EC301 quizes - Assignment Essays

question

Al Gore

answer

Political incumbents often gain or lose re-election because of a strong or weak economy. Which of the following is an exception to that rule?

question

jobless individuals looking for work divided by those employed and unemployed but actively looking

answer

The unemployment rate is the number of

question

The unemployment rate in the most recent recession involved a peak rate of unemployment lower than the peak rate of the recession before it.

answer

Which of the following statements about the behavior of the unemployment rate in the United States is true?

question

percentage increase in the average level of prices.

answer

The inflation rate is the

question

Actual real GDP = Natural real GDP

answer

The output gap is zero when

question

a society with no productivity growth in which any additional good enjoyed by one person requires that something be taken away from someone else.

answer

The "zero sum" society is

question

Yes, since government actions and policies can affect an economy's overall performance.

answer

Are government activities of any concern to macroeconomists?

question

well-being of the average individual in the nation.

answer

The real income per capita is a measure of the

question

flow of income from domestic firms to the nonproduction sector and back again.

answer

The circular flow of income describes the

question

Output has increased.

answer

If real GDP has increased, which of the following statements is always true?

question

equal to capital consumption allowances.

answer

The difference between gross investment and net investment is

question

government purchases of goods and services, net exports, private domestic investment

answer

Which of the following sets of categories correctly describes the categories of nonconsumption injections?

question

exports will increase and U.S. exporters gain.

answer

When the dollar depreciates

question

To increase the amount of borrowing from foreigners.

answer

Which of the following is not one of the ways a budget surplus can be used?

question

above last year's.

answer

Actual real GDP this year is expected to exceed last year's by two percent, while the annual growth rate of natural real GDP is three percent. This is enough to lead us to expect that this year's unemployment rate will be

question

exogenous and to remain constant.

answer

In the simple Keynesian model of the determination of income, the price level is assumed to be

question

endogenous

answer

What type of variables have their movements explained by theory?

question

completely independent of income, although they can be explained by movements in other variables.

answer

As used in this text, "autonomous" variables are

question

rise in equilibrium GDP resulting from a one dollar rise in planned autonomous expenditures.

answer

The multiplier measures the

question

the marginal propensity to save is 0.25.

answer

If disposable income increases by $100 and saving increased by $25, ceteris paribus, we may conclude that

question

decreases saving by that amount times the marginal propensity to save.

answer

An increase in autonomous taxes

question

lower the multiplier and lower equilibrium income.

answer

A rise in the income tax rate will

question

offset by government tax and spending policies.

answer

In an economy described by the assumptions of the simple Keynesian Model, the impact of fluctuations in autonomous investment on consumption spending could be

question

IS curve is negatively sloped.

answer

An increase in the money supply will raise equilibrium GDP if the

question

only at a point that is on both the IS and LM curves.

answer

The economy is in short-run equilibrium

question

change the slope and position of the LM curve.

answer

A change in the public's desire to hold money will

question

There is an excess demand for commodities at the existing interest rate.

answer

Which of the following statements would be true of an economy that can be characterized as being to the left of the IS curve?

question

fall if the change in future earnings is thought to be greater than the change in interest payments.

answer

During the recession phase of the business cycle, business firms become pessimistic about their future earning capacity as do banks. Nominal interest rates fall during recessions. Investment lending could be expected to

question

autonomous expenditures were insensitive to the interest rate.

answer

The IS curve would be vertical if

question

the money supply, the interest rate, equilibrium income

answer

One of the major chains of causation in macroeconomic policymaking is government manipulation of __________ in order to affect __________, and thus ultimately __________.

question

IS curve is flatter and the AD curve is flatter.

answer

If the interest responsiveness of business firms investment is great then the

question

impact on Y and P for a given change in the SAS curve.

answer

The slope of the AD curve is important because it explains the

question

AD up and raise the price level.

answer

An increase in the nominal money supply will shift

question

firms will hire more labor as they move down the demand curve for labor.

answer

When the real wage falls, as a result of a rise in the price level

question

vertical at the natural level of income.

answer

The long-run aggregate supply curve is

question

raise both the price level and real income in the short run.

answer

A fiscal expansion will

question

SAS curve to shift rightward.

answer

Suppose that the discovery of cold fusion implies that the productivity of each worker in the economy doubles. This would cause the

question

inability of an increase in real balances to raise the level of output

answer

The term monetary impotence refers to the

question

shift the SAS curve upward thereby decreasing output.

