m a c r o f i n a l
Suppose a country has a national debt of $5,000 billion, a GDP of $20,000 billion, and a budget surplus of $130 billion. How much will its new national debt be? a. $4, 870 billion b. $19, 870 billion c. $15,130 billion d. $5,130 billion
a. $4, 870 billion
Which of the following groups of economists perceive the economy as essentially stable and self-correcting? a. Classical economists, monetarists, and new classical economists. b. Classical economists, Keynesians, monetarists, and new classical economists. c. Keynesians, monetarists, and classical economists d. Monetarists, classical economists, and socialists
a. Classical economists, monetarists, and new classical economists.
Which of the following was not an explanation for the lower volatility of the U.S. economy during the 25-year period that preceded the Great Recession? a. Increased government spending b. Improved monetary policy c. Good luck d. Positive structural change in the economy
a. Increased government spending
If the economy's short-run aggregate supply curve is upward sloping, a decrease in aggregate demand will cause: a. an increase in the price level and a decrease in employment. b. a decrease in the price level and employment. c. a decrease in the price level and an increase in employment. d. an increase in the price level and employment.
b. a decrease in the price level and employment.
If an increase in government spending of $20 million results in a $100 million increase in GDP, then the spending multiplier is: a. 0.2 b. 2.5 c. 5 d. 20
c. 5
When did policy makers in the U.S. first use fiscal policy with the intent of manipulating aggregate demand to move the economy to its potential level of real GDP? a. During the Truman administration b. During the Roosevelt administration c. During the Eisenhower administration d. During the Kennedy administration
d. During the Kennedy administration
Which of the following are reasons why monetarists oppose activist stabilization policies? I. Monetary policy lags are so long and variable that trying to stabilize the economy using monetary policy can be destabilizing. II. Monetary policy affects a nation's currency exchange rate and affects the nation's competitiveness in the global market. III. Because of crowding-out effects, fiscal policy has no effect on GDP. IV. Fiscal policies must be financed by government borrowing or tax increases, both of which affect aggregate demand negatively. a. I, II, III, and IV b. I and II only c. I only d. I and III only
d. I and III only
Which of the following is true about new Keynesian economics? I. It incorporates monetarist ideas about the importance of monetary policy. II. It incorporates new classical ideas about the importance of aggregate supply. III. It includes a greater use of microeconomic analysis in macroeconomic analysis than Keynesian economics. IV. Unlike Keynesian economics, it is opposed to active stabilization policies. a. II and III only b. I and III only c. I, II, III, and IV d. I, II, and III only
d. I, II, and III only
Which of the following is true about Keynesians and monetarists with regards to policy intervention?
d. Keynesians favor active policy intervention to bring the economy back to its potential output while monetarists argue that the uncertain nature of lags renders policy intervention destabilizing.
The impact of fiscal policy is: a. magnified because of crowding out and weakened because of crowding in. b. magnified because of crowding in and weakened because of crowding out. c. magnified because of crowding out and crowding in. d. weakened because of crowding out and crowding in.
d. weakened because of crowding out and crowding in.
What is meant by the term "credit easing"? a. It is a strategy which involves the extension of central bank lending to influence more broadly the proper functioning of credit markets and to improve liquidity. b. It is a strategy which involves keeping interest rates very low by providing substantial reserves for as long as is necessary to avoid deflation and encourage spending. c. It is a strategy which involves lowering the required reserve ratio and lowering the federal funds rate to encourage banks to increase loan creation. d. It is a strategy which involves allowing interest rates to rise slowly by providing substantial reserves for as long as is necessary to avoid inflation.
a. It is a strategy which involves the extension of central bank lending to influence more broadly the proper functioning of credit markets and to improve liquidity.
The General Theory of Employment, Interest, and Money was written by: a. John Maynard Keynes b. Thomas Malthus c. Robert Lucas d. David Ricardo
a. John Maynard Keynes
The notion that there is a tradeoff between inflation and unemployment is expressed as a: a. Phillips curve. b. Keynes curve. c. Friedman curve d. Schumpeter curve.
a. Phillips curve.
