Econ 102 Quiz 17

According to an analysis by Obama administration economists, A the government purchases multiplier is 1.57, whereas the tax multiplier is only 0.99 B the tax multiplier is 1.57, whereas the government purchases multiplier is only 0.99

A

According to standard Keynesian theory, A the government-purchases multiplier exceeds the tax multiplier B the tax multiplier exceeds the government-purchases multiplier

A

For Keynesians, fiscal policy requires that the government should act as the A the demander of last resort B the lender of last resort

A

From 1995 to 2006, average house prices in the United States A more than doubled B more than trebled

A

From 2006 to 2009, housing prices nationwide fell A about 30 percent B about 40 percent C about 50 percent

A

Other economists argued that despite the predictions of conventional Keynesian models, A spending-based fiscal stimulus is not as effective as tax-based initiatives Btax-based initiatives are not as effective as spending-based fiscal stimulus

A

Which was by far the more severe recession? A The Great Depression of the 1930s. B The Great Recession of 2008-2009. (Mankiw 359, text and Figure 12-9, but note that the text doesn't completely mesh with the diagram)

A

As a result of the events described in 4 above, the economy went into recession, and production, income, and employment declined. Policymakers responded vigorously as the crisis unfolded. Choose the statements below that are TRUE. (Choose one or more.) A First, the Fed cut its target for the federal funds rate from 5.25 percent in September 2007 to about zero in December 2008. B Second, in October 2008, Congress appropriated $700 billion for the Treasury to use to rescue the financial system. In large part these funds were used for equity injections into banks. C Third, the new president, Barack Obama, supported a major increase in government spending to expand aggregate demand. D Finally, the Federal Reserve engaged in various unconventional monetary policies, such as buying long-term bonds, to lower long-term interest rates, and thereby encourage borrowing and private bonding.

A, B, C & D

The fall in housing prices led to (choose one or more) A a substantial rise in mortgage defaults and home foreclosures B large losses at the various financial institutions that owned mortgage-backed securities C a substantial rise in stock market volatility D a decline in consumer confidence

A, B, C & D

The financial crisis of 2008 began a few years earlier with a substantial boom in the housing market that was caused by several factors that included (choose one or more) A historically low interest rates in the aftermath of the 2001 recession B historically high interest rates in the aftermath of the 2001 boom C developments in the mortgage market that made it easier for subprime borrowers to get mortgages to buy homes D securitization, the process by which one mortgage originator makes loans and then sells them to an investment bank, which in turn bundles them together into a variety of "mortgage-backed securities" and then sells them to a third financial institution (such as a bank, pension fund, or insurance company), who it seems sometimes failed to fully appreciate the risks they were taking.

A, C & D

In March 2009, economist Paul Krugman argued that the Obama stimulus was A about the right size given the apparent depth of the economic downturn B not large enough given the apparent depth of the economic downturn C too large given the apparent depth of the economic downtown

B

Mankiw describes the economists who joined the Council of Economic Advisers in 1961 as A classical economists B Keynesians C monetarists D supply-siders

B

A study of fiscal policy since 1970 in OECD countries found that A successful fiscal stimulus relies almost entirely on cuts in business and income taxes. B failed fiscal stimulus relies primarily on increases in government spending. C both A and B

C

Ceteris paribus, cutting taxes can A expand aggregate demand by raising households' disposable income B stimulate aggregate supply by improving incentives to work, save, and take risks C both A and B D neither A nor B

C

Economist Gary Becker argued that A using infrastructure spending to promote employment always conflicts with the goal of obtaining the infrastructure that was most needed B using infrastructure spending to promote employment does not conflict with the goal of obtaining the infrastructure that was most needed C using infrastructure spending to promote employment might conflict with the goal of obtaining the infrastructure that was most needed

C