Question 1

A negative demand shock could cause an increase in U.S. exports.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following chances has the biggest expected return?

Accepted Answer

A)  a 100% chance of getting $1,500 
B)  a 60% chance of winning $3,000 and a 40% chance of winning $0 
C)  a 50% chance of winning $3,000, 20% chance of winning $6,000 and a 30% chance of losing $6,000 
D)  All of the above have the same expected return. 
A)  a 100% chance of getting $1,500 
B)  a 60% chance of winning $3,000 and a 40% chance of winning $0 
C)  a 50% chance of winning $3,000, 20% chance of winning $6,000 and a 30% chance of losing $6,000 
D)  All of the above have the same expected return.

Question 3

A boom in the stock market affects the economy because

Accepted Answer

A)  wealth of households grow as the stock market booms. 
B)  brokers make a lot of money. 
C)  the Fed feels it can increase the money supply without worry. 
D)  the stock market boom takes pressure off social security. 
A)  wealth of households grow as the stock market booms. 
B)  brokers make a lot of money. 
C)  the Fed feels it can increase the money supply without worry. 
D)  the stock market boom takes pressure off social security.

Question 4

All of the following are stock price indices except

Accepted Answer

A)  the Dow Jones Industrial Average. 
B)  the Fortune 500. 
C)  the NASDAQ composite. 
D)  the S&P 500. 
A)  the Dow Jones Industrial Average. 
B)  the Fortune 500. 
C)  the NASDAQ composite. 
D)  the S&P 500.

Question 5

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 economy is actually at Point C but policy makers think that it is still at Point B, this is an example of

Accepted Answer

A)  economic policies ineffectiveness. 
B)  recognition lag. 
C)  implementation lag. 
D)  response lag. 
A)  economic policies ineffectiveness. 
B)  recognition lag. 
C)  implementation lag. 
D)  response lag.

Question 6

If the stock market booms, investment will rise.

Accepted Answer

A) True 
 B)False

Question 7

Other things being equal, the larger the expected future dividends to be received from stock ownership, the higher the current stock price.

Accepted Answer

A) True 
 B)False

Question 8

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 t2 to time t4 to take an action to stimulate the economy. This is an example of

Accepted Answer

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

Question 9

If investors begin to perceive that government bonds being sold to finance a deficit have become more risky, the interest rate the country must pay on its bonds will decrease.

Accepted Answer

A) True 
 B)False

Question 10

When you can sell an asset for more than you paid for it, you have earned a

Accepted Answer

A)  capital gain. 
B)  dividend. 
C)  retained earning. 
D)  perpetuity asset. 
A)  capital gain. 
B)  dividend. 
C)  retained earning. 
D)  perpetuity asset.

Question 11

The ________ sought to reduce the federal deficit by $36 billion each year between 1987 and 1991.

Accepted Answer

A)  Sherman Antitrust Act 
B)  McCain-Feingold bill 
C)  Cellar-Kefauver Act 
D)  Gramm-Rudman-Hollings Act 
A)  Sherman Antitrust Act 
B)  McCain-Feingold bill 
C)  Cellar-Kefauver Act 
D)  Gramm-Rudman-Hollings Act

Question 12

Between the second quarter of 2006 and the first quarter of 2009, the value of housing wealth

Accepted Answer

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

Question 13

The Standard & Poor's 500 index is a broad index of the 500 largest firms from the New York Stock Exchange, the NASDAQ stock market and the American Stock Exchange.

Accepted Answer

A) True 
 B)False

Question 14

Because Congress decides on the federal government's budget during the year prior to when it will take effect, the tax laws and spending programs embodied in the budget ________ once they are in place. Because of this, the implementation lag for fiscal policy is ________.

Accepted Answer

A)  are easy to change; often quite long 
B)  are hard to change; often quite long 
C)  are easy to change; usually very short 
D)  are hard to change; usually very short 
A)  are easy to change; often quite long 
B)  are hard to change; often quite long 
C)  are easy to change; usually very short 
D)  are hard to change; usually very short

Question 15

The return on the money risked on a share of stock is called

Accepted Answer

A)  interest. 
B)  dividends. 
C)  retained earnings. 
D)  capital gains. 
A)  interest. 
B)  dividends. 
C)  retained earnings. 
D)  capital gains.

Question 16

The boom in housing prices from 2000-2005 contributed to the expansion that followed the 2000-2001 recession.

Accepted Answer

A) True 
 B)False

Question 17

The farther into the future a stock dividend is expected to be paid, the less the stock price will be discounted.

Accepted Answer

A) True 
 B)False

Question 18

The multiplier means that the response to fiscal policy is not completed immediately.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

If the federal government had not bailed out the large financial institutions during the financial crisis of 2008-2009,

Accepted Answer

A)  the negative wealth effect would likely have been smaller. 
B)  the positive wealth effect would likely have been smaller. 
C)  the negative wealth effect would likely have been larger. 
D)  the positive wealth effect would likely have been larger. 
A)  the negative wealth effect would likely have been smaller. 
B)  the positive wealth effect would likely have been smaller. 
C)  the negative wealth effect would likely have been larger. 
D)  the positive wealth effect would likely have been larger.

Exam 14: Financial Crises, Stabilization, and Deficits

A negative demand shock could cause an increase in U.S. exports.

Which of the following chances has the biggest expected return?

A boom in the stock market affects the economy because

All of the following are stock price indices except

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 economy is actually at Point C but policy makers think that it is still at Point B, this is an example of

If the stock market booms, investment will rise.

Other things being equal, the larger the expected future dividends to be received from stock ownership, the higher the current stock price.

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 t2 to time t4 to take an action to stimulate the economy. This is an example of

If investors begin to perceive that government bonds being sold to finance a deficit have become more risky, the interest rate the country must pay on its bonds will decrease.

When you can sell an asset for more than you paid for it, you have earned a

The ________ sought to reduce the federal deficit by $36 billion each year between 1987 and 1991.

Between the second quarter of 2006 and the first quarter of 2009, the value of housing wealth

The Standard & Poor's 500 index is a broad index of the 500 largest firms from the New York Stock Exchange, the NASDAQ stock market and the American Stock Exchange.

Because Congress decides on the federal government's budget during the year prior to when it will take effect, the tax laws and spending programs embodied in the budget ________ once they are in place. Because of this, the implementation lag for fiscal policy is ________.

The return on the money risked on a share of stock is called

The boom in housing prices from 2000-2005 contributed to the expansion that followed the 2000-2001 recession.

The farther into the future a stock dividend is expected to be paid, the less the stock price will be discounted.

The multiplier means that the response to fiscal policy is not completed immediately.

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

If the federal government had not bailed out the large financial institutions during the financial crisis of 2008-2009,

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. Suppose it takes policy makers from time t₂ to time t₄ to take an action to stimulate the economy. This is an example of

Because Congress decides on the federal government's budget during the year prior to when it will take effect, the tax laws and spending programs embodied in the budget once they are in place. Because of this, the implementation lag for fiscal policy is .