Monetarists believe that a. the Open Market Committee should only sell government bonds, never buy them. b. the Fed should alter the target growth rate of money periodically to counteract adverse economic activity. c. the Fed should be constantly changing the growth of the money supply to counteract economic fluctuations. d. the Fed should allow the money supply to grow at a constant rate to accommodate the natural rate of economic growth.
Keynesian economists argue that the velocity of money is
Question 6 options:
A) stable over the long term.
B) stable in both the short run and the long rum.
C) unstable and predictable.
D) unstable and unpredictable.
If the Fed follows a monetary rule, it will
Question 7 options:
A) change the money supply as needed to combat recessions.
B) have absolute control over the money supply.
C) target a rate at which they believe the money supply should grow and stick to it.
D) try to make the money supply grow at approximately twice the potential growth rate of real GDP.
Monetarists argue that changes in the money supply
Question 8 options:
A) must be adjusted frequently in response to ever-changing economic conditions.
B) stimulate aggregate demand indirectly, through changes in interest rates and investment.
C) have a direct impact on aggregate demand.
D) have little impact on the inflation rate
The precautionary demand for money is the stock of money that people hold to
Question 1 options:
A) pay their predictable, everyday expenses.
B) pay for any unexpected expenses that may occur.
C) buy stocks, bonds, and other nonmoney financial assets.
D) buy the foreign currencies needed to purchase imports.
If the Fed wants to lower interest rates, then it can use its open market operations to
Question 4 options:
A) increase the money supply.
B) decrease the money supply.
C) increase money demand.
D) decrease the money demand.
Keynesian economists argue that monetary policy works through its effects on
Question 5 options:
A) interest rates and investment.
B) price and wage flexibilty.
C) budget deficits and trade deficits.
D) the spending and money multipliers
Question 3 (1 point)
[Question 3 Unsaved]
If the spending multiplier is 8, the tax multiplier is
Question 3 options:
Question 4 (1 point)
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Suppose the marginal propensity to consume (MPC) is 0.90. If the government increases both its spending and taxes by $50 million, then aggregate demand will
Question 4 options:
A) increase by $50 million.
B) increase by $45 million.
C) remain unchanged.
D) increase by $4.5 million.
Question 5 (1 point)
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Which of the following types of economic policy was advocated by the Reagan administration?
Question 5 options:
A) Keynesian fiscal policy.
B) Supply-side fiscal policy.
C) Balanced-budget fiscal policy.
D) Automatic stabilizers.
Question 6 (1 point)
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The Laffer curve is a graph of the relationship between tax rates and
Question 6 options:
A) government spending.
C) real GDP.
D) total tax revenues.
Question 7 (1 point)
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Supply-side fiscal policies primarily focus on
Question 7 options:
A) improving incentives to work, save, and invest.
B) adjusting interest rates and the money supply.
C) expanding overseas markets.
D) developing the nation's infrastructure.
Question 1: The recognition time lag is the time that elapses between Question 1 options: A) when an economic problem manifests itself and it is officially acknowledged. B) the recognition of an economic problem and implementing policies to solve it. C) implementing policies to solve an economic problem and when the results of that policy can be measured. D) the beginning of the budgetary process and the final budget resolution. Save Question 2 (5 points) Question 2 Unsaved The permanent income hypothesis implies that the effect of a temporary tax cut on economic activity Question 2 options: A) is smaller than the effect of a permanent tax cut. B) can be greater than or smaller than the effect of a permanent tax cut, depending on how the tax cut affects the government. C) is greater than the effect of a permanent tax cut. D) is the same as the effect of a permanent tax cut. Save Question 3 (5 points) Question 3 Unsaved When the government deliberately alters its level of spending and/or taxes in order to achieve specific national economic goals, it is exercising Question 3 options: A) a Ricardian policy. B) a laissez-faire policy. C) discretionary fiscal policy. D) monetary policy. Save Question 4 (5 points) Question 4 Unsaved Supply-side economists argue that changes in tax rates cause changes in Question 4 options: A) the full-employment level of output. B) labor supply. C) saving. D) All of these. Save Question 5 (5 points) Question 5 Unsaved Which of the following fiscal policy actions would definitely cause a reduction in the size of an inflationary gap? Question 5 options: A) increases in taxes B) cuts in taxes C) cuts in taxes and increases in government spending D) increases in government spending Save Question 6 (5 points) Question 6 Unsaved By definition, a direct expenditure offset will occur whenever Question 6 options: A) the interest rate rises. B) the