Question 1

A recognition lag is

Accepted Answer

A)  the time it takes to see if that there has been a shock to the economy. 
B)  the time it takes the Fed or Congress to change economic policy. 
C)  the time it takes for a new economic policy to affect behavior in the economy. 
D)  none of the above 
A)  the time it takes to see if that there has been a shock to the economy. 
B)  the time it takes the Fed or Congress to change economic policy. 
C)  the time it takes for a new economic policy to affect behavior in the economy. 
D)  none of the above

Question 2

A stock market boom increases wealth and thus saving.

Accepted Answer

A) True 
 B)False

Question 3

If the risk associated with the business of a company rises, then its stock price will rise.

Accepted Answer

A) True 
 B)False

Question 4

Time lags that often erode effectiveness of monetary and fiscal policy measures represent

Accepted Answer

A)  the change in export and import prices. 
B)  the foreign response to price changes. 
C)  delays in the response of the economy to stabilization policy. 
D)  the change in exchange rates. 
A)  the change in export and import prices. 
B)  the foreign response to price changes. 
C)  delays in the response of the economy to stabilization policy. 
D)  the change in exchange rates.

Question 5

During periods of ________ growth and inflationary pressures, the Federal Reserve will likely decrease 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 6

Other things equal, high interest rates increase the government deficit because of higher government interest payments.

Accepted Answer

A) True 
 B)False

Question 7

In general, fiscal policy has a longer ________ lag than monetary policy but shorter ________ lag.

Accepted Answer

A)  recognition; response 
B)  implementation; recognition 
C)  implementation; response 
D)  response; implementation 
A)  recognition; response 
B)  implementation; recognition 
C)  implementation; response 
D)  response; implementation

Question 8

If you buy a bond from a firm, you are making a loan to the firm.

Accepted Answer

A) True 
 B)False

Question 9

Fiscal policy and monetary policy have a similar ________ time lag.

Accepted Answer

A)  implementation 
B)  structural 
C)  recognition 
D)  response 
A)  implementation 
B)  structural 
C)  recognition 
D)  response

Question 10

The implementation lag for fiscal policy is longer than for monetary policy because

Accepted Answer

A)  it takes longer for the Fed to act than Congress. 
B)  it takes longer for Congress to act than the Fed. 
C)  fiscal policy changes more quickly affect behavior than monetary policy changes. 
D)  monetary policy changes more quickly affect behavior than than fiscal policy changes. 
A)  it takes longer for the Fed to act than Congress. 
B)  it takes longer for Congress to act than the Fed. 
C)  fiscal policy changes more quickly affect behavior than monetary policy changes. 
D)  monetary policy changes more quickly affect behavior than than fiscal policy changes.

Question 11

Wealth and consumption rise when there is a stock market

Accepted Answer

A)  boom. 
B)  crash. 
C)  split. 
D)  merger. 
A)  boom. 
B)  crash. 
C)  split. 
D)  merger.

Question 12

Between the second quarter of 2006 and the first quarter of 2009, the value of housing wealth decreased by about $7 trillion.

Accepted Answer

A) True 
 B)False

Question 13

If the stock market crashes, investment will fall.

Accepted Answer

A) True 
 B)False

Question 14

From 2007 to 2009, the federal deficit as a percentage of GDP rose from about 2 percent to about 9 percent. This indicates that by 2009,

Accepted Answer

A)  all of the deficit was cyclical. 
B)  most of the deficit was cyclical. 
C)  all of the deficit was structural. 
D)  most of the deficit was structural. 
A)  all of the deficit was cyclical. 
B)  most of the deficit was cyclical. 
C)  all of the deficit was structural. 
D)  most of the deficit was structural.

Question 15

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 the condition of the economy at Point H is realized by policy makers when the economy is at Point I, policy is likely to be inappropriate due to

Accepted Answer

A)  crowding out. 
B)  the implementation lag. 
C)  the recognition lag. 
D)  the response lag. 
A)  crowding out. 
B)  the implementation lag. 
C)  the recognition lag. 
D)  the response lag.