Which of the following statements is true about the Great Depression? a. The fall in aggregate demand at the start of the Great Depression began with the collapse in investment. b. The fall in the short-run aggregate supply at the start of the Great Depression began with the collapse in exports because of the passage of Smoot-Hawley Tariff Act of 1930 which raised tariffs on imported goods. c. The fall in aggregate demand at the start of the Great Depression began with the collapse consumption because of the decrease in incomes, following the stock market crash of 1929. d. The fall in the short-run aggregate supply at the start of the Great Depression began with the collapse in investment.
a. The fall in aggregate demand at the start of the Great Depression began with the collapse in investment.
Keynes believed that wages and prices were sticky. Therefore, a rightward shift of the aggregate demand curve would cause: a. an increase in employment, production, and income. b. a change in the long-run aggregate supply curve. c. a decrease in the level of income. d. an increase in the unemployment level.
a. an increase in employment, production, and income.
The crowding out of consumer spending by an increase in taxes will be the greatest when: a. consumers would have spent the entire amount they now must pay in taxes. b. consumers would have spent only a fraction of the amount they now must pay in taxes. c. the government has a history of increasing taxes on a regular basis. d. consumers would have saved the entire amount they now must pay in taxes.
a. consumers would have spent the entire amount they now must pay in taxes.
During a recession, unemployment insurance ensures that: a. disposable income does not fall by as much as GDP decreases. b. disposable income increases as GDP falls. c. firms layoff fewer of its employees than it would if there is no unemployment insurance. d. the marginal propensity to consume increases.
a. disposable income does not fall by as much as GDP decreases.
Prior to the Great Depression, the dominant economic view held that: a. economies should be able to reach full employment through a process of self-correction. b. monetary policy should be used to move the economy back to its potential output because it was more immediate than fiscal policy. c. any movement away from potential output was due to either an excess aggregate demand or an excess aggregate supply. d. fiscal policy could effectively eliminate a recessionary gap and return the economy to its potential output.
a. economies should be able to reach full employment through a process of self-correction.
(Exhibit: Monetary Policy 1) By shifting the demand curve from D1 to D2, the Fed is exercising: a. expansionary monetary policy to lower interest rates. b. contractionary monetary policy to lower interest rates. c. expansionary monetary policy to increase interest rates. d. contractionary monetary policy to increase interest rates.
a. expansionary monetary policy to lower interest rates.
The total amount of money the government owes to its creditors is the: a. federal debt. b. federal withholding tax. c. federal fiscal IOU. d. federal government budget deficit.
a. federal debt.
Since 1979 when inflation soared into the double-digit, the Federal Reserve's policies: a. have clearly shown a reduced tolerance for inflation b. have been focused on moving the economy to its potential output. c. were concentrated on bringing the price of oil down. d. have moved toward restraining growth in financial markets.
a. have clearly shown a reduced tolerance for inflation
Suppose the economy experiences a recessionary gap. Expansionary monetary policy will: a. increase real GDP and increase the price level. b. decrease real GDP and increase the price level. c. decrease real GDP and decrease the price level. d. increase real GDP and decrease the price level.
a. increase real GDP and increase the price level.
The national debt: a. is the sum of all past federal deficits less any surpluses. b. is the difference between total government revenues and government expenditures. c. is the sum of all past federal deficits plus any surpluses. d. grows when government spending increases.
a. is the sum of all past federal deficits less any surpluses.
During an economic slump, policies that lower interest rates may not actually boost investment because: a. of pessimistic expectations by businesses about the future of the economy. b. taxes may have been decreased during a recessionary period. c. investment is never affected by interest rate changes. d. lower interest rates tend to discourage investment, all other things unchanged.
a. of pessimistic expectations by businesses about the future of the economy.
Suppose the economy experiences an inflationary gap. Policymakers who believe that government is too big would favor which of the following policies to close the gap? a. reduction in government spending b. increases in interest rates c. increases in corporate tax rates d. increases in income tax rates
a. reduction in government spending
The monetarist school of thought lost credibility due to sudden and large changes in the behavior of: a. the velocity of money b. interest rates c. the reserve requirement d. the money multiplier
a. the velocity of money
According to Milton Friedman, any divergence in unemployment from its natural rate is temporary because: a. unanticipated price changes affect real wages in the short run but workers will rectify this over time. b. anticipated price changes affect real wages in the short run but workers will rectify this over time. c. unanticipated price changes create inflation which is addressed by policymakers over time. d. anticipated price changes affect nominal wages in the short run but workers will rectify this over time.
a. unanticipated price changes affect real wages in the short run but workers will rectify this over time.
(Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a and that individuals have rational expectations. They calculate that expansionary monetary policy: a. will raise the price level to Pd; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS2. b. will raise the price level to Pb; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS1. c. will keep the price level at Pa; and the short-run aggregate supply curve at AS1. d. will raise the price level to Pc; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS2.
a. will raise the price level to Pd; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS2.
Which of the following are monetary policy goals? I. maintain high interest rates II. keep unemployment rates low III. reduce the size of the banking sector IV. prevent high rates of inflation a. I, II, and III b. II and IV c. II, III, and IV d. I, II, III, and IV
b. II and IV
Which of the following statements is true if interest rates were zero? a. The demand for bonds increases because bonds will be a more attractive alternative to money. b. People will hold their wealth in the form of money rather than in bonds. c. The supply of bonds will increase. d. Bonds and money will become perfect substitutes since both are non-interest earning assets.
b. People will hold their wealth in the form of money rather than in bonds.
(Exhibit: Fiscal Policy Options) Suppose the aggregate demand curve is AD1. All of the following events would more likely bring the economy back to the natural rate of unemployment except: a. The government orders a cut in withholding rates designed to increase disposable income and boost consumption. b. The government orders a one-time surcharge of 10% to be added to individual income tax liabilities. c. The Federal Reserve buys bonds on the open market. d. Businesses increase investment in response to tax breaks for businesses.
b. The government orders a one-time surcharge of 10% to be added to individual income tax liabilities.
Suppose the economy is initially in long-run equilibrium. Now suppose oil prices rise sharply and at the same time, policymakers pursue expansionary monetary and fiscal policies. Which of the following will occur as a result of these two events, given that supply-side effects dominate demand-side effects? a. Real GDP must necessarily fall but the effect on the price level is indeterminate. b. The price level must rise and real GDP must fall. c. The price level will necessarily rise but the effect on output is indeterminate. d. The price level and real GDP must rise.
b. The price level must rise and real GDP must fall.
Which of the following statements characterizes government transfer payment spending in the United States between 1960 and 2015? a. Transfer payment spending by the federal government and by state and local governments has decreased as a percentage of GDP. b. Transfer payment spending by the federal government and by state and local governments has more than tripled as a percentage of GDP. c. Transfer payment spending by the federal government and by state and local governments has fluctuated widely over this period. d. Transfer payment spending by the federal government and by state and local governments has remained constant as a percentage of GDP.
b. Transfer payment spending by the federal government and by state and local governments has more than tripled as a percentage of GDP.
Suppose the economy is in long-run equilibrium. If the federal government cuts government spending, which of the following is likely to result? a. a decrease in unemployment and a decrease in the price level b. a decrease in the price level and an increase in unemployment c. an increase in unemployment and an increase in the price level d. an increase in real GDP and an increase in the price level
b. a decrease in the price level and an increase in unemployment
In the 1970s the U.S. economy experienced a novel set of macroeconomic outcomes: rising price level and falling output. This experience led policymakers to: a. conclude that fiscal policy alone was enough to stabilize the economy. b. acknowledge that monetary policy and aggregate supply play a role in influencing macroeconomic performance. c. conclude that being a vital input, oil prices should be controlled by the government. d. aggregate demand was more important than aggregate supply in determining the economy's output level.
b. acknowledge that monetary policy and aggregate supply play a role in influencing macroeconomic performance.
b. Transfer payment spending by the federal government and by state and local governments has more than tripled as a percentage of GDP. a. allowing the aggregate demand to shift to the left. b. allowing the short-run aggregate supply to shift to the left. c. allowing the aggregate demand to shift to the right. d. allowing the short-run aggregate supply to shift to the right.
b. allowing the short-run aggregate supply to shift to the left.
