Question 1

A monetarist rule would be to vary the money growth rate between set limits, such as 3% to 5% annual growth.

Accepted Answer

A) True 
 B)False

Question 2

Discretionary fiscal policy may be counterproductive because:

Accepted Answer

A)   the countercyclical nature of such policies sometimes reduces their effectiveness.
B)   in the short run, only monetary policy is effective.
C)   increases in the government budget deficit affect economic growth in the long run.
D)   the various lags in fiscal policy mean that it may take effect when the economy has already recovered.E) B) and C)
F) B) and D)

Question 3

Adam believes that in the long run all prices are flexible and that any increase in the money supply will lead only to inflation, not to an increase in aggregate output. Because the economy would self-correct to long-run equilibrium output, there is no role for either fiscal or monetary policy. Adam is best described as a:

Accepted Answer

A)   supply-sider.
B)   Keynesian.
C)   classical economist.
D)   monetarist.E) A) and D)
F) None of the above

Question 4

Which of the following years is often described as the worst year of the Great Depression?

Accepted Answer

A)   1913
B)   1933
C)   1953
D)   1973E) All of the above
F) B) and C)

Question 5

According to Keynes, changes in business confidence are often responsible for business cycles.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is FALSE? Keynesian economics:

Accepted Answer

A)   emphasizes the effects of shifts in aggregate demand on aggregate output.
B)   focuses the attention of economists on situations in which the short-run aggregate supply curve slopes upward.
C)   holds "animal spirits" mainly responsible for business cycles.
D)   holds that changes in business confidence have no effect on either the aggregate price level or aggregate output.E) A) and B)
F) A) and C)

Question 7

The Great Moderation consensus among macroeconomists is described by all of the following EXCEPT that:

Accepted Answer

A)   monetary policy should play the main role in stabilization policy.
B)   the central bank should be independent of politics.
C)   discretionary fiscal policy should be used sparingly.
D)   monetary policy is the only way to get out of the liquidity trap.E) A) and B)
F) A) and C)

Question 8

Which of the following is the consensus among most economists today with respect to the management of unemployment?

Accepted Answer

A)   Government can't do anything about it.
B)   Expansionary policy can be used to achieve permanently low unemployment.
C)   Unemployment cannot be kept below the natural rate.
D)   Unemployment cannot be kept anywhere near the natural rate.E) C) and D)
F) A) and C)

Question 9

When interest rates are very high, the economy is in a liquidity trap, and monetary policy may be ineffective in fighting a recession.

Accepted Answer

A) True 
 B)False

Question 10

New classical economics:

Accepted Answer

A)   focuses on short-run economic fluctuations.
B)   returns to the view that shifts in aggregate demand affect only the price level.
C)   argues that the business cycle is caused by "animal spirits."
D)   focuses on the trade-off between unemployment and inflation.E) A) and B)
F) A) and C)

Question 11

A stimulus is an expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 12

The economic view that reducing tax rates will increase the incentives to work and invest and will ensure a high growth rate of the potential output is known as _____ economics.

Accepted Answer

A)   supply-side
B)   demand-side
C)   new classical
D)   new KeynesianE) A) and B)
F) C) and D)

Question 13

The classical macroeconomists believed that fiscal policy was even less effective than monetary policy.

Accepted Answer

A) True 
 B)False

Question 14

Using increased government spending and tax cuts to fight a recession is consistent with _____ economics.

Accepted Answer

A)   classical
B)   classical and monetarist
C)   classical and Keynesian
D)   Keynesian and Great Moderation consensusE) B) and C)
F) A) and B)

Question 15

Which of the following statements is TRUE of the state of modern macroeconomics?

Accepted Answer

A)   There is much more consensus than disagreement among economists.
B)   Inflation targeting and asset price management are incompatible duties for a central bank.
C)   Congress indirectly controls the Fed and monetary policy through its annual budget allocations.
D)   The Great Recession heightened the areas of disagreement among macroeconomists over key policy questions.E) A) and B)
F) A) and C)

Question 16

In a liquidity trap:

Accepted Answer

A)   fiscal policy becomes ineffective because of the high budget deficit.
B)   monetary policy becomes ineffective because the nominal interest rate is close to the zero bound.
C)   the aggregate price level becomes downwardly sticky.
D)   any increase in government spending drives out planned investment spending.E) None of the above
F) All of the above

Question 17

Prior to the 1930s, classical economics was the predominant theory about the behavior of the aggregate price level, aggregate output, and the appropriate role of monetary policy. Describe how classical economists believed the economy would be affected by an increase in the money supply.

Accepted Answer

The classical economists believed that t...