answer

After a period of sustained unexpected inflation, it is likely that the renegotiation of nominal wages will 9) _______

question

nominal wages are fixed.

answer

In constructing the short-run Phillips curve, SP,

question

the inflation rate that both workers and firms expected at the time of the last contract negotiation.

answer

The variable p(e) represents

question

all possible combinations of real GDP and inflation, for a given set of expectations.

answer

The short-run Phillips curve gives

question

can be broken down into the growth of money supply plus the growth of velocity.

answer

The growth of nominal GDP

question

forward-looking expectations.

answer

Lucas's idea of information barriers as applied to the formation of inflation expectations is an example of

question

both output and inflation.

answer

Assuming adaptive expectations, a "cold turkey" reduction in AD by policymakers will initially reduce

question

choose the overall level of interest rates, with a high budget deficit implying a high level of interest rates.

answer

Once monetary policy is dedicated to controlling the level of nominal GDP, then fiscal policy can be used to

question

A sharp reduction in corporate income taxes would discourage U.S. corporations from shifting their production facilities to other countries, thus leading to a decrease in the unemployment rate.

answer

Which of the following beliefs is not part of supply-side economics?

question

temporarily shift both the short-run Phillips curve and aggregate nominal demand.

answer

A cut in income taxes tends to

question

accelerated economic growth if the money supply is increased to stabilize the output ratio.

answer

A decrease in deficit spending or an increase in the government surplus will lead to

question

crowd out private expenditures.

answer

A major side-effect of a stimulative fiscal policy is that it will

question

economy's real growth rate of output equals or exceeds its real interest rate.

answer

The government can meet its interest bill without having to levy taxes if it issues more bonds and if the

question

tighten fiscal policy

answer

The conditions for joining the "Euro" single-currency block led a number of European countries to __________ and consequently reduce their debt-GDP ratios.

question

it is too costly for individual savers to research your credit worthiness.

answer

As an individual, you cannot participate in the financial markets to issue new stock or sell new bonds because

question

both money demand and commodity demand are stable.

answer

A fixed money-supply rule will have the greatest stabilizing effect on output when

question

doubling of the level of nominal output.

answer

Given the quantity theory of money demand, a doubling of the money supply will lead to a

question

individuals are continually trying to maximize their wealth and income.

answer

Keynes' speculative demand for money arises because

question

substitution between money and virtually all other goods and assets.

answer

An important distinction between Friedman's and others' views of the demand for money is the former's emphasis on the

question

he made the transaction demand a real demand for money.

answer

A major criticism of Keynes' original theory of the demand for money is that

question

the medium of exchange function and income; store of value function and interest rates

answer

In the Keynesian theory of the demand for money, the transaction demand for money is primarily determined by __________ and the speculative demand by __________.

question

reserves held by banks to meet withdrawals

answer

High powered money is

question

Monetarists believe all of the above are correct.

answer

According to the Monetarists, "Policy activism" is difficult if not impossible to perform successfully because

question

monetary policy is impotent relative to fiscal policy

answer

Which of the following is NOT an argument of non-activists?

question

very flat and that real output is sometimes very sensitive to monetary policy in the short run.

answer

Non-activists believe that the IS curve is

question

monetary rules will not iron out every short-run fluctuation resulting from shocks.

answer

In the early 1970s monetary growth was relatively stable yet unemployment and prices were quite unstable. This suggests that

question

the time required for flexible prices to return the economy to the natural level of real GDP is intolerably long.

answer

The activists believe that

question

feedback rules are preferred to discretionary rules.

answer

According to the new classical macroeconomists, each of the following statements is true EXCEPT

question

for monetary policy to have an impact on inflation and unemployment

answer

The "effectiveness lag" in monetary policy is the amount of time it takes

question

the model relied on a non-market-clearing explanation of the labor market

answer

Which of the following are NOT included among Gordon's criticisms of Friedman's fooling model?

question

Friedman fooling model

answer

The actual real wage must be below the equilibrium real wage in order to encourage firms to produce at any output level above the natural rate. Once workers realize this situation, their expected price level will gradually rise and they will demand a higher nominal wage. This description of a business cycle adjustment is part of which of the following theories?

question

monetary policy cannot change real GDP in a regular or predictable way

answer

Which of the following best describes the policy ineffectiveness proposition?