(Exhibit: Fiscal Policy Options) If the aggregate demand curve is AD1, which of the following is the most appropriate discretionary fiscal policy to pursue? a. a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates b. an expansionary fiscal policy involving increases in government spending and increases in investment tax credits c. a contractionary fiscal policy involving reductions in government spending and increases in income tax rates d. an expansionary fiscal policy involving increases in government spending and decreases in investment tax credits
b. an expansionary fiscal policy involving increases in government spending and increases in investment tax credits
An increase in government transfer payments will shift the aggregate demand curve to the right: a. by the initial change in income arising from the change in transfer payment × the spending multiplier. b. by the initial change in consumption arising from the change in transfer payment × the spending multiplier. c. by the change in transfer payments × times the marginal propensity to consume. d. by the change in transfer payments × times the spending multiplier.
b. by the initial change in consumption arising from the change in transfer payment × the spending multiplier.
New classical theory asserts that, because people have rational expectations, if a policy of reducing the money supply is used: a. it might affect both aggregate demand and potential real GDP. b. consumers and firms observe that the money supply has fallen, anticipate the eventual reduction in the price level, and adjust their expectations accordingly. c. market participants react in such a way that shifts in aggregate supply will reinforce shifts in aggregate demand and real GDP will shift inevitably into inflationary or recessionary gaps. d. All of the above are true.
b. consumers and firms observe that the money supply has fallen, anticipate the eventual reduction in the price level, and adjust their expectations accordingly.
If the economy experiences an inflationary gap, a contractionary monetary policy will: a. decrease interest rates and decrease the bond prices. b. increase interest rates and decrease the bond prices. c. decrease interest rates and increase the bond prices. d. increase interest rates and increase the bond prices.
b. increase interest rates and decrease the bond prices.
Suppose that an economy experiences an increase in the unemployment rate and a decline in the inflation rate simultaneously. This situation would be consistent with a movement along a: a. vertical Phillips curve. b. negatively sloped Phillips curve. c. positively sloped Phillips curve. d. horizontal Phillips curve.
b. negatively sloped Phillips curve.
Taxes assessed on firms and employees on wages and salaries earned are called: a. corporate profits taxes. b. payroll taxes. c. earned income taxes. d. dividend taxes.
b. payroll taxes.
When consumers and producers operate under rational expectations: a. stabilization policy affects only the long-run aggregate supply curve. b. shifts in aggregate demand are perfectly anticipated by market participants, negating any attempt by policymakers to shift aggregate demand. c. stabilization policy affects only the short-run aggregate supply curve. d. stabilization policy does not affect the short-run aggregate supply curve.
b. shifts in aggregate demand are perfectly anticipated by market participants, negating any attempt by policymakers to shift aggregate demand.
The time it takes for the Fed or government policymakers to enact policies to correct unemployment or inflation problems is a source of which lag? a. the government lag b. the implementation lag c. the recognition lag d. the impact lag
b. the implementation lag
Payments to households that do not require anything in exchange are called: a. investment expenditures. b. transfer payments. c. government purchases. d. consumption expenditures.
b. transfer payments.
(Exhibit: Responses to a Decrease in Aggregate Demand) The economy is initially in equilibrium at point (1). Now suppose a reduction in the money supply causes aggregate demand to fall to AD2. Which of the following explains the new classical view regarding economic agents' response to the decrease in money supply?
c. Consumers and firms observe that the money supply has fallen and anticipate the eventual reduction in the price level to P3. They adjust their expectations accordingly. Workers agree to lower nominal wages, and the short-run aggregate supply curve shifts to SRAS2 at the same time as aggregate demand falls, bypassing point (2).
The congressional act that established the U.S. central banking system in 1913 was the: a. Gramm-Rudman Act. b. Employment Act. c. Federal Reserve Act. d. Humphrey-Hawkins Act.
c. Federal Reserve Act.
Which of the following is true about the Great Depression? a. The Great Depression of 1929 was considered to be a normal stage of business cycles. b. Expansionary monetary and fiscal policies successfully moved the economy from the Great Depression of 1929 within three to five years. c. Following the Great Depression of 1929, the economy did not regain its potential output until the early 1940s when the pressures of WWII sharply increased aggregate demand. d. The Great Depression could be explained by classical economic theory.
c. Following the Great Depression of 1929, the economy did not regain its potential output until the early 1940s when the pressures of WWII sharply increased aggregate demand.
