Question

73. Past inflation alone determines expectations about future inflation according to which theory

Group of answer choices

(a) adaptive expectations.

(b) rational expectations.

(c) asymmetric expectations.

(d) erratic expectations.

(e) all of the above.

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Question 741 pts

74. The extreme application of rational expectations leads to which of the following conclusions:

Group of answer choices

(a) inflation can be ended without a recession.

(b) intentional government efforts to increase output and reduce unemployment through manipulating aggregate demand will usually fail.

(c) people do not make systematic errors in their inflationary expectations.

(d) all of the above.

(e) none of the above.

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Question 751 pts

75. If all prices and wages are fully flexible at all times, what will be the shape of the aggregate supply curve?

Group of answer choices

(a) horizontal.

(b) upward sloping.

(c) downward sloping.

(d) vertical.

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Question 761 pts

76. The idea that recessions or depressions are the result of negative technology or supply-side shocks is known as:

Group of answer choices

(a) New Keynesian economics.

(b) a liquidity trap.

(c) real business cycle theory.

(d) the Laffer Curve.

(e) free banking.

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Question 771 pts

77. Which of the following positions is most closely associated with New Keynesian economics?

Group of answer choices

(a) Ricardian equivalence.

(b) the role of menu costs and imperfect competition in creating inflexible (sticky) prices.

(c) real business cycle theory.

(d) a self-reversing boom.

(e) all of the above.

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Question 781 pts

78. If the demand for loanable funds decreases, ceteris paribus, what will happen to interest rates?

Group of answer choices

(a) they will rise.

(b) they will fall.

(c) they will remain the same.

(d) we do not know.

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Question 791 pts

79. The immediate effect of an expansionary monetary policy on the interest rate is to:

Group of answer choices

(a) raise it.

(b) lower it.

(b) lower it.

(d) we do not know.

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Question 801 pts

80. The impact on interest rates in the previous question is referred to as:

Group of answer choices

(a) the substitution effect.

(b) the income effect.

(c) the Fisher effect.

(d) Gibson’s paradox.

(e) liquidity effect.

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Question 811 pts

81. Over the long run, if the rate of inflation falls, what happens to nominal interest rates?

Group of answer choices

(a) they rise.

(b) they fall.

(c) they remain the same.

(d) we do not know.

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Question 821 pts

82 If the nominal rate of interest is 5 percent, and the rate of inflation is 2 percent, what is the real rate of interest?

Group of answer choices

(a) 7 percent.

(b) 3 percent.

(c) 5 percent.

(d) 2.5 percent.

(e) none of the above.

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Question 831 pts

83. Which of the following positions is most closely associated with Austrian economics?

Group of answer choices

(a) Ricardian equivalence.

(b) the role of menu costs and imperfect competition in creating inflexible (sticky) prices.

(c) real business cycle theory.

(d) a self-reversing boom (an asset bubble).

(e) all of the above.

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Question 841 pts

84. From the end of World War II until the 1980s, the total U.S. national debt:

Group of answer choices

(a) rose in nominal dollars and rose in real dollars.

(b) rose in nominal dollars and fell in real dollars.

(c) fell in nominal dollars and fell in real dollars.

(c) fell in nominal dollars and fell in real dollars.

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Question 851 pts

85. Which part of the national government’s deficit is most likely to generate sustained inflation?

Group of answer choices

(a) the part that is monetized by the Fed.

(b) the part that is borrowed from the general public.

(c) both parts.

(d) neither part.

(d) neither part.

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Question 861 pts

86. According to which theory do people not suffer from bond-illusion?

Group of answer choices

(a Ricardian Equivalence, also known as the classical view.

(b) the conservative view of James Buchanan.

(c) the Keynesian short-run view.

(d) all of the above.

(e) (b) and (c) but not (a).

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Question 871 pts

87. According to which theory does fiscal policy lead to significant crowding out?

Group of answer choices

(a) Ricardian Equivalence, also known as the classical view.

(b) the conservative view of James Buchanan.

(c) the Keynesian short-run view.

(d) all of the above.

(e) (a) and (b) but not (c).

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Question 881 pts

88. If people do not suffer from bond or fiscal illusion, what effect will a tax cut have on aggregate demand, holding government expenditures constant?

Group of answer choices

(a) increase it.

(b) decrease it,

(c) leave it unchanged

(d) we do not know?

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Question 891 pts

89. Social Security has an unfunded liability because it is run on a pay-as-you-go basis.

Group of answer choices

(a) True.

(b) False.

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Question 901 pts

90. How does the expenditure (Keynesian) multiplier affect fiscal policy?

Group of answer choices

(a) it makes fiscal policy more effective.