question

large supply responses to variations in the inflation rate.

answer

Switzerland has experienced the lowest rate of price increases in the post World War II period. Consequently, Lucas would predict

question

rise during recessions.

answer

According to the Keynesian model, real wages should

question

raise the price level and leave unemployment unchanged.

answer

An adverse supply shock with a vertical supply of labor curve will

question

not all labor contracts within the economy expire at the same time.

answer

Staggered, overlapping contracts mean

question

firms are on their labor demand curve and workers are off their labor supply curve.

answer

According to the original Keynesian model, there would be counter-cyclical movements of the real wage rate in response to changes in aggregate demand because

question

identical to the natural employment deficit and it decreases whenever the natural level of output increases.

answer

The structural deficit is

question

constitutes discretionary fiscal policy.

answer

A deliberate change in the government's deficit

question

cannot; it includes non-discretionary spending changes

answer

The actual government budget deficit __________ be used to determine the effectiveness of discretionary fiscal policy actions because __________.

question

exports but not domestic investment as interest rates rose.

answer

In the 1980s, expansionary fiscal policy is believed to have crowded out

question

the amount by which the actual government budget deficit exceeds the structural deficit.

answer

The cyclical deficit is

question

a rapid change in fiscal policy and monetary policy.

answer

The economic policy response to the 2001 recession consisted of

question

World War II.

answer

By far the largest real government budget deficits measured as a percentage of natural real GDP occurred during

question

recovery from recession was accompanied by a growing deficit.

answer

A prominent postwar pattern of U.S. government budget deficits was broken in 1983-1990 as

question

dividends paid to foreigners

answer

Which of the following would give rise to a debit in the balance of payments?

question

the current account and capital account taken together are in surplus.

answer

The "official reserve transactions balance" will be positive when

question

it is one element of the domestic price of foreign goods.

answer

The exchange rate affects a nation's imports, essentially, because

question

the U.S. dollar is overvalued.

answer

Suppose the United States and Canada were the only two countries in the world. There is an excess supply of U.S. dollars on the foreign-exchange market. This implies that

question

automatically, in the long-run.

answer

Under a fixed exchange system with a flexible price level, balance of payments equilibrium will occur

question

a nation's exchange rate will decline at a rate equal to the difference between the domestic and the foreign rates of inflation.

answer

The purchasing power parity theory predicts that

question

U.S. assets abroad were less than foreign assets in the United States.

answer

In 1985 the United States was in a "net debtor" position. This description means that

1 of 90

question

Al Gore

answer

Political incumbents often gain or lose re-election because of a strong or weak economy. Which of the following is an exception to that rule?

question

jobless individuals looking for work divided by those employed and unemployed but actively looking

answer

The unemployment rate is the number of

question

The unemployment rate in the most recent recession involved a peak rate of unemployment lower than the peak rate of the recession before it.

answer

Which of the following statements about the behavior of the unemployment rate in the United States is true?

question

percentage increase in the average level of prices.

answer

The inflation rate is the

question

Actual real GDP = Natural real GDP

answer

The output gap is zero when

question

a society with no productivity growth in which any additional good enjoyed by one person requires that something be taken away from someone else.

answer

The "zero sum" society is

question

Yes, since government actions and policies can affect an economy's overall performance.

answer

Are government activities of any concern to macroeconomists?

question

well-being of the average individual in the nation.

answer

The real income per capita is a measure of the

question

flow of income from domestic firms to the nonproduction sector and back again.

answer

The circular flow of income describes the

question

Output has increased.

answer

If real GDP has increased, which of the following statements is always true?

question

equal to capital consumption allowances.

answer

The difference between gross investment and net investment is

question

government purchases of goods and services, net exports, private domestic investment

answer

Which of the following sets of categories correctly describes the categories of nonconsumption injections?

question

exports will increase and U.S. exporters gain.

answer

When the dollar depreciates

question

To increase the amount of borrowing from foreigners.

answer

Which of the following is not one of the ways a budget surplus can be used?

question

above last year's.

answer

question

exogenous and to remain constant.

answer

In the simple Keynesian model of the determination of income, the price level is assumed to be

question

endogenous

answer

What type of variables have their movements explained by theory?

question

completely independent of income, although they can be explained by movements in other variables.

answer

As used in this text, "autonomous" variables are

question

rise in equilibrium GDP resulting from a one dollar rise in planned autonomous expenditures.

