Question 1

Keynes's ideas were:

Accepted Answer

A)  quickly adopted in the 1930s to end the Great Depression.
B)  slowly but consistently used in 2008 to end the Great Recession.
C)  used somewhat to help reduce the Great Depression.
D)  ignored in the Great Depression.E) B) and D)
F) A) and C)

Question 2

Monetarism asserts that GDP will grow steadily if the money supply grows steadily.

Accepted Answer

A) True 
 B)False

Question 3

Keynesian economics emphasizes _____ shifts in aggregate _____.

Accepted Answer

A)  long-run; demand
B)  long-run; supply
C)  short-run; demand
D)  short-run; supplyE) A) and D)
F) All of the above

Question 4

The monetary policy rule suggests that:

Accepted Answer

A)  we should follow the rules set by the Fed.
B)  the Fed should follow the rules set by Congress.
C)  the interest rate should grow at a slow and steady pace.
D)  the money supply should grow at a slow and steady pace.E) A) and B)
F) None of the above

Question 5

Most economists believe that discretionary fiscal policy should be used sparingly because of the risk of:

Accepted Answer

A)  budget deficits.
B)  lags in adjusting policy, so that policies designed to fight a recession may end up intensifying an inflationary gap.
C)  budget surpluses.
D)  sacrificing equity for efficiency.E) A) and B)
F) A) and C)

Question 6

According to the real business cycle theory, the primary source of fluctuations in real output is changes in the:

Accepted Answer

A)  level of investment spending by manufacturing firms.
B)  rate of growth of total factor productivity.
C)  rate of growth of the aggregate price level.
D)  level of spending on durable goods by households.E) A) and B)
F) All of the above

Question 7

Nearly all economists agree that central banks should:

Accepted Answer

A)  be subject to political control.
B)  be elected by voters.
C)  be independent.
D)  play a minor role in the economy.E) None of the above
F) All of the above

Question 8

The argument that households and firms view an increase in government spending as a sign that taxes will rise in the future and decrease current spending in anticipation of higher future taxes is called:

Accepted Answer

A)  debt overhang.
B)  the natural rate hypothesis.
C)  supply-side economics.
D)  Ricardian equivalence.E) A) and C)
F) All of the above

Question 9

The slump that followed the 2008 financial crisis is called the:

Accepted Answer

A)  Great Depression
B)  Great Moderation.
C)  Great Recession.
D)  Great Modernization.E) None of the above
F) All of the above

Question 10

According to the theory of rational expectations, individuals will respond to expansionary monetary policy by predicting:

Accepted Answer

A)  a lower rate of inflation.
B)  a higher rate of inflation.
C)  no change in the rate of inflation.
D)  incorrectly what will happen to the price level and employment.E) A) and D)
F) All of the above

Question 11

Keynesian economics emphasized that economic downturns could be due to:

Accepted Answer

A)  inflation.
B)  technological shocks.
C)  a decline in business confidence.
D)  deflation.E) None of the above
F) A) and B)

Question 12

The monetary policy in which the Fed purchased assets other than short-term government securities is called:

Accepted Answer

A)  maturity transformation.
B)  shadow banking.
C)  quantitative easing.
D)  debt overhang.E) All of the above
F) A) and D)

Question 13

Challenges to Keynesian economics were based on:

Accepted Answer

A)  the fact that lags in fiscal policy make it relatively ineffective.
B)  the liquidity trap, which makes fiscal policy ineffective.
C)  the possibility of a trade-off between inflation and unemployment.
D)  the usefulness of discretionary fiscal policy.E) C) and D)
F) A) and D)

Question 14

According to the Great Moderation consensus, expansionary fiscal policy will shift the aggregate demand curve to the _____ and lead to a _____ level of output and a _____ level of employment in the short run.

Accepted Answer

A)  right; higher; higher
B)  left; lower; lower
C)  right; higher; lower
D)  left; lower; higherE) B) and C)
F) B) and D)

Question 15

Which of the following schools of thought believe that expansionary monetary policy has very little or no effect on output?
I. Keynesian macroeconomics
II. Great Moderation consensus

Accepted Answer

A)  I only
B)  II only
C)  I and II
D)  neither I nor IIE) A) and B)
F) A) and C)

Question 16

The rational expectations theory states that when individuals and firms make decisions, they take everything into account. Thus:

Accepted Answer

A)  if it's clear that the government intends to trade off higher inflation for lower unemployment, the public will understand this and help the government achieve its goal.
B)  if it's clear that the government intends to trade off higher inflation for lower unemployment, the public will understand this and inflation expectations will immediately rise.
C)  a government attempt to trade off higher inflation for lower unemployment would not work in the short run but would be fine in the long run.
D)  even if people are not expecting inflation and are unaware of government policies, inflation expectations are still going to be embedded.E) All of the above
F) A) and B)

Question 17

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) C) and D)
F) B) and C)

Question 18

_____ answers NO to all five key questions about whether macroeconomic policy, either monetary or fiscal, can help fight recession, reduce unemployment, or should be used in a discretionary way.

