Question 1

The conventional fiscal policy to fight inflation is to ___________ while the conventional monetary policy is to __________.

Accepted Answer

run budget surpluses...

Question 2

The theory of rational expectations concludes that

Accepted Answer

A)  since expectations can cause discretionary stabilization policies to be pro-cyclical,it is better to rely upon policy rules.
B)  discretionary monetary policy is a more powerful stabilization device than is discretionary fiscal policy.
C)  discretionary fiscal policy is a more powerful stabilization device than is discretionary monetary policy.
D)  discretionary policies are more effective than rules in stabilizing the economy.E) None of the above
F) A) and D)

Question 3

Suppose that M doubles and PQ remains the same.In that case we know that V

Accepted Answer

A)  fell by 100%.
B)  fell by 50%.
C)  stayed the same.
D)  rose by 50%.
E)  rose by 100%.F) B) and E)
G) A) and D)

Question 4

The __________ school of economics holds that lower tax rates and less government intervention in the private sector are the only ways to stimulate saving,investment,and productivity.

Accepted Answer

The answer of The __________ school of economics holds that...

Question 5

Real GDP is the same as

Accepted Answer

A)  M.
B)  V.
C)  P.
D)  Q.E) B) and D)
F) B) and C)

Question 6

Keynesian economics focused on

Accepted Answer

A)  equally at curing recessions and inflations.
B)  mainly at curing inflations.
C)  mainly at curing recessions.
D)  curing hyperinflation.E) B) and C)
F) A) and D)

Question 7

One of the potential economic problems associated with the extensive use of macropolicy to recover from the Great Recession is

Accepted Answer

A)  the huge government deficits will cause increasing interest rates which could choke off the recovery..
B)  the large amount of government spending for job creation could result in rapid and uncontrollable increases in wages.
C)  the flood of money into the banks could cause excessive investment expenditures in the economy.
D)  the tax rebates made available to consumers could cause uncontrollable increases in the price of housing.E) A) and D)
F) All of the above

Question 8

Use the following list of modern macroeconomic theories in order to describe the following statement: Discretionary fiscal and monetary policies are effective tools of economic stabilization.

Accepted Answer

A)  Keynesian economics
B)  Monetarism
C)  The theory of rational expectations
D)  New Classical Economics
E)  Supply-side economicsF) A) and B)
G) B) and E)

Question 9

The main purpose of the Laffer curve is to crudely suggest

Accepted Answer

A)  how government can increase tax revenues by increasing tax rates.
B)  that a tax cut will lead to an increase in GDP.
C)  the disincentive effects of high marginal tax rates.
D)  the tax rate which will yield maximum revenue for the government.E) B) and C)
F) None of the above

Question 10

Monetarists take the policy position that the supply of money should be

Accepted Answer

A)  increased at a constant rate each year.
B)  decreased during recession and increased during inflation.
C)  held constant over time.
D)  increased during recession and decreased during inflation.E) A) and B)
F) A) and D)

Question 11

The main criticism leveled at the rational expectations school of economic thought is that

Accepted Answer

A)  they assume too much influence due to monopoly power.
B)  they just go too far in ascribing rationality to the general population.
C)  the assumption that the velocity of circulation is predictable in the short run is not borne out by the facts.
D)  the assumption that labor union contracts create a rigid wage structure is unrealistic.E) B) and D)
F) C) and D)

Question 12

During the 19th century,____ was the mainstream school of economics.

Accepted Answer

A)  classical
B)  Keynesian
C)  monetarism
D)  supply-side
E)  rational expectationistF) A) and E)
G) C) and E)

Question 13

Which statement is true?

Accepted Answer

A)  Only monetary policy can affect aggregate demand.
B)  Only fiscal policy can affect aggregate demand.
C)  Both monetary and fiscal policy can affect aggregate demand.
D)  Neither monetary nor fiscal policy can affect aggregate demand.E) B) and C)
F) A) and D)

Question 14

According to the sophisticated,or modern quantity theory of money,if there is a depression and M rises,

Accepted Answer

A)  P will rise.
B)  P will fall.
C)  Q will rise.
D)  Q will fall.E) None of the above
F) B) and C)

Question 15

The equation of exchange

Accepted Answer

A)  is an identity.
B)  requires that an increase in nominal GDP must always be accompanied by an increase in the velocity of money.
C)  does not apply when the level of unemployment is quite high.
D)  holds only if the velocity of circulation of money is a constant.E) All of the above
F) B) and C)

