0.4 for tax cuts. 
A) 3.2 for government purchases and 2.0 for tax cuts. 
B) 2.4 for government purchases and 1.4 for tax cuts. 
C) 1.6 for government purchases and 1.0 for tax cuts. 
D) 1.6 for government purchases and 0.4 for tax cuts.

Exam 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: Using Policy to Stabilize the Economy

A tax cut targeted at ---- people may have a bigger effect because ​

What actions could be taken to stabilize output in response to a large decrease in U.S.net exports?

Suppose aggregate demand shifts to the left and policymakers want to stabilize output.What can they do?

Which of the following statements generates the greatest amount of disagreement among economists?

Figure 34-9 -Refer to Figure 34-9.Suppose the economy is currently at point A.To restore full employment,the Federal Reserve should

Macroeconomic forecasts are

Monetary policy affects the economy with a long lag,in part because

The Employment Act of 1946

Which of the following is not an automatic stabilizer?

Keynes argued that

Suppose there is a tax increase.To stabilize output,the Federal Reserve will

Keynes argued that aggregate demand is

Other things the same,automatic stabilizers tend to

Keynes used the term "animal spirits" to refer to

Most recessions and depressions

The Employment Act of 1946 states that

Figure 34-9 -Refer to Figure 34-9.Suppose the economy is currently at point A.To restore full employment,the appropriate fiscal response

If businesses and consumers become pessimistic,the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

Which of the following policies would be advocated by proponents of stabilization policy when the economy is experiencing severe unemployment?

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009.At that time,the president's economists estimated the multiplier to be

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

A tax cut targeted at ---- people may have a bigger effect because