interest rate falls. C) the government increases spending in an area that competes with the private sector. D) the government increases spending for the military. Save Question 7 (5 points) Question 7 Unsaved Which of the following are lags that fiscal policy makers must cope with? Question 7 options: A) recognition time lags B) action time lags C) effect time lags D) All of these are correct. Save Question 8 (5 points) Question 8 Unsaved When fiscal policy is used, time lags are variable and last anywhere from Question 8 options: A) one to three decades. B) one to three months. C) one to three weeks. D) one to three years. Save Question 9 (5 points) Question 9 Unsaved Discretionary fiscal policy is Question 9 options: A) deliberate changes in government expenditures or taxes in order to achieve certain national economic goals. B) automatic changes in government expenditures and interest rates that achieve certain national economic goals. C) changes in support for research and education in order to achieve certain national economic goals. D) used to achieve full employment by changing monetary growth targets. Save Question 10 (5 points) Question 10 Unsaved To close a recessionary gap through fiscal policy, the government should Question 10 options: A) decrease government spending in order to increase aggregate supply. B) reduce taxes in order to stimulate investment, and thus increase aggregate supply. C) increase government spending in order to increase aggregate demand. D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply. Save Question 11 (5 points) Question 11 Unsaved Discretionary Fiscal policy Question 11 options: A) is the conversion of nominal data to real data. B) is the use of government spending and tax policies to influence economic growth and inflation. C) is the use of regulation to influence economic growth and inflation. D) is the purchase and sale of Treasury securities to influence economic growth and inflation. Save Question 12 (5 points) Question 12 Unsaved An example of an automatic stabilizer is Question 12 options: A) the Congressional decision to increase unemployment benefits in a recession. B) the decision of the President to cut taxes in a recession. C) the progressive tax system. D) the raising of taxes on cigarettes to discourage smoking to stabilize health-care costs. Save Question 13 (5 points) Question 13 Unsaved Expansionary fiscal policy falls short of its goal. Some economists claim it is due to indirect crowding out. What evidence would be consistent with this claim? Question 13 options: A) The interest rate increased. B) An increase in consumer spending occurred. C) The price level decreased. D) Saving decreased. Save Question 14 (5 points) Question 14 Unsaved If the crowding-out effect is complete and the marginal propensity to save is 0.25, then an increase in government spending of $100 billion will generate how much more real GDP? Question 14 options: A) $0 B) $100 billion C) $25 billion D) $400 billion Save Question 15 (5 points) Question 15 Unsaved If the government increases aggregate demand when the economy is at both short-run and long-run equilibrium, the full long-run effect of this fiscal policy will be to Question 15 options: A) increase the price level. B) increase either the real Gross Domestic Product (GDP) or the price level, depending on the length of the time lag. C) decrease both real Gross Domestic Product (GDP) and the price level. D) increase real Gross Domestic Product (GDP). Save Question 16 (5 points) Question 16 Unsaved Refer to the above figure. If the relevant aggregate demand curve is AD2, what is the current economic situation? Question 16 options: A) overemployment B) inflationary gap C) recessionary gap D) equilibrium Save Question 17 (5 points) Question 17 Unsaved Which of the following conditions describes a recessionary gap? Question 17 options: A) The actual interest rate is above the equilibrium interest rate. B) The short-run equilibrium level of real GDP is above the long-run level of real GDP. C) The short-run equilibrium level of real GDP is below the long-run level of real GDP. D) The actual interest rate is below the equilibrium interest rate. Save Question 18 (5 points) Question 18 Unsaved Suppose there currently is an inflationary gap. What could the government do to bring the overall price level down? Question 18 options: A) Increase government spending. B) Reduce the nation's aggregate supply. C) Reduce government spending. D) nothing Save Question 19 (5 points) Question 19 Unsaved The traditional Keynesian approach to fiscal policy assumes Question 19 options: A) the Ricardian equivalence theorem is correct. B) the price level is constant. C) the validity of supply-side economics. D) government expenditures are often substitutes for private expenditures. Save Question 20 (5 points) Question 20 Unsaved The effect time lag is the time period that elapses Question 20 options: A) between the beginning of the budgetary process and the final budget resolution. B) between the recognition of an economic problem and implementing policies to solve it. C) between implementing policies to solve an economic problem and when the results of that policy can be measured. D) between when an economic problem manifests itself and it is officially acknowledged. Save