Question 18

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

Accepted Answer

A) True 
 B)False

Question 19

The policies that seemed to be effective during the Great Moderation seemed to be inadequate to fight the Great Recession.

Accepted Answer

A) True 
 B)False

Question 20

Many economists believe that:

Accepted Answer

A)   fiscal policy can be used effectively to reduce unemployment below its natural rate.
B)   monetary policy can be used effectively to reduce unemployment below its natural rate.
C)   discretionary fiscal policy should be used sparingly because political influence may manipulate its implementation and use.
D)   monetary rules are best.E) None of the above
F) C) and D)

Exam 30: Macroeconomics- Events and Ideas

A monetarist rule would be to vary the money growth rate between set limits, such as 3% to 5% annual growth.

Correct Answer
verified

The Great Moderation consensus among macroeconomists is described by all of the following EXCEPT that:

Correct Answer
verified

According to Keynes, changes in business confidence are often responsible for business cycles.

Correct Answer
verified

Using increased government spending and tax cuts to fight a recession is consistent with _____ economics.

Correct Answer
verified

When interest rates are very high, the economy is in a liquidity trap, and monetary policy may be ineffective in fighting a recession.

Correct Answer
verified

Which of the following statements is TRUE of the state of modern macroeconomics?

Correct Answer
verified

Discretionary fiscal policy may be counterproductive because:

Correct Answer
verified

A stimulus is an expansionary fiscal policy.

Correct Answer
verified

Which of the following statements is FALSE? Keynesian economics:

Correct Answer
verified

Many economists believe that:

Correct Answer
verified

Correct Answer
verified

New classical economics:

Correct Answer
verified

The economic view that reducing tax rates will increase the incentives to work and invest and will ensure a high growth rate of the potential output is known as _____ economics.

Correct Answer
verified

Prior to the 1930s, classical economics was the predominant theory about the behavior of the aggregate price level, aggregate output, and the appropriate role of monetary policy. Describe how classical economists believed the economy would be affected by an increase in the money supply.

Correct Answer
verified
The classical economists believed that t...
View Answer

Which of the following years is often described as the worst year of the Great Depression?

Correct Answer
verified

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

Correct Answer
verified

Which of the following is the consensus among most economists today with respect to the management of unemployment?

Correct Answer
verified

The classical macroeconomists believed that fiscal policy was even less effective than monetary policy.

Correct Answer
verified

In a liquidity trap:

Correct Answer
verified

The policies that seemed to be effective during the Great Moderation seemed to be inadequate to fight the Great Recession.

Correct Answer
verified

Exam 30: Macroeconomics- Events and Ideas

A monetarist rule would be to vary the money growth rate between set limits, such as 3% to 5% annual growth.

Correct AnswerverifiedShow Answer

The Great Moderation consensus among macroeconomists is described by all of the following EXCEPT that:

Correct AnswerverifiedShow Answer

According to Keynes, changes in business confidence are often responsible for business cycles.

Correct AnswerverifiedShow Answer

Using increased government spending and tax cuts to fight a recession is consistent with _____ economics.

Correct AnswerverifiedShow Answer

When interest rates are very high, the economy is in a liquidity trap, and monetary policy may be ineffective in fighting a recession.

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE of the state of modern macroeconomics?

Correct AnswerverifiedShow Answer

Discretionary fiscal policy may be counterproductive because:

Correct AnswerverifiedShow Answer

A stimulus is an expansionary fiscal policy.

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE? Keynesian economics:

Correct AnswerverifiedShow Answer

Many economists believe that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

New classical economics:

Correct AnswerverifiedShow Answer

The economic view that reducing tax rates will increase the incentives to work and invest and will ensure a high growth rate of the potential output is known as _____ economics.

Correct AnswerverifiedShow Answer

Prior to the 1930s, classical economics was the predominant theory about the behavior of the aggregate price level, aggregate output, and the appropriate role of monetary policy. Describe how classical economists believed the economy would be affected by an increase in the money supply.

Correct AnswerverifiedThe classical economists believed that t...View AnswerShow Answer

Which of the following years is often described as the worst year of the Great Depression?

Correct AnswerverifiedShow Answer

Most economists today agree that the Federal Reserve should remain independent so that it is insulated from political pressure.

Correct AnswerverifiedShow Answer

Which of the following is the consensus among most economists today with respect to the management of unemployment?

Correct AnswerverifiedShow Answer

The classical macroeconomists believed that fiscal policy was even less effective than monetary policy.

Correct AnswerverifiedShow Answer

In a liquidity trap:

Correct AnswerverifiedShow Answer

The policies that seemed to be effective during the Great Moderation seemed to be inadequate to fight the Great Recession.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The classical economists believed that t...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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