Question 1

Automatic stabilizers include

Accepted Answer

A)  Open market operations.
B)  Unemployment benefits.
C)  Deregulation.
D)  Discretionary tax cuts.E) None of the above
F) A) and C)

Question 2

The decision concerning how the dollars left over from a defense cutback will be distributed is an example of

Accepted Answer

A)  A goal conflict.
B)  A design problem.
C)  A velocity problem.
D)  An implementation problem.E) B) and C)
F) None of the above

Question 3

Which of the following is most consistent with supply-side policy?

Accepted Answer

A)  The Workforce Investment Act,which increased funds for skill training.
B)  The increase in the interest rate six times during 1999-2000 by the Fed.
C)  The decrease in the growth of the money supply in 1994.
D)  The Budget Enforcement Act of 1990.E) B) and D)
F) None of the above

Question 4

It is not possible to have a "growth recession" because if the economy grows at all then it is not in a recession.
A "growth recession" occurs when the economy experiences positive growth that is less than 3 percent.

Accepted Answer

A) True 
 B)False

Question 5

One In the News article is titled "Lobbyists Flock as Businesses Seek Share of the Stimulus Pie." According to the text,the projected $800 billion stimulus package led to lobbying efforts on behalf of which of the following?

Accepted Answer

A)  Steel companies.
B)  Wind farmers.
C)  Universities.
D)  All of the choices are correct.E) All of the above
F) A) and C)

Question 6

One In the News article is titled "CBO's Flawed Forecasts." According to the text,the CBO's forecasts typically miss the actual budget balance in the fifth year by

Accepted Answer

A)  1 percent of GDP.
B)  2 percent of GDP.
C)  3 percent of GDP.
D)  4 percent of GDP.E) A) and D)
F) A) and C)

Question 7

The correction of any and all macroeconomic problems that arise

Accepted Answer

A)  Is compatible with our design capabilities.
B)  Has been easy to accomplish over the last decade.
C)  Is the concept of fine-tuning.
D)  Is the policy approach favored by most economists.E) A) and B)
F) B) and C)

Question 8

Which of the following explains why Congress or the president might hesitate to use restrictive fiscal policy in an election year?

Accepted Answer

A)  Monetary policy is always more effective.
B)  Voters might become unemployed.
C)  Fiscal policy is too complex.
D)  Fiscal year appropriations are not under the authority of Congress.E) A) and B)
F) B) and D)

Question 9

The aggregate supply curves shown in the model in Figure 18.3 are most consistent with the views of

Accepted Answer

A)  Monetarists.
B)  Supply-siders.
C)  Keynesians.
D)  Modern Keynesians.E) B) and C)
F) B) and D)

Question 10

One In the News article is titled "No Recession,Bernanke Says." According to the text,Bernanke cited all of the following responsible for sluggish growth except

Accepted Answer

A)  High energy prices.
B)  A weaker dollar.
C)  Stock market turmoil.
D)  Declining home values.E) A) and B)
F) A) and C)

Question 11

Modern Keynesians believe that fiscal stimulus raises interest rates,which eliminates an AD excess.
Modern Keynesians believe that fiscal stimulus shifts the AD curve to the right,thereby restoring full employment.

Accepted Answer

A) True 
 B)False

Question 12

Explain why new classical economists favor a laissez faire policy approach.

Accepted Answer

New classical economists believe that pe...

Question 13

Which of the following is an example of supply-side policy?

Accepted Answer

A)  Selling bonds in the open market.
B)  The purchase of military goods by the government.
C)  Tax incentives for business investment.
D)  Changes in the reserve requirement.E) A) and C)
F) A) and B)

Question 14

Which of the following actions results in the shortest lag between recognition of a problem and an appropriate stabilization response?

Accepted Answer

A)  Congress takes authority over stabilization and is not required to wait for the executive branch to respond.
B)  The appropriation and authorization responsibilities of Congress are transferred to the executive branch in order to eliminate congressional lags.
C)  Congress writes legislation providing more automatic stabilizers in the economy.
D)  Congress provides limited authority to the president to alter fiscal or monetary policy for the purpose of stabilization.E) All of the above
F) A) and D)

Question 15

Fiscal and monetary policies are most effective in reducing inflation when the aggregate

Accepted Answer

A)  Supply curve is horizontal.
B)  Supply curve is vertical.
C)  Supply curve is upward-sloping but not vertical.
D)  Demand curve is vertical.E) All of the above
F) A) and B)

Question 16

Which of the following believe that lower tax rates will increase the incentives to work,invest,and produce?

