Question 1

Monetarists take the policy position that the supply of money should be

Accepted Answer

A)  increased at a constant rate each year.
B)  decreased during recession and increased during inflation.
C)  held constant over time.
D)  increased during recession and decreased during inflation.E) B) and C)
F) All of the above

Question 2

If people take into account the expected behavior of fiscal and monetary authorities in forecasting the behavior of inflation rates,they are most likely forming their projections using

Accepted Answer

A)  behavioral expectations.
B)  adaptive expectations.
C)  contractionary expectations.
D)  inflationary expectations.
E)  rational expectations.F) B) and D)
G) D) and E)

Question 3

According to the equation of exchange

Accepted Answer

A)  when M rises,P must rise.
B)  when M rises,V must fall.
C)  when MV falls,PQ must fall.
D)  when V rises,Q must rise.E) C) and D)
F) B) and D)

Question 4

If Q = 800,P = 20,and V = 4,then M

Accepted Answer

A)  is 2,000.
B)  is 4,000.
C)  is 8,000.
D)  is 16,000.
E)  cannot be found.F) B) and C)
G) A) and B)

Question 5

The classicals assumed ________ wages and _________ prices.

Accepted Answer

flexible (...

Question 6

Which of the following is true?

Accepted Answer

A)  The bible for the classical economists was Adam Smith's The Wealth of Nations.
B)  Keynes believed that the problem during recessions was inadequate aggregate demand.
C)  Say's law states that supply creates its own demand.
D)  All of the statements are true.E) A) and B)
F) B) and C)

Question 7

According to supply-side economics,when operating in the upper portion of the Laffer curve,tax cuts result in

Accepted Answer

A)  interest rate increases.
B)  productivity decreases.
C)  income decreases.
D)  tax revenue increases.
E)  savings decreases.F) B) and E)
G) A) and B)

Question 8

When interest rates were very low,said Keynes,people would ___________ their money.

Accepted Answer

The answer of When interest rates were very low,said Keynes,people...

Question 9

If M were 800,V were 4,and Q were 1,600,how much would P be?

Accepted Answer

The answer of If M were 800,V were 4,and Q...

Question 10

Statement I: Rational expectationists believe that people make well-reasoned and self-interested decisions based upon available information.
Statement II: The Laffer curve describes the relationship between cost-push inflation and demand-pull inflation.

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) B) and D)
F) B) and C)

Question 11

Who believed that people had transactional,precautionary,and speculative motives for holding money?

Accepted Answer

A)  John Maynard Keynes and the classical economists
B)  Neither John Maynard Keynes nor the classical economists
C)  The classical economists,but not John Maynard Keynes
D)  John Maynard Keynes,but not the classical economistsE) None of the above
F) A) and C)

Question 12

Statement I: As our economy becomes even more closely integrated into the world economy,macropolicy will become more important.
Statement II: Lower interest rates attract foreign investors,and thus increases the amount of money coming into the country.

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) B) and C)
F) A) and B)

Question 13

According to many modern monetarists,the government can minimize economic instability by stabilizing growth of the _________.

Accepted Answer

The answer of According to many modern monetarists,the government can...

Question 14

Milton Friedman concluded that we have never had a serious inflation that was not accompanied by __________.

Accepted Answer

rapid mone...

Question 15

Expansionary monetary policy will only temporarily depress interest rates in a basic proposition of the __________ school.

Accepted Answer

The answer of Expansionary monetary policy will only temporarily depress...

Question 16

The work effect is a basic assumption of the ________ school;it states that __________.

Accepted Answer

supply-side;high tax rates hur...

Question 17

Monetary and fiscal policy measures won't help end a recession,according to the _________ school of thought.

Accepted Answer

rational e...

Question 18

Which is the most accurate statement?

Accepted Answer

A)  The quantity theory of money and the equation of exchange are two ways of saying exactly the same thing.
B)  The crude quantity theory of money very accurately describes the relation between the money supply and the price level.
C)  According to the crude quantity theory,Q and V are constants.
D)  One of our main economic problems has been that the equation of exchange has not been balanceD.E) A) and B)
F) A) and C)

Question 19

The __________ theory holds that people will expect fiscal and monetary policies to have certain effects and that they will take actions that make these policies ineffective.

Accepted Answer

rational e...

Question 20

Monetarists argue that business fluctuations are caused by

Accepted Answer

A)  excessive government spending.
B)  ups and downs in the growth of the money supply.
C)  changes in tax rates.
D)  changes in transfer payments.E) B) and C)
F) A) and D)

Exam 15: A Century of Economic Theory

Statement I: As our economy becomes even more closely integrated into the world economy,macropolicy will become more important. Statement II: Lower interest rates attract foreign investors,and thus increases the amount of money coming into the country.

Correct AnswerverifiedShow Answer

Expansionary monetary policy will only temporarily depress interest rates in a basic proposition of the __________ school.

Correct AnswerverifiedShow Answer

According to the equation of exchange

Correct AnswerverifiedShow Answer

According to many modern monetarists,the government can minimize economic instability by stabilizing growth of the _________.

Correct AnswerverifiedShow Answer

If M were 800,V were 4,and Q were 1,600,how much would P be?

Correct AnswerverifiedShow Answer

If Q = 800,P = 20,and V = 4,then M

Correct AnswerverifiedShow Answer

Monetarists take the policy position that the supply of money should be

Correct AnswerverifiedShow Answer

The work effect is a basic assumption of the ________ school;it states that __________.

Correct Answerverifiedsupply-side;high tax rates hur...View AnswerShow Answer

Statement I: Rational expectationists believe that people make well-reasoned and self-interested decisions based upon available information. Statement II: The Laffer curve describes the relationship between cost-push inflation and demand-pull inflation.

Correct AnswerverifiedShow Answer

The classicals assumed ________ wages and _________ prices.

Correct Answerverifiedflexible (...View AnswerShow Answer

Monetarists argue that business fluctuations are caused by

Correct AnswerverifiedShow Answer

Monetary and fiscal policy measures won't help end a recession,according to the _________ school of thought.

Correct Answerverifiedrational e...View AnswerShow Answer

Which is the most accurate statement?

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Who believed that people had transactional,precautionary,and speculative motives for holding money?

Correct AnswerverifiedShow Answer

The __________ theory holds that people will expect fiscal and monetary policies to have certain effects and that they will take actions that make these policies ineffective.

Correct Answerverifiedrational e...View AnswerShow Answer

According to supply-side economics,when operating in the upper portion of the Laffer curve,tax cuts result in

Correct AnswerverifiedShow Answer

Milton Friedman concluded that we have never had a serious inflation that was not accompanied by __________.

Correct Answerverifiedrapid mone...View AnswerShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

When interest rates were very low,said Keynes,people would ___________ their money.

Correct AnswerverifiedShow Answer

If people take into account the expected behavior of fiscal and monetary authorities in forecasting the behavior of inflation rates,they are most likely forming their projections using

Correct AnswerverifiedShow Answer

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The work effect is a basic assumption of the school;it states that __.

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supply-side;high tax rates hur...
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The classicals assumed wages and _ prices.

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flexible (...
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rational e...
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rational e...
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rapid mone...
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