answer

The multiplier measures the

question

the marginal propensity to save is 0.25.

answer

If disposable income increases by $100 and saving increased by $25, ceteris paribus, we may conclude that

question

decreases saving by that amount times the marginal propensity to save.

answer

An increase in autonomous taxes

question

lower the multiplier and lower equilibrium income.

answer

A rise in the income tax rate will

question

offset by government tax and spending policies.

answer

In an economy described by the assumptions of the simple Keynesian Model, the impact of fluctuations in autonomous investment on consumption spending could be

question

IS curve is negatively sloped.

answer

An increase in the money supply will raise equilibrium GDP if the

question

only at a point that is on both the IS and LM curves.

answer

The economy is in short-run equilibrium

question

change the slope and position of the LM curve.

answer

A change in the public's desire to hold money will

question

There is an excess demand for commodities at the existing interest rate.

answer

Which of the following statements would be true of an economy that can be characterized as being to the left of the IS curve?

question

fall if the change in future earnings is thought to be greater than the change in interest payments.

answer

question

autonomous expenditures were insensitive to the interest rate.

answer

The IS curve would be vertical if

question

the money supply, the interest rate, equilibrium income

answer

One of the major chains of causation in macroeconomic policymaking is government manipulation of __________ in order to affect __________, and thus ultimately __________.

question

IS curve is flatter and the AD curve is flatter.

answer

If the interest responsiveness of business firms investment is great then the

question

impact on Y and P for a given change in the SAS curve.

answer

The slope of the AD curve is important because it explains the

question

AD up and raise the price level.

answer

An increase in the nominal money supply will shift

question

firms will hire more labor as they move down the demand curve for labor.

answer

When the real wage falls, as a result of a rise in the price level

question

vertical at the natural level of income.

answer

The long-run aggregate supply curve is

question

raise both the price level and real income in the short run.

answer

A fiscal expansion will

question

SAS curve to shift rightward.

answer

Suppose that the discovery of cold fusion implies that the productivity of each worker in the economy doubles. This would cause the

question

inability of an increase in real balances to raise the level of output

answer

The term monetary impotence refers to the

question

shift the SAS curve upward thereby decreasing output.

answer

After a period of sustained unexpected inflation, it is likely that the renegotiation of nominal wages will 9) _______

question

nominal wages are fixed.

answer

In constructing the short-run Phillips curve, SP,

question

the inflation rate that both workers and firms expected at the time of the last contract negotiation.

answer

The variable p(e) represents

question

all possible combinations of real GDP and inflation, for a given set of expectations.

answer

The short-run Phillips curve gives

question

can be broken down into the growth of money supply plus the growth of velocity.

answer

The growth of nominal GDP

question

forward-looking expectations.

answer

Lucas's idea of information barriers as applied to the formation of inflation expectations is an example of

question

both output and inflation.

answer

Assuming adaptive expectations, a "cold turkey" reduction in AD by policymakers will initially reduce

question

choose the overall level of interest rates, with a high budget deficit implying a high level of interest rates.

answer

Once monetary policy is dedicated to controlling the level of nominal GDP, then fiscal policy can be used to

question

A sharp reduction in corporate income taxes would discourage U.S. corporations from shifting their production facilities to other countries, thus leading to a decrease in the unemployment rate.

answer

Which of the following beliefs is not part of supply-side economics?

question

temporarily shift both the short-run Phillips curve and aggregate nominal demand.

answer

A cut in income taxes tends to

question

accelerated economic growth if the money supply is increased to stabilize the output ratio.

answer

A decrease in deficit spending or an increase in the government surplus will lead to

question

crowd out private expenditures.

answer

A major side-effect of a stimulative fiscal policy is that it will

question

economy's real growth rate of output equals or exceeds its real interest rate.

answer

The government can meet its interest bill without having to levy taxes if it issues more bonds and if the

question

tighten fiscal policy

answer

The conditions for joining the "Euro" single-currency block led a number of European countries to __________ and consequently reduce their debt-GDP ratios.

question

it is too costly for individual savers to research your credit worthiness.

answer

As an individual, you cannot participate in the financial markets to issue new stock or sell new bonds because

question

both money demand and commodity demand are stable.

answer

A fixed money-supply rule will have the greatest stabilizing effect on output when

question

doubling of the level of nominal output.