(b) it makes fiscal policy less effective.

(c) it has no effect on fiscal policy.

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Question 911 pts

91. How does crowding out affect fiscal policy?

Group of answer choices

(a) it makes fiscal policy more effective.

(b) it makes fiscal policy less effective.

(c) it has no effect on fiscal policy.

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Question 921 pts

92. Monetary policy works best when money’s velocity is stable and predictable.

Group of answer choices

(a) True.

(b) False.

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Question 931 pts

93. Concern that time lags in the implementation and impact of macroeconomic policy are long and variable would tend to make one support what kind of policy?

Group of answer choices

(a) activist.

(b) non-activist.

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Question 941 pts

94. Milton Friedman once proposed that the Federal Reserve increase the money stock a constant percentage every year. Is this an example of:

Group of answer choices

(a) countercyclical fiscal policy.

(b) discretionary monetary policy.

(c) a monetary rule.

(d) free banking.

(e) supply-side fiscal policy.

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Question 951 pts

95. What is the formula for the Taylor Rule?

Group of answer choices

(a) Y = C + I + G + NX.

(b) M^S = B [(k +1)/(k + rr)].

(c) Y = Py.

(d) M^SV = Py.

(e) target interest rate = real rate + ∆P/P + a(inflation gap) + b(output gap).

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Question 961 pts

96. What is the formula for the money multiplier?

Group of answer choices

(a) Y = C + I + G + NX.

(b) M^SV = Py.

(c) M^S = B/rr.

(d) M^S = B [(k +1)/(k + rr)].

(e) target interest rate = real rate + ∆P/P + a(inflation gap) + b(output gap).

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Question 971 pts

97. If the relative price of oil is falling, what is happening to the price level?

Group of answer choices

(a) it is rising.

(b) it is falling.

(c) it is constant.

(d) we don’t know.

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Question 981 pts

98. If you construct a graph for the demand and stock of money, what goes on the vertical axis?

Group of answer choices

(a) the price level (P).

(b) the interest rate (i).

(c) the purchasing power of money (PPM).

(d) real GDP (y).

(e) money (M).

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Question 991 pts

99. If you construct a graph for the demand and stock of money, what should be the shape of money stock (supply) curve?

Group of answer choices

(a) upward sloping.

(b) downward sloping.

(c) vertical.

(c) vertical.

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Question 1001 pts

100. How would you depict an increase in the velocity of money on a graph of the demand and stock of money?

Group of answer choices

(a) shift the stock of money curve to the right.

(b) the stock of money curve to the left.

(c) shift the demand for money curve to the right.

(d) shift the demand for money curve to the left.

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Question 1011 pts

101. When the central bank conducts an expansionary monetary policy that increases the rate of inflation, what effect does it have on the real rate of interest over the long-run?

Group of answer choices

(a) it increases the real rate of interest.

(b) it decreases the real rate of interest.

(c) it leaves the real rate of interest unchanged.

(d) we don’t know.

Answer 1

Ans 73: (a) adaptive expectations.

Ans 74: (b) intentional government efforts to increase output and reduce unemployment through manipulating aggregate demand will usually fail.

Ans 75: (d) vertical. (Classical case)

Ans 76: (c) real business cycle theory.

Ans 77: (b) the role of menu costs and imperfect competition in creating inflexible (sticky) prices.

Ans 78: (b) they will fall.

Ans 79: (b) lower it.

Ans 80: (e) liquidity effect.

Ans 81: (b) they fall.

Ans 82: (b) 3 percent. (real = nominal - inflation)

Ans 83: (d) a self-reversing boom (an asset bubble).

Ans 84: (b) rose in nominal dollars and fell in real dollars.

Ans 85: (a) the part that is monetized by the Fed.

Ans 86: a Ricardian Equivalence, also known as the classical view.

Ans 87: (a) Ricardian Equivalence, also known as the classical view.

Ans 88: (a) increase it.

Ans 89 : (a) True

Ans 90: (a) it makes fiscal policy more effective.

Ans 91: (b) it makes fiscal policy less effective.

Ans 92: (a) True.

Ans 93: (b) non-activist.

Ans 94: c) a monetary rule.

Ans 95: e) target interest rate = real rate + ∆P/P + a(inflation gap) + b(output gap).

Ans 96: (d) MS = B [(k +1)/(k + rr)].

Ans 97: (b) it is falling.

Ans 98: (b) the interest rate (i).

Ans 99: (c) vertical.

Ans 100:  (c) shift the demand for money curve to the right.

Ans 101: (b) it decreases the real rate of interest.