Question 1

Velocity will be constant if the demand for money with respect to the interest rate is

Accepted Answer

A)  unitary elastic. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  elastic, but not perfectly elastic. 
A)  unitary elastic. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  elastic, but not perfectly elastic.

Question 2

If real output is $50 billion, the price level is 10, and velocity is 5, what is the stock of money?

Accepted Answer

A)  $1 billion 
B)  $25 billion 
C)  $100 billion 
D)  $2,500 billion 
A)  $1 billion 
B)  $25 billion 
C)  $100 billion 
D)  $2,500 billion

Question 3

The new classical theoretical critique of the existing macroeconomic models is based on

Accepted Answer

A)  the way people form their expectations. 
B)  the nature of the tradeoff between inflation and growth. 
C)  wages and labor market equilibrium. 
D)  the link between the money market and the goods market. 
A)  the way people form their expectations. 
B)  the nature of the tradeoff between inflation and growth. 
C)  wages and labor market equilibrium. 
D)  the link between the money market and the goods market.

Question 4

MV = PY represents the

Accepted Answer

A)  quantity theory of money. 
B)  Keynesian equation of equality. 
C)  banking equilibrium. 
D)  federal funds equation. 
A)  quantity theory of money. 
B)  Keynesian equation of equality. 
C)  banking equilibrium. 
D)  federal funds equation.

Question 5

According to supply-side economists, as tax rates are increased, labor supply should decrease. This implies that the substitution effect of a wage change ________ the income effect of a wage change.

Accepted Answer

A)  is less than 
B)  is greater than 
C)  is equal to 
D)  has no impact on 
A)  is less than 
B)  is greater than 
C)  is equal to 
D)  has no impact on

Question 6

According to the Lucas supply function, ________ affect(s) both actual and expected price levels in the same way.

Accepted Answer

A)  any announced policy change 
B)  any unanticipated policy change 
C)  only announced fiscal policy changes 
D)  only announced monetary policy changes 
A)  any announced policy change 
B)  any unanticipated policy change 
C)  only announced fiscal policy changes 
D)  only announced monetary policy changes

Question 7

According to the Lucas supply function, workers who experience a positive price surprise will work fewer hours when

Accepted Answer

A)  there is no substitution effect from a positive price surprise. 
B)  there is no income effect from a positive price surprise. 
C)  the substitution effect dominates the income effect. 
D)  the income effect dominates the substitution effect. 
A)  there is no substitution effect from a positive price surprise. 
B)  there is no income effect from a positive price surprise. 
C)  the substitution effect dominates the income effect. 
D)  the income effect dominates the substitution effect.

Question 8

Monetarists believe that the underlying economy is stable.

Accepted Answer

A) True 
 B)False

Question 9

According to the Lucas supply function, if people's expectations are ________, then the amount of output they produce is not related to the price level.

Accepted Answer

A)  on target 
B)  too low 
C)  too high 
D)  none of the above 
A)  on target 
B)  too low 
C)  too high 
D)  none of the above

Question 10

Refer to the information provided in Figure 17.2 below to answer the questions that follow.   Figure 17.2
-Refer to Figure 17.2. According to the monetarists, a recession can be caused when

Accepted Answer

A)  AD1 shifts to the right. 
B)  AD1 shifts to the left. 
C)  AS1 shifts to the left. 
D)  LRAS shifts to the left. 
A)  AD1 shifts to the right. 
B)  AD1 shifts to the left. 
C)  AS1 shifts to the left. 
D)  LRAS shifts to the left.

Question 11

According to the new classical theory, economic policies are

Accepted Answer

A)  effective only if anticipated. 
B)  ineffective if unanticipated. 
C)  ineffective if anticipated. 
D)  ineffective, whether anticipated or unanticipated. 
A)  effective only if anticipated. 
B)  ineffective if unanticipated. 
C)  ineffective if anticipated. 
D)  ineffective, whether anticipated or unanticipated.

Question 12

The real business cycle theory places little emphasis on shocks to technology.