Question 16

Which of the following is not a type of time lag regarding monetary and fiscal policy?

Accepted Answer

A)  reorganization lag 
B)  response lag 
C)  recognition lag 
D)  implementation lag 
A)  reorganization lag 
B)  response lag 
C)  recognition lag 
D)  implementation lag

Question 17

If the government spending multiplier were 4.2, a $1 billion increase in government spending would raise GDP by

Accepted Answer

A)  $2.1 billion after one year. 
B)  $1 billion after two years. 
C)  $3.2 billion after one year. 
D)  $4.2 billion after one year. 
A)  $2.1 billion after one year. 
B)  $1 billion after two years. 
C)  $3.2 billion after one year. 
D)  $4.2 billion after one year.

Question 18

If the expected future earnings of a company goes up, you would expect the price of its stock to

Accepted Answer

A)  rise. 
B)  fall. 
C)  be unaffected. 
D)  fall to zero. 
A)  rise. 
B)  fall. 
C)  be unaffected. 
D)  fall to zero.

Question 19

The time it takes to see if that there has been a shock to the economy is

Accepted Answer

A)  a recognition lag. 
B)  an implementation lag. 
C)  a response lag. 
D)  none of the above 
A)  a recognition lag. 
B)  an implementation lag. 
C)  a response lag. 
D)  none of the above

Question 20

Refer to the information provided in Figure 14.1 below to answer the questions that follow.   Figure 14.1
-Refer to Figure 14.1. Suppose it takes policy makers from time t5 to time t7 to see that the economy has started expanding. This is an example of

Accepted Answer

A)  a response lag. 
B)  an implementation lag. 
C)  a policy lag. 
D)  a recognition lag. 
A)  a response lag. 
B)  an implementation lag. 
C)  a policy lag. 
D)  a recognition lag.

Exam 14: Financial Crises, Stabilization, and Deficits

A recognition lag is

A stock market boom increases wealth and thus saving.

If the risk associated with the business of a company rises, then its stock price will rise.

Time lags that often erode effectiveness of monetary and fiscal policy measures represent

During periods of ________ growth and inflationary pressures, the Federal Reserve will likely decrease the money supply to ________ interest rates.

Other things equal, high interest rates increase the government deficit because of higher government interest payments.

In general, fiscal policy has a longer ________ lag than monetary policy but shorter ________ lag.

If you buy a bond from a firm, you are making a loan to the firm.

Fiscal policy and monetary policy have a similar ________ time lag.

The implementation lag for fiscal policy is longer than for monetary policy because

Wealth and consumption rise when there is a stock market

Between the second quarter of 2006 and the first quarter of 2009, the value of housing wealth decreased by about $7 trillion.

If the stock market crashes, investment will fall.

From 2007 to 2009, the federal deficit as a percentage of GDP rose from about 2 percent to about 9 percent. This indicates that by 2009,

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 the condition of the economy at Point H is realized by policy makers when the economy is at Point I, policy is likely to be inappropriate due to

Which of the following is not a type of time lag regarding monetary and fiscal policy?

If the government spending multiplier were 4.2, a $1 billion increase in government spending would raise GDP by

If the expected future earnings of a company goes up, you would expect the price of its stock to

The time it takes to see if that there has been a shock to the economy is

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. Suppose it takes policy makers from time t5 to time t7 to see that the economy has started expanding. This is an example of

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

During periods of growth and inflationary pressures, the Federal Reserve will likely decrease the money supply to interest rates.

In general, fiscal policy has a longer lag than monetary policy but shorter lag.

Refer to the information provided in Figure 14.1 below to answer the questions that follow. Figure 14.1 -Refer to Figure 14.1. Suppose it takes policy makers from time t₅ to time t₇ to see that the economy has started expanding. This is an example of