Question 1

The way the U.S. government borrows money to finance deficits is by the U.S. Treasury selling bills and bonds.

Accepted Answer

A) True 
 B)False

Question 2

Automatic destabilizing policies would tend to

Accepted Answer

A)  negate inflation and stimulate expansion. 
B)  promote the nation's exports. 
C)  reinforce inflationary pressures and deepen recessionary conditions. 
D)  decrease the nation's imports. 
A)  negate inflation and stimulate expansion. 
B)  promote the nation's exports. 
C)  reinforce inflationary pressures and deepen recessionary conditions. 
D)  decrease the nation's imports.

Question 3

A boom in the stock market affects the economy because

Accepted Answer

A)  firms invest more as demand grows. 
B)  consumers consume more as stock prices increase. 
C)  wealth of consumers grows as stock prices increase. 
D)  all of the above 
A)  firms invest more as demand grows. 
B)  consumers consume more as stock prices increase. 
C)  wealth of consumers grows as stock prices increase. 
D)  all of the above

Question 4

The gain that occurs when the owner of an asset actually sells it for more than she paid for it is called a(n)

Accepted Answer

A)  dividend. 
B)  realized capital gain. 
C)  coupon payment. 
D)  economic profit. 
A)  dividend. 
B)  realized capital gain. 
C)  coupon payment. 
D)  economic profit.

Question 5

Firms can finance capital spending by doing all of the following except

Accepted Answer

A)  selling stock in the company. 
B)  issuing bonds. 
C)  borrowing from a bank. 
D)  paying dividends. 
A)  selling stock in the company. 
B)  issuing bonds. 
C)  borrowing from a bank. 
D)  paying dividends.

Question 6

Under the ________, the federal deficit was to be eliminated by 1991.

Accepted Answer

A)  Gramm-Rudman-Hollings Act 
B)  McCain-Feingold bill 
C)  Clinton Deficit Eradication bill 
D)  Clayton Act 
A)  Gramm-Rudman-Hollings Act 
B)  McCain-Feingold bill 
C)  Clinton Deficit Eradication bill 
D)  Clayton Act

Question 7

Refer to the information provided in Figure 14.1 below to answer the questions that follow.   Figure 14.1
-Refer to Figure 14.1. If policy makers decide on a policy at Point t4 but it does not affect the economy until period t7, then the policy choice is likely to be

Accepted Answer

A)  destabilizing. 
B)  stabilizing. 
C)  optimal. 
D)  automatically stabilizing. 
A)  destabilizing. 
B)  stabilizing. 
C)  optimal. 
D)  automatically stabilizing.

Question 8

Refer to the information provided in Figure 14.2 below to answer the questions that follow.   Figure 14.2
-Refer to Figure 14.2. If the economy is currently at Point A and policy makers implement a policy to increase aggregate demand, the time the economy needs to make the adjustment is known as the

Accepted Answer

A)  implementation lag. 
B)  recognition lag. 
C)  response lag. 
D)  frictional lag. 
A)  implementation lag. 
B)  recognition lag. 
C)  response lag. 
D)  frictional lag.

Question 9

The way the U.S. government borrows money to finance deficits is by

Accepted Answer

A)  selling shares of stock in the government. 
B)  the U.S. Treasury selling bills and bonds. 
C)  purchasing foreign assets. 
D)  lowering interest rates. 
A)  selling shares of stock in the government. 
B)  the U.S. Treasury selling bills and bonds. 
C)  purchasing foreign assets. 
D)  lowering interest rates.

Question 10

During periods of ________ growth, the Federal Reserve will likely increase the money supply to ________ interest rates.

Accepted Answer

A)  slow; increase 
B)  slow; decrease 
C)  high; increase 
D)  high; decrease 
A)  slow; increase 
B)  slow; decrease 
C)  high; increase 
D)  high; decrease

Question 11

A stock holder is part owner of the firm.

Accepted Answer

A) True 
 B)False

Question 12

The enacted Gramm-Rudman-Hollings Act would tend to have an

Accepted Answer

A)  automatic stabilizing impact upon the economy. 
B)  automatic destabilizing impact upon the economy. 
C)  overall neutral impact upon the economy. 
D)  overall positive impact upon the economy during any stage of a business cycle. 
A)  automatic stabilizing impact upon the economy. 
B)  automatic destabilizing impact upon the economy. 
C)  overall neutral impact upon the economy. 
D)  overall positive impact upon the economy during any stage of a business cycle.

Question 13

The legislative intent of the Gramm-Rudman-Hollings Act was to increase the nation's spending on public transfers.

Accepted Answer

A) True 
 B)False

Question 14

Without deficit targeting, a negative demand shock results in a decrease in income, but with deficit targeting, a negative demand shock results in an increase in income.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following chances has the biggest expected return?

Accepted Answer

A)  a 40% chance of winning $200 and a 60% chance of winning $0 
B)  a 100% chance of getting $100 
C)  a 50% chance of winning $200, 30% chance of winning $400 and a 20% chance of losing $400 
D)  All of the above have the same expected return. 
A)  a 40% chance of winning $200 and a 60% chance of winning $0 
B)  a 100% chance of getting $100 
C)  a 50% chance of winning $200, 30% chance of winning $400 and a 20% chance of losing $400 
D)  All of the above have the same expected return.

Question 16

A firm issues bonds to

Accepted Answer

A)  borrow money. 
B)  earn a return. 
C)  lend money. 
D)  influence monetary policy. 
A)  borrow money. 
B)  earn a return. 
C)  lend money. 
D)  influence monetary policy.

Question 17

Other things being equal, if the government tries to stimulate the economy through tax cuts, the government deficit will decrease.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the information provided in Figure 14.1 below to answer the questions that follow.   Figure 14.1
-Refer to Figure 14.1. If policy makers decide at time t5 that the economy is expanding too fast, but the policy changes start affecting the economy at t7, then the policy will be

Accepted Answer

A)  inappropriate. 
B)  well timed. 
C)  ineffective. 
D)  optimal. 
A)  inappropriate. 
B)  well timed. 
C)  ineffective. 
D)  optimal.

Question 19

Corporations are required to pay dividends.

Accepted Answer

A) True 
 B)False

Question 20

Between the first quarter of 2000 and the first quarter of 2006, the value of housing wealth

Accepted Answer

A)  increased by about $500 billion. 
B)  increased by about $13 trillion. 
C)  decreased by about $600 billion. 
D)  decreased by about $7 trillion. 
A)  increased by about $500 billion. 
B)  increased by about $13 trillion. 
C)  decreased by about $600 billion. 
D)  decreased by about $7 trillion.

Exam 14: Financial Crises, Stabilization, and Deficits

The way the U.S. government borrows money to finance deficits is by the U.S. Treasury selling bills and bonds.

Automatic destabilizing policies would tend to

A boom in the stock market affects the economy because

The gain that occurs when the owner of an asset actually sells it for more than she paid for it is called a(n)

Firms can finance capital spending by doing all of the following except

Under the ________, the federal deficit was to be eliminated by 1991.

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. If policy makers decide on a policy at Point t4 but it does not affect the economy until period t7, then the policy choice is likely to be

Refer to the information provided in Figure 14.2 below to answer the questions that follow. Figure 14.2 -Refer to Figure 14.2. If the economy is currently at Point A and policy makers implement a policy to increase aggregate demand, the time the economy needs to make the adjustment is known as the

The way the U.S. government borrows money to finance deficits is by

During periods of ________ growth, the Federal Reserve will likely increase the money supply to ________ interest rates.

A stock holder is part owner of the firm.

The enacted Gramm-Rudman-Hollings Act would tend to have an

The legislative intent of the Gramm-Rudman-Hollings Act was to increase the nation's spending on public transfers.

Without deficit targeting, a negative demand shock results in a decrease in income, but with deficit targeting, a negative demand shock results in an increase in income.

Which of the following chances has the biggest expected return?

A firm issues bonds to

Other things being equal, if the government tries to stimulate the economy through tax cuts, the government deficit will decrease.

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. If policy makers decide at time t5 that the economy is expanding too fast, but the policy changes start affecting the economy at t7, then the policy will be

Corporations are required to pay dividends.

Between the first quarter of 2000 and the first quarter of 2006, the value of housing wealth

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

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

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

Filters

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. If policy makers decide on a policy at Point t₄ but it does not affect the economy until period t₇, then the policy choice is likely to be

During periods of growth, the Federal Reserve will likely increase the money supply to interest rates.

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. If policy makers decide at time t₅that the economy is expanding too fast, but the policy changes start affecting the economy at t₇, then the policy will be