Accepted Answer

A)  Classical macroeconomics
B)  Keynesian economics
C)  Rational expectations theory
D)  MonetarismE) C) and D)
F) B) and C)

Question 19

Use the following to answer questions :
Scenario: The Velocity Equation
Suppose that real GDP equals $10 trillion, nominal GDP equals $20 trillion, and the aggregate price level equals 2.
-(Scenario: The Velocity Equation)  Look at the scenario The Velocity Equation. If the money supply is $5 trillion, then the velocity of money is:

Accepted Answer

A)  5.
B)  8.
C)  4
D)  10.E) A) and C)
F) B) and C)

Question 20

If a contraction in aggregate demand causes a recession, the Great Moderation consensus on macroeconomics suggests that:

Accepted Answer

A)  fiscal discipline with a balanced budget eventually stimulates aggregate demand.
B)  fiscal policy should take the leading role in economic stabilization.
C)  the use of discretionary fiscal policy is counterproductive except in special circumstances.
D)  monetary discipline with a reduction in the money supply eventually stimulates aggregate demand.E) C) and D)
F) All of the above

Exam 18: Events and Ideas

Correct Answer
verified

Challenges to Keynesian economics were based on:

Correct Answer
verified

_____ answers NO to all five key questions about whether macroeconomic policy, either monetary or fiscal, can help fight recession, reduce unemployment, or should be used in a discretionary way.

Correct Answer
verified

The monetary policy rule suggests that:

Correct Answer
verified

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

Correct Answer
verified

The slump that followed the 2008 financial crisis is called the:

Correct Answer
verified

Monetarism asserts that GDP will grow steadily if the money supply grows steadily.

Correct Answer
verified

Keynesian economics emphasizes _ shifts in aggregate _.

Correct Answer
verified

If a contraction in aggregate demand causes a recession, the Great Moderation consensus on macroeconomics suggests that:

Correct Answer
verified

Nearly all economists agree that central banks should:

Correct Answer
verified

Keynesian economics emphasized that economic downturns could be due to:

Correct Answer
verified

Most economists believe that discretionary fiscal policy should be used sparingly because of the risk of:

Correct Answer
verified

According to the theory of rational expectations, individuals will respond to expansionary monetary policy by predicting:

Correct Answer
verified

According to the real business cycle theory, the primary source of fluctuations in real output is changes in the:

Correct Answer
verified

The rational expectations theory states that when individuals and firms make decisions, they take everything into account. Thus:

Correct Answer
verified

Keynes's ideas were:

Correct Answer
verified

The argument that households and firms view an increase in government spending as a sign that taxes will rise in the future and decrease current spending in anticipation of higher future taxes is called:

Correct Answer
verified

According to the Great Moderation consensus, expansionary fiscal policy will shift the aggregate demand curve to the ___ and lead to a _ level of output and a ___ level of employment in the short run.

Correct Answer
verified

Which of the following schools of thought believe that expansionary monetary policy has very little or no effect on output? I. Keynesian macroeconomics II. Great Moderation consensus

Correct Answer
verified

The monetary policy in which the Fed purchased assets other than short-term government securities is called:

Correct Answer
verified

Exam 18: Events and Ideas

Correct AnswerverifiedShow Answer

Challenges to Keynesian economics were based on:

Correct AnswerverifiedShow Answer

_____ answers NO to all five key questions about whether macroeconomic policy, either monetary or fiscal, can help fight recession, reduce unemployment, or should be used in a discretionary way.

Correct AnswerverifiedShow Answer

The monetary policy rule suggests that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The slump that followed the 2008 financial crisis is called the:

Correct AnswerverifiedShow Answer

Monetarism asserts that GDP will grow steadily if the money supply grows steadily.

Correct AnswerverifiedShow Answer

Keynesian economics emphasizes _____ shifts in aggregate _____.

Correct AnswerverifiedShow Answer

If a contraction in aggregate demand causes a recession, the Great Moderation consensus on macroeconomics suggests that:

Correct AnswerverifiedShow Answer

Nearly all economists agree that central banks should:

Correct AnswerverifiedShow Answer

Keynesian economics emphasized that economic downturns could be due to:

Correct AnswerverifiedShow Answer

Most economists believe that discretionary fiscal policy should be used sparingly because of the risk of:

Correct AnswerverifiedShow Answer

According to the theory of rational expectations, individuals will respond to expansionary monetary policy by predicting:

Correct AnswerverifiedShow Answer

According to the real business cycle theory, the primary source of fluctuations in real output is changes in the:

Correct AnswerverifiedShow Answer

The rational expectations theory states that when individuals and firms make decisions, they take everything into account. Thus:

Correct AnswerverifiedShow Answer

Keynes's ideas were:

Correct AnswerverifiedShow Answer

The argument that households and firms view an increase in government spending as a sign that taxes will rise in the future and decrease current spending in anticipation of higher future taxes is called:

Correct AnswerverifiedShow Answer

According to the Great Moderation consensus, expansionary fiscal policy will shift the aggregate demand curve to the _____ and lead to a _____ level of output and a _____ level of employment in the short run.

Correct AnswerverifiedShow Answer

Which of the following schools of thought believe that expansionary monetary policy has very little or no effect on output? I. Keynesian macroeconomics II. Great Moderation consensus

Correct AnswerverifiedShow Answer

The monetary policy in which the Fed purchased assets other than short-term government securities is called:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Keynesian economics emphasizes _ shifts in aggregate _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

According to the Great Moderation consensus, expansionary fiscal policy will shift the aggregate demand curve to the ___ and lead to a _ level of output and a ___ level of employment in the short run.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified