Question 1

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.

Question 2

For Keynes, changes in aggregate demand had their greatest impact:

Accepted Answer

A)   on the aggregate price level.
B)   in the long run.
C)   on the aggregate output level.
D)   equally on the aggregate output level and the aggregate price level.

Question 3

Use the following to answer questions 
Figure: Fiscal Policy with a Fixed Money Supply 1. Now government deficit spending is increased, but the Federal Reserve does NOT expand the money supply. According to this model: A)  real GDP will expand just as much as if the Federal Reserve had expanded the money supply. B)  real GDP will decrease because the Federal Reserve did not expand the money supply. C)  real GDP will expand, but not as much as if the Federal Reserve had expanded the money supply. D)  interest rates will decrease." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Fiscal Policy with a Fixed Money Supply)  Look at the figure Fiscal Policy with a Fixed Money Supply. Assume that this economy is at E1. Now government deficit spending is increased, but the Federal Reserve does NOT expand the money supply. According to this model:

Accepted Answer

A)   real GDP will expand just as much as if the Federal Reserve had expanded the money supply.
B)   real GDP will decrease because the Federal Reserve did not expand the money supply.
C)   real GDP will expand, but not as much as if the Federal Reserve had expanded the money supply.
D)   interest rates will decrease.

Question 4

Use the following to answer questions 
Figure: Classical Versus Keynesian Macroeconomics 2 to AD1, perhaps because of a large increase in government spending, the price level will _____ and real GDP will _____. A)  rise; fall B)  not change; rise C)  rise; not change D)  rise; rise" class="answers-bank-image d-inline" rel="preload" >
-(Figure: Classical Versus Keynesian Macroeconomics)  Look at the figure Classical Versus Keynesian Macroeconomics. According to the Keynesian view, if this economy shifts from AD2 to AD1, perhaps because of a large increase in government spending, the price level will _____ and real GDP will _____.

Accepted Answer

A)   rise; fall
B)   not change; rise
C)   rise; not change
D)   rise; rise

Question 5

Monetary policy:

Accepted Answer

A)   can be made more effective with the presence of a liquidity trap.
B)   is less hampered by the political process than fiscal policy.
C)   has been proven to be an ineffective tool in controlling business cycles.
D)   works well only if it is well coordinated with fiscal policy efforts.

Question 6

The _____ hypothesis is that macroeconomic policy should be used to stabilize the economy rather than to permanently decrease the unemployment rate.

Accepted Answer

A)   natural rate
B)   political business cycle
C)   rational expectations
D)   real business cycle

Question 7

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.

Question 8

Monetarists argue that:

Accepted Answer

A)   the Federal Reserve System should allow the money supply to increase at a slow, steady annual rate.
B)   since the velocity of money is unstable, a fixed annual increase in the money supply will exacerbate inflation in the long run.
C)   self-correction is less effective than activist monetary policy.
D)   fiscal policy should always be used before monetary policy.

Question 9

According to a Keynesian economist, a recessionary gap should be fixed with:

Accepted Answer

A)   a monetary rule.
B)   supply-side tax increases to balance the budget.
C)   decreases in government spending.
D)   discretionary fiscal policy.

Question 10

The real business cycle theorists say that changes in total factor productivity are totally the result of:

Accepted Answer

A)   depressions.
B)   shifts in aggregate supply.
C)   shifts in aggregate demand.
D)   uneven technological progress.

Question 11

The belief that fluctuations in the rate of growth of factor productivity cause the business cycle is:

Accepted Answer

A)   new classicalism.
B)   monetarism.
C)   Keynesianism.
D)   the real business cycle theory.

Question 12

Cutting government spending to increase private-sector confidence, leading to increases in output and employment, is called:

Accepted Answer

A)   expansionary austerity.
B)   expansionary monetary policy.
C)   Ricardian equivalence.
D)   new Keynesian economics.

Question 13

A monetary policy rule:

Accepted Answer

A)   occurs when the central bank pursues a formula that determines its actions.
B)   brings politics into the monetary policy process.
C)   is the same as discretionary monetary policy.
D)   is likely to be advocated by Keynesians.

Question 14

The Great Moderation consensus regarding the use of monetary policy to fight recessions is that expansionary monetary policy:

Accepted Answer

A)   is ineffective because the public expects it.
B)   is harmful because it only increases the aggregate price level.
C)   has little impact on aggregate demand because of liquidity traps.
D)   can be used to increase aggregate demand but at the cost of higher aggregate prices.

Question 15

In the Keynesian model, prices and nominal wages are _____, the short-run aggregate supply curve is upward sloping, and as a result, an increase in the money supply leads to _____ in the aggregate price level.

Accepted Answer

A)   sticky; a less than proportional decrease
B)   flexible; a proportional decrease
C)   sticky; a less than proportional increase
D)   flexible; a proportional increase

Question 16

According to the natural rate hypothesis:

Accepted Answer

A)   once inflation is built into expectations, a policy aimed at lowering unemployment below the natural rate would lead to accelerating inflation.
B)   the natural rate of unemployment is above the NAIRU.
C)   once inflation is embedded in the public's expectations, it will stop accelerating.
D)   changes in discretionary policy aimed at increasing GDP will have no impact on inflation expectations.

Question 17

According to rational expectations, monetary policy is:

Accepted Answer

A)   always effective.
B)   effective only if it is unexpected.
C)   ineffective compared to fiscal policy.
D)   effective only when fiscal policy accommodates it.

Question 18

Keynesian economists didn't oppose monetary policy, but they felt that it was ineffective in fighting a recession.

Accepted Answer

A) True 
 B)False

Question 19

Classical macroeconomists believed that government could reduce the unemployment rate to a permanently low rate.

Accepted Answer

A) True 
 B)False

Question 20

Nearly all economists agree that expansionary fiscal policy can _____ aggregate _____.

Accepted Answer

A)   increase; supply
B)   decrease; supply
C)   increase; demand
D)   decrease; demand

Exam 30: Macroeconomics- Events and Ideas

For Keynes, changes in aggregate demand had their greatest impact:

Correct Answer
verified

Nearly all economists agree that expansionary fiscal policy can _ aggregate _.

Correct Answer
verified

The Great Moderation consensus regarding the use of monetary policy to fight recessions is that expansionary monetary policy:

Correct Answer
verified

The real business cycle theorists say that changes in total factor productivity are totally the result of:

Correct Answer
verified

The belief that fluctuations in the rate of growth of factor productivity cause the business cycle is:

Correct Answer
verified

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

Correct Answer
verified

In the Keynesian model, prices and nominal wages are _, the short-run aggregate supply curve is upward sloping, and as a result, an increase in the money supply leads to _ in the aggregate price level.

Correct Answer
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Correct Answer
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Correct Answer
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According to rational expectations, monetary policy is:

Correct Answer
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Monetary policy:

Correct Answer
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According to a Keynesian economist, a recessionary gap should be fixed with:

Correct Answer
verified

According to the natural rate hypothesis:

Correct Answer
verified

Cutting government spending to increase private-sector confidence, leading to increases in output and employment, is called:

Correct Answer
verified

Keynesian economists didn't oppose monetary policy, but they felt that it was ineffective in fighting a recession.

Correct Answer
verified

The _____ hypothesis is that macroeconomic policy should be used to stabilize the economy rather than to permanently decrease the unemployment rate.

Correct Answer
verified

Classical macroeconomists believed that government could reduce the unemployment rate to a permanently low rate.

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

A monetary policy rule:

Correct Answer
verified

Monetarists argue that:

Correct Answer
verified

Exam 30: Macroeconomics- Events and Ideas

For Keynes, changes in aggregate demand had their greatest impact:

Correct AnswerverifiedShow Answer

Nearly all economists agree that expansionary fiscal policy can _____ aggregate _____.

Correct AnswerverifiedShow Answer

The Great Moderation consensus regarding the use of monetary policy to fight recessions is that expansionary monetary policy:

Correct AnswerverifiedShow Answer

The real business cycle theorists say that changes in total factor productivity are totally the result of:

Correct AnswerverifiedShow Answer

The belief that fluctuations in the rate of growth of factor productivity cause the business cycle is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the Keynesian model, prices and nominal wages are _____, the short-run aggregate supply curve is upward sloping, and as a result, an increase in the money supply leads to _____ in the aggregate price level.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to rational expectations, monetary policy is:

Correct AnswerverifiedShow Answer

Monetary policy:

Correct AnswerverifiedShow Answer

According to a Keynesian economist, a recessionary gap should be fixed with:

Correct AnswerverifiedShow Answer

According to the natural rate hypothesis:

Correct AnswerverifiedShow Answer

Cutting government spending to increase private-sector confidence, leading to increases in output and employment, is called:

Correct AnswerverifiedShow Answer

Keynesian economists didn't oppose monetary policy, but they felt that it was ineffective in fighting a recession.

Correct AnswerverifiedShow Answer

The _____ hypothesis is that macroeconomic policy should be used to stabilize the economy rather than to permanently decrease the unemployment rate.

Correct AnswerverifiedShow Answer

Classical macroeconomists believed that government could reduce the unemployment rate to a permanently low rate.

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

A monetary policy rule:

Correct AnswerverifiedShow Answer

Monetarists argue that:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Nearly all economists agree that expansionary fiscal policy can _ aggregate _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In the Keynesian model, prices and nominal wages are _, the short-run aggregate supply curve is upward sloping, and as a result, an increase in the money supply leads to _ in the aggregate price level.

Correct Answer
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Correct Answer
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