Which of the following is a cost of unemployment? I. output foregone II. unemployment compensation that must be paid III. rising inflation that erodes the value of money a. II and III b. I and III c. I and II d. I, II, and III
c. I and II
Which of the following statements is true about the U.S. national debt? I. Relative to the level of economic activity, the debt is well below the levels reached during World War II. II. The ratio of debt to GDP fell in the last years of the twentieth century; it began rising again in 2002 and has risen substantially since the 2008 recession. III. Judged by international standards, the U.S. national debt relative to its GDP is above average among developed nations. a. II only b. III only c. I, II, and III d. I only
c. I, II, and III
Consider the following statement: "President X expressed concern about reports of rising inflation but insisted the economy is on the right course. He pointed to recent reductions in unemployment as evidence that his economic policies are working." Which of the following could have caused this phenomenon? a. Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right. b. Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left. c. Increase in government spending that shifted the aggregate demand curve to the right. d. Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right.
c. Increase in government spending that shifted the aggregate demand curve to the right.
Which of the following statements is true about Keynes' macroeconomic theory? a. Keynes stressed the notion that the economy would achieve price stability in the long run only if expansionary fiscal and monetary policies were used to address recessions. b. Keynes agreed that the notion that the economy would achieve the potential level of output in the long run is crucial to explaining prolonged recessions. c. Keynes dismissed the notion that the economy would achieve full employment in the long run as irrelevant in explaining prolonged recessions. d. Keynes argued that the economy would achieve full employment in the long run because of wage and price flexibility.
c. Keynes dismissed the notion that the economy would achieve full employment in the long run as irrelevant in explaining prolonged recessions.
(Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression) Which price level and output level best illustrates where the U.S. economy was before the Great Depression began? a. Pk; Yk b. Pn; Yn c. Pm; Ym d. Pj; Yj
c. Pm; Ym
Suppose the Fed's primary goal is price stability and it aims to keep the inflation rate at 2%. If the inflation rate rose above 2%, what should it do? a. Impose a temporary ceiling on the federal funds rate. b. Reduce the required reserve ratio. c. Pursue a contractionary monetary policy. d. Pursue an expansionary monetary policy.
c. Pursue a contractionary monetary policy.
Keynesian theory was a response to the prevailing: a. monetarist theory that held that monetary policy should be used to return the economy to its potential output. b. classical theory that held that the economy could suffer from a period of sustained unemployment. c. classical theory that held that the economy is self-correcting. d. monetarist theory that held that the economy is self-correcting.
c. classical theory that held that the economy is self-correcting.
If the economy experiences an inflationary gap, a contractionary monetary policy will: a. increase investment and decrease interest rates. b. decrease investment and decrease interest rates. c. decrease investment and increase interest rates. d. increase investment and increase interest rates.
c. decrease investment and increase interest rates.
Which of the following is an interest rate that the Fed has targeted in the last several years? a. the prime rate b. the discount rate c. the federal funds rate d. the government bond rate
c. the federal funds rate
During the Great Depression, investment plummeted because: a. more and more firms invest abroad rather than in the domestic economy to cut production costs. b. government policies related to investment tax credit changed the incentives for firms to undertake investment spending. c. the investment boom of the 1920s had left firms with an expanded stock of capital and as the capital stock approached its desired level, firms did not need as much new capital. d. consumers were not spending enough to justify expenditures on investment.
c. the investment boom of the 1920s had left firms with an expanded stock of capital and as the capital stock approached its desired level, firms did not need as much new capital.
Medicaid, welfare payments, and Temporary Assistance to Needy Families are classified as: a. unilateral payments. b. income redistribution payments. c. transfer payments. d. gifts.
c. transfer payments.
Which of the following statements is true about classical economists? a. They represent a large and cohesive group of economists who agreed with David Ricardo concerning wage and price flexibility in both the short run and the long run. b. Their theories shed little insight on the economy today because modern issues and concerns are so different from those described in their earlier writings. c. They did not believe in the neutrality of money. d. They may have shared some ideas in common, but their views were far from uniform.
d. They may have shared some ideas in common, but their views were far from uniform.
Which of the following statements is true about fiscal policy lags? a. Although automatic stabilizers have a much shorter lag, discretionary fiscal policy instruments have a more potent impact on the economy because they are more precise. b. Automatic stabilizers have a much shorter impact lag than discretionary fiscal policy. c. Although the recognition lag is equally long for discretionary fiscal policy and for automatic stabilizers, the latter avoid implementation lag because automatic stabilizers are triggered automatically. d. Unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags.
d. Unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags.
Crowding out occurs when expansionary fiscal policy leads to: a. a higher money supply and a reduction in net exports. b. a higher price level and a reduction in the money supply. c. a higher money supply and a reduction in the interest rate. d. a higher interest rate and a reduction in private investment.
d. a higher interest rate and a reduction in private investment.
(Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply) If the economy is at point c, an open market purchase would cause: a. a shift of the short-run aggregate supply curve from AS1 to AS2. b. a shift of the short-run aggregate supply curve from AS2 to AS1. c. a shift of the aggregate demand curve from AD2 to AD1. d. a shift of the aggregate demand curve from AD1 to AD2.
d. a shift of the aggregate demand curve from AD1 to AD2.
Suppose in the beginning of 2013, a country has a national debt of $8,000 billion. Its GDP in 2013 is $32,000 billion and its budget deficit of $1,600 billion. Compute its debt-GDP ratio at the end of the year. a. about 20,0% b. about 25.0% c. about 5. 0% d. about 30%
d. about 30%
Suppose Congress increases the corporate profit tax rates. This is an example of: a. automatic fiscal policy of the contractionary variety. b. automatic fiscal policy of the expansionary variety. c. discretionary fiscal policy of the expansionary variety. d. discretionary fiscal policy of the contractionary variety.
d. discretionary fiscal policy of the contractionary variety.
The three major categories of government spending are: a. defense spending, Medicare and Medicaid, and net interest. b. government purchases, defense spending, and transfer payments. c. government purchases, defense spending, and interest payments. d. government purchases, transfer payments, and net interest.
d. government purchases, transfer payments, and net interest.
Suppose the economy experiences a recessionary gap. Expansionary monetary policy will: a. increase investment and increase interest rates. b. decrease investment and decrease interest rates. c. decrease investment and increase interest rates. d. increase investment and decrease interest rates.
d. increase investment and decrease interest rates.
(Exhibit: The Bond Market) Suppose the Fed takes action that shifts the demand curve from S to S , as illustrated in Panel (b). As a result, the interest rate: a. decreases and investment increases. b. decreases and investment decreases. c. increases and investment increases. d. increases and investment decreases.
d. increases and investment decreases.
When the U.S. government runs a budget deficit, its primary way of covering that deficit is: a. selling stock. b. defaulting on its payments. c. printing money. d. issuing bonds.
d. issuing bonds.
When interest rates are near zero and traditional monetary policy is ineffective, the Fed or other central bank may resort to a strategy referred to as quantitative easing. What does this strategy involve? a. increasing the money supply and interest rates at a constant rate to stimulate economic activity b. allowing interest rates to rise slowly by providing substantial reserves for as long as is necessary to avoid inflation c. reducing the money supply to raise the interest rates slowly without discouraging spending d. keeping interest rates very low by providing substantial reserves for as long as is necessary to avoid deflation and encourage spending
d. keeping interest rates very low by providing substantial reserves for as long as is necessary to avoid deflation and encourage spending
The term "crowding out" refers to the phenomenon that occurs when increased government spending: a. leads to higher bond prices which decreases the demand for Treasury bonds. b. raises the price level and reduces consumption. c. leads to increased budget deficits that ultimately warrant increases in income taxes. d. leads to higher interest rates which reduces private investments.
d. leads to higher interest rates which reduces private investments.
According to the Keynesian theory of income and employment: a. the economy never tends toward equilibrium. b. the economy's level of employment is unrelated to its level of income. c. the economy automatically tends toward equilibrium at the level of full employment. d. the economy may be in equilibrium at less than full employment.
d. the economy may be in equilibrium at less than full employment.
Possible targets for monetary policy include all of the following except: a. the interest rate. b. money growth rate. c. expected changes in the price level. d. the government's budget deficit or surplus.
d. the government's budget deficit or surplus.
What are the three types of