Accepted Answer

A)  Keynesians.
B)  New classical economists.
C)  Monetarists.
D)  Supply-siders.E) C) and D)
F) None of the above

Question 17

During a severe recession,appropriate economic policy might include

Accepted Answer

A)  An open market purchase by the Fed,a decrease in the discount rate,or a decrease in government regulation.
B)  An open market sale by the Fed,a decrease in the discount rate,or an increase in the budget deficit.
C)  A decrease in government spending,a decrease in the discount rate,or a decrease in government regulation.
D)  An open market purchase by the Fed,a decrease in the tax rates,or a decrease in the budget deficit.E) None of the above
F) A) and C)

Question 18

Which of the following is an accurate statement about supply-side policy?

Accepted Answer

A)  The aggregate supply curve should be shifted to the right during periods of inflation and to the left during a recession.
B)  The aggregate supply curve should be shifted to the left during periods of inflation and to the right during a recession.
C)  The aggregate supply curve should be shifted to the right during periods of both inflation and recession.
D)  The aggregate supply curve should be left alone.E) A) and D)
F) B) and D)

Question 19

The reason unemployment claims are a good leading indicator of economic activity is that they reflect

Accepted Answer

A)  Orders for new goods.
B)  Hours worked per week.
C)  Automatic stabilizers.
D)  Industry layoffs and hiring.E) A) and B)
F) A) and C)

Question 20

Which of the following is a monetary policy action?

Accepted Answer

A)  Open market operations.
B)  Changes in transfer payments.
C)  Changes in government spending.
D)  Deregulation.E) B) and C)
F) C) and D)

Exam 18: Theory Versus Reality

One In the News article is titled "CBO's Flawed Forecasts." According to the text,the CBO's forecasts typically miss the actual budget balance in the fifth year by

Correct AnswerverifiedShow Answer

During a severe recession,appropriate economic policy might include

Correct AnswerverifiedShow Answer

Which of the following is an accurate statement about supply-side policy?

Correct AnswerverifiedShow Answer

Which of the following is a monetary policy action?

Correct AnswerverifiedShow Answer

The correction of any and all macroeconomic problems that arise

Correct AnswerverifiedShow Answer

Which of the following actions results in the shortest lag between recognition of a problem and an appropriate stabilization response?

Correct AnswerverifiedShow Answer

Which of the following believe that lower tax rates will increase the incentives to work,invest,and produce?

Correct AnswerverifiedShow Answer

Modern Keynesians believe that fiscal stimulus raises interest rates,which eliminates an AD excess. Modern Keynesians believe that fiscal stimulus shifts the AD curve to the right,thereby restoring full employment.

Correct AnswerverifiedShow Answer

One In the News article is titled "Lobbyists Flock as Businesses Seek Share of the Stimulus Pie." According to the text,the projected $800 billion stimulus package led to lobbying efforts on behalf of which of the following?

Correct AnswerverifiedShow Answer

Fiscal and monetary policies are most effective in reducing inflation when the aggregate

Correct AnswerverifiedShow Answer

One In the News article is titled "No Recession,Bernanke Says." According to the text,Bernanke cited all of the following responsible for sluggish growth except

Correct AnswerverifiedShow Answer

Which of the following is an example of supply-side policy?

Correct AnswerverifiedShow Answer

The reason unemployment claims are a good leading indicator of economic activity is that they reflect

Correct AnswerverifiedShow Answer

Which of the following is most consistent with supply-side policy?

Correct AnswerverifiedShow Answer

The decision concerning how the dollars left over from a defense cutback will be distributed is an example of

Correct AnswerverifiedShow Answer

Which of the following explains why Congress or the president might hesitate to use restrictive fiscal policy in an election year?

Correct AnswerverifiedShow Answer

Explain why new classical economists favor a laissez faire policy approach.

Correct AnswerverifiedNew classical economists believe that pe...View AnswerShow Answer

It is not possible to have a "growth recession" because if the economy grows at all then it is not in a recession. A "growth recession" occurs when the economy experiences positive growth that is less than 3 percent.

Correct AnswerverifiedShow Answer

The aggregate supply curves shown in the model in Figure 18.3 are most consistent with the views of

Correct AnswerverifiedShow Answer

Automatic stabilizers include

Correct AnswerverifiedShow Answer

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New classical economists believe that pe...
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