Accepted Answer

A) True 
 B)False

Question 13

Over the past 50 years, the velocity of money has remained very stable in the United States.

Accepted Answer

A) True 
 B)False

Question 14

The Keynesian hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.

Accepted Answer

A) True 
 B)False

Question 15

Velocity is ________ if the demand for money depends on the interest rate.

Accepted Answer

A)  constant 
B)  zero 
C)  infinite 
D)  not constant 
A)  constant 
B)  zero 
C)  infinite 
D)  not constant

Question 16

According to the new classical theory, economic policies are effective

Accepted Answer

A)  only if they are unanticipated. 
B)  only if they are anticipated. 
C)  only if they are formed with rational expectations. 
D)  only if they are expansionary in nature. 
A)  only if they are unanticipated. 
B)  only if they are anticipated. 
C)  only if they are formed with rational expectations. 
D)  only if they are expansionary in nature.

Question 17

The Fed decreases money supply. In this case, the time lag problem of monetary policy may

Accepted Answer

A)  increase the velocity of money in the short run. 
B)  increase real GDP in the short run. 
C)  decrease the velocity of money in the short run. 
D)  none of the above 
A)  increase the velocity of money in the short run. 
B)  increase real GDP in the short run. 
C)  decrease the velocity of money in the short run. 
D)  none of the above

Question 18

Traditional treatments of macroeconomic expectations are not consistent with the assumptions of

Accepted Answer

A)  Keynesian policy. 
B)  fiscal policy. 
C)  microeconomics. 
D)  all of the above 
A)  Keynesian policy. 
B)  fiscal policy. 
C)  microeconomics. 
D)  all of the above

Question 19

The velocity of money is

Accepted Answer

A)  the number of times a dollar bill exchanges hands in a year. 
B)  the ratio of deposits to money supply. 
C)  the number of times the Fed increases money supply in a year. 
D)  the relationship between money supply and money demand. 
A)  the number of times a dollar bill exchanges hands in a year. 
B)  the ratio of deposits to money supply. 
C)  the number of times the Fed increases money supply in a year. 
D)  the relationship between money supply and money demand.

Question 20

According to the Laffer curve, an increase in the tax rate will increase tax revenue

Accepted Answer

A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the farthest point out on the curve. 
D)  no matter the location of the economy on the curve. 
A)  if the economy is on the positively sloped section of the curve. 
B)  if the economy is on the negatively sloped section of the curve. 
C)  if the economy is at the farthest point out on the curve. 
D)  no matter the location of the economy on the curve.

Exam 17: Alternative Views in Macroeconomics

Velocity will be constant if the demand for money with respect to the interest rate is

If real output is $50 billion, the price level is 10, and velocity is 5, what is the stock of money?

The new classical theoretical critique of the existing macroeconomic models is based on

MV = PY represents the

According to supply-side economists, as tax rates are increased, labor supply should decrease. This implies that the substitution effect of a wage change ________ the income effect of a wage change.

According to the Lucas supply function, ________ affect(s) both actual and expected price levels in the same way.

According to the Lucas supply function, workers who experience a positive price surprise will work fewer hours when

Monetarists believe that the underlying economy is stable.

According to the Lucas supply function, if people's expectations are ________, then the amount of output they produce is not related to the price level.

Refer to the information provided in Figure 17.2 below to answer the questions that follow. Figure 17.2 -Refer to Figure 17.2. According to the monetarists, a recession can be caused when

According to the new classical theory, economic policies are

The real business cycle theory places little emphasis on shocks to technology.

Over the past 50 years, the velocity of money has remained very stable in the United States.

The Keynesian hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.

Velocity is ________ if the demand for money depends on the interest rate.

According to the new classical theory, economic policies are effective

The Fed decreases money supply. In this case, the time lag problem of monetary policy may

Traditional treatments of macroeconomic expectations are not consistent with the assumptions of

The velocity of money is

According to the Laffer curve, an increase in the tax rate will increase tax revenue

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

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