Question 1

During the past 15 years,the increased use of _______ _______,________ _______,and __________ ___________ the velocity of money has tripled the United States since the mid 1950s.

Accepted Answer

credit car...

Question 2

According to many modern monetarists

Accepted Answer

A)  the government can minimize economic instability by stabilizing growth of the money supply at a constant low rate.
B)  short-run variations in an economy's productive capacity can be predicted precisely.
C)  discretionary monetary policy enables the Federal Reserve System to closely control the economy.
D)  the money supply should grow at a rate determined by short-run economic fluctuations.
E)  history has proven that fine-tuning fiscal and monetary policy is both possible and practical.F) B) and D)
G) A) and E)

Question 3

Systematic error is most clearly associated with

Accepted Answer

A)  rational expectations.
B)  adaptive expectations.
C)  supply-side expectations.
D)  monetary expectations.
E)  economic behaviorists.F) A) and D)
G) D) and E)

Question 4

The conventional monetary policy to fight inflation would be to

Accepted Answer

A)  increase the rate of monetary growth.
B)  decrease the rate of monetary growth.
C)  run budget deficits.
D)  run budget surpluses.E) B) and C)
F) B) and D)

Question 5

The ______ believed that our economy was self-regulating and argued against government interference with its operations.

Accepted Answer

A)  classical economists
B)  supply-side economists
C)  Keynesians
D)  economic behaviorists
E)  monetaristsF) A) and C)
G) All of the above

Question 6

The theory of rational expectations concludes that

Accepted Answer

A)  the public's expectations can influence the outcome of monetary policy,but not of fiscal policy.
B)  the public's expectations can influence the outcome of fiscal policy,but not of monetary policy.
C)  the public's expectations as to the effects of economic policies will tend to reinforce the effectiveness of those policies.
D)  by reacting in its self-interest to the expected effects of stabilization policy,the public will tend to negate the impact of those policies.E) A) and B)
F) A) and C)

Question 7

While most economists believe that Keynes was correct when he placed primary focus on aggregate demand manipulation to solve the recessionary gap of the Great Depression,supply-siders are critical of this focus,claiming that

Accepted Answer

A)  Keynesian economics can only be successful if interest rates are allowed to rise.
B)  Keynesian economics diverted attention away from important factors such as work effort,labor productivity,and incentives to save and invest.
C)  the Great Depression was caused by the stock market crash of 1929,not a decline in aggregate demand.
D)  greater control of the way in which stocks and bonds were traded would have brought the economy out of the Great Depression.
E)  the supply of goods and services should have been placed under the control of the government until the economy had time to adjust to the decline of aggregate demand.F) B) and E)
G) B) and D)

Question 8

Economists favoring the rational expectations theory maintain that

Accepted Answer

A)  market participants plan counterstrategies to what the Fed is planning to do.
B)  the Fed has no real short-term effect on output and employment unless it truly surprises markets.
C)  market participants anticipate government policies.
D)  All of the choices are correct.E) A) and B)
F) All of the above

Question 9

The school of economic thought that recently has questioned a core belief among economists that people's actions are guided by rational,unemotional self-interest is the ______________ school.

Accepted Answer

economic b...

Question 10

The classical economist holds that interest rates are set by

Accepted Answer

A)  the government.
B)  banks.
C)  supply and demand.
D)  None of the choices are correct.E) A) and B)
F) A) and C)

Question 11

The velocity of money measures the

Accepted Answer

A)  proportion of the money supply which is held as an asset.
B)  ratio of the transactions demand to the asset demand for money.
C)  average annual rate of increase in the money supply.
D)  number of times per year the average dollar is spent on final goods and services.E) C) and D)
F) B) and D)

Question 12

Classical economists perceive that

Accepted Answer

A)  investors' expectations about returns on investment are unstable.
B)  large investment swings are responses to small changes in interest rates.
C)  the best way to cure unemployment is to start a war.
D)  the proper cure for unemployment is active fiscal policy.E) All of the above
F) None of the above

Question 13

Statement I: According to the rational expectations theory,the prime economic mover is aggregate demand,not aggregate supply.
Statement II: The rational expectationists believed that the oil price shocks of 1973 and 1979 created declines in aggregate supply,lowering the natural level of GDP.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) A) and B)
F) A) and C)