answer

Given the quantity theory of money demand, a doubling of the money supply will lead to a

question

individuals are continually trying to maximize their wealth and income.

answer

Keynes' speculative demand for money arises because

question

substitution between money and virtually all other goods and assets.

answer

An important distinction between Friedman's and others' views of the demand for money is the former's emphasis on the

question

he made the transaction demand a real demand for money.

answer

A major criticism of Keynes' original theory of the demand for money is that

question

the medium of exchange function and income; store of value function and interest rates

answer

In the Keynesian theory of the demand for money, the transaction demand for money is primarily determined by __________ and the speculative demand by __________.

question

reserves held by banks to meet withdrawals

answer

High powered money is

question

Monetarists believe all of the above are correct.

answer

According to the Monetarists, "Policy activism" is difficult if not impossible to perform successfully because

question

monetary policy is impotent relative to fiscal policy

answer

Which of the following is NOT an argument of non-activists?

question

very flat and that real output is sometimes very sensitive to monetary policy in the short run.

answer

Non-activists believe that the IS curve is

question

monetary rules will not iron out every short-run fluctuation resulting from shocks.

answer

In the early 1970s monetary growth was relatively stable yet unemployment and prices were quite unstable. This suggests that

question

the time required for flexible prices to return the economy to the natural level of real GDP is intolerably long.

answer

The activists believe that

question

feedback rules are preferred to discretionary rules.

answer

According to the new classical macroeconomists, each of the following statements is true EXCEPT

question

for monetary policy to have an impact on inflation and unemployment

answer

The "effectiveness lag" in monetary policy is the amount of time it takes

question

the model relied on a non-market-clearing explanation of the labor market

answer

Which of the following are NOT included among Gordon's criticisms of Friedman's fooling model?

question

Friedman fooling model

answer

question

monetary policy cannot change real GDP in a regular or predictable way

answer

Which of the following best describes the policy ineffectiveness proposition?

question

large supply responses to variations in the inflation rate.

answer

Switzerland has experienced the lowest rate of price increases in the post World War II period. Consequently, Lucas would predict

question

rise during recessions.

answer

According to the Keynesian model, real wages should

question

raise the price level and leave unemployment unchanged.

answer

An adverse supply shock with a vertical supply of labor curve will

question

not all labor contracts within the economy expire at the same time.

answer

Staggered, overlapping contracts mean

question

firms are on their labor demand curve and workers are off their labor supply curve.

answer

According to the original Keynesian model, there would be counter-cyclical movements of the real wage rate in response to changes in aggregate demand because

question

identical to the natural employment deficit and it decreases whenever the natural level of output increases.

answer

The structural deficit is

question

constitutes discretionary fiscal policy.

answer

A deliberate change in the government's deficit

question

cannot; it includes non-discretionary spending changes

answer

The actual government budget deficit __________ be used to determine the effectiveness of discretionary fiscal policy actions because __________.

question

exports but not domestic investment as interest rates rose.

answer

In the 1980s, expansionary fiscal policy is believed to have crowded out

question

the amount by which the actual government budget deficit exceeds the structural deficit.

answer

The cyclical deficit is

question

a rapid change in fiscal policy and monetary policy.

answer

The economic policy response to the 2001 recession consisted of

question

World War II.

answer

By far the largest real government budget deficits measured as a percentage of natural real GDP occurred during

question

recovery from recession was accompanied by a growing deficit.

answer

A prominent postwar pattern of U.S. government budget deficits was broken in 1983-1990 as

question

dividends paid to foreigners

answer

Which of the following would give rise to a debit in the balance of payments?

question

the current account and capital account taken together are in surplus.

answer

The "official reserve transactions balance" will be positive when

question

it is one element of the domestic price of foreign goods.

answer

The exchange rate affects a nation's imports, essentially, because

question

the U.S. dollar is overvalued.

answer

Suppose the United States and Canada were the only two countries in the world. There is an excess supply of U.S. dollars on the foreign-exchange market. This implies that

question

automatically, in the long-run.

answer

Under a fixed exchange system with a flexible price level, balance of payments equilibrium will occur

question

a nation's exchange rate will decline at a rate equal to the difference between the domestic and the foreign rates of inflation.

answer

The purchasing power parity theory predicts that

question

U.S. assets abroad were less than foreign assets in the United States.

answer

In 1985 the United States was in a "net debtor" position. This description means that

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