Question 16

The crude quantity theory is based on each of these assumptions except that

Accepted Answer

A)  if M rises by a certain percentage,P rises by that same percentage.
B)  V and Q are constants.
C)  MV = PQ.
D)  if M rises by a certain percentage,V will rise by that same percentage.E) B) and D)
F) A) and B)

Question 17

-This curve is

Accepted Answer

A)  a Phillips curve.
B)  a Laffer curve.
C)  an aggregate supply curve.
D)  an aggregate demand curve.E) None of the above
F) All of the above

Question 18

According to the monetary rule,for price stability given real growth in the economy of 7% in 2008,the money supply should

Accepted Answer

A)  decrease by 7%.
B)  decrease 7%.
C)  increase 7%.
D)  only be adjusted to reflect annualized growth rate.
E)  the money supply should increase 7% AND be adjusted to reflect annualized growth rate.F) A) and B)
G) B) and E)

Question 19

If we are in a recession and follow conventional monetary policy,interest rates will ____ and then ____.

Accepted Answer

A)  fall;fall further
B)  fall;rise
C)  rise;fall
D)  rise;rise furtherE) A) and D)
F) C) and D)

Question 20

Milton Friedman,a leading monetarist,believes the Fed should not manage the money supply in a discretionary manner.Which of the following statements is NOT a reason for Friedman's belief?

Accepted Answer

A)  The limitations of our knowledge make any discretionary policy very unpredictable.
B)  The past performance of the Fed has not given a strong indication that it has the ability to regulate the money supply in such a manner.
C)  Friedman advocates the rule of steady monetary growth.
D)  Discretionary monetary policy promotes confidence within the business community by providing a greater amount of stability to money and credit.E) C) and D)
F) A) and D)

Exam 15: A Century of Economic Theory

The conventional fiscal policy to fight inflation is to ___________ while the conventional monetary policy is to __________.

Correct Answerverifiedrun budget surpluses...View AnswerShow Answer

The theory of rational expectations concludes that

Correct AnswerverifiedShow Answer

Keynesian economics focused on

Correct AnswerverifiedShow Answer

The main purpose of the Laffer curve is to crudely suggest

Correct AnswerverifiedShow Answer

According to the monetary rule,for price stability given real growth in the economy of 7% in 2008,the money supply should

Correct AnswerverifiedShow Answer

During the 19th century,____ was the mainstream school of economics.

Correct AnswerverifiedShow Answer

Real GDP is the same as

Correct AnswerverifiedShow Answer

The __________ school of economics holds that lower tax rates and less government intervention in the private sector are the only ways to stimulate saving,investment,and productivity.

Correct AnswerverifiedShow Answer

The crude quantity theory is based on each of these assumptions except that

Correct AnswerverifiedShow Answer

The main criticism leveled at the rational expectations school of economic thought is that

Correct AnswerverifiedShow Answer

If we are in a recession and follow conventional monetary policy,interest rates will ____ and then ____.

Correct AnswerverifiedShow Answer

Use the following list of modern macroeconomic theories in order to describe the following statement: Discretionary fiscal and monetary policies are effective tools of economic stabilization.

Correct AnswerverifiedShow Answer

Suppose that M doubles and PQ remains the same.In that case we know that V

Correct AnswerverifiedShow Answer

According to the sophisticated,or modern quantity theory of money,if there is a depression and M rises,

Correct AnswerverifiedShow Answer

One of the potential economic problems associated with the extensive use of macropolicy to recover from the Great Recession is

Correct AnswerverifiedShow Answer

The equation of exchange

Correct AnswerverifiedShow Answer

Which statement is true?

Correct AnswerverifiedShow Answer

Monetarists take the policy position that the supply of money should be

Correct AnswerverifiedShow Answer

-This curve is

Correct AnswerverifiedShow Answer

Milton Friedman,a leading monetarist,believes the Fed should not manage the money supply in a discretionary manner.Which of the following statements is NOT a reason for Friedman's belief?

Correct AnswerverifiedShow Answer

The conventional fiscal policy to fight inflation is to _ while the conventional monetary policy is to .

Correct Answer
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run budget surpluses...
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During the 19^th century,____ was the mainstream school of economics.

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If we are in a recession and follow conventional monetary policy,interest rates will and then .

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