Question 14

Milton Friedman and others,citing imperfections and mistakes in the administration of fiscal policy,argue that government stabilization policies

Accepted Answer

A)  often destabilize the economy.
B)  are usually in doses too small to correct fluctuations in the economy.
C)  are always for political gain,not economic stability.
D)  always cause inflation.
E)  have no effect on the economy.F) A) and D)
G) A) and B)

Question 15

The theory of rational expectations concludes that

Accepted Answer

A)  by reacting to the expected effects of a stabilization policy,the public will tend to negate the impact of that policy.
B)  the public's expectations as to the effects of economic policies will tend to reinforce the effectiveness of those policies.
C)  the public's expectations can influence the outcome of fiscal policy,but not of monetary policy.
D)  the public's expectations can influence the outcome of monetary policy,but not of fiscal policy.E) None of the above
F) C) and D)

Question 16

President Nixon once proclaimed that he followed the __________ school of economics.

Accepted Answer

The answer of President Nixon once proclaimed that he followed...

Question 17

The classical economists espoused

Accepted Answer

A)  the crude version of the quantity theory of money
B)  the sophisticated version of the quantity theory of money
C)  both the crude and sophisticated quantity theories of money
D)  neither the crude nor sophisticated quantity theories of moneyE) B) and D)
F) A) and D)

Question 18

According to the monetarists,

Accepted Answer

A)  the supply of money changes in response to changes in the levels of real output and prices.
B)  changes in the velocity of money are more important than changes in the money supply in causing the level of economic activity to change.
C)  an expansionary fiscal policy will lower interest rates and thereby tend to over stimulate the economy.
D)  changes in the money supply temporarily cause changes in real output and price level but in the long run only prices change.E) All of the above
F) B) and D)

Question 19

Supply-side economists believe that,if the marginal tax rates are high,we can raise tax revenue by _______.

Accepted Answer

The answer of Supply-side economists believe that,if the marginal tax...

Question 20

Which of the following is NOT a component of the equation of exchange?

Accepted Answer

A)  The price level
B)  The interest rate
C)  Real output
D)  The velocity of money
E)  The supply of moneyF) C) and E)
G) D) and E)

Exam 15: A Century of Economic Theory

Statement I: According to the rational expectations theory,the prime economic mover is aggregate demand,not aggregate supply. Statement II: The rational expectationists believed that the oil price shocks of 1973 and 1979 created declines in aggregate supply,lowering the natural level of GDP.

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According to the monetarists,

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Classical economists perceive that

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The classical economists espoused

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Economists favoring the rational expectations theory maintain that

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The velocity of money measures the

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According to many modern monetarists

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During the past 15 years,the increased use of _______ _______,________ _______,and __________ ___________ the velocity of money has tripled the United States since the mid 1950s.

Correct Answerverifiedcredit car...View AnswerShow Answer

The ______ believed that our economy was self-regulating and argued against government interference with its operations.

Correct AnswerverifiedShow Answer

The theory of rational expectations concludes that

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The theory of rational expectations concludes that

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Milton Friedman and others,citing imperfections and mistakes in the administration of fiscal policy,argue that government stabilization policies

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President Nixon once proclaimed that he followed the __________ school of economics.

Correct AnswerverifiedShow Answer

Which of the following is NOT a component of the equation of exchange?

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Supply-side economists believe that,if the marginal tax rates are high,we can raise tax revenue by _______.

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The conventional monetary policy to fight inflation would be to

Correct AnswerverifiedShow Answer

While most economists believe that Keynes was correct when he placed primary focus on aggregate demand manipulation to solve the recessionary gap of the Great Depression,supply-siders are critical of this focus,claiming that

Correct AnswerverifiedShow Answer

Systematic error is most clearly associated with

Correct AnswerverifiedShow Answer

The school of economic thought that recently has questioned a core belief among economists that people's actions are guided by rational,unemotional self-interest is the ______________ school.

Correct Answerverifiedeconomic b...View AnswerShow Answer

The classical economist holds that interest rates are set by

Correct AnswerverifiedShow Answer

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During the past 15 years,the increased use of ___ _,__ _,and ___ the velocity of money has tripled the United States since the mid 1950s.

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credit car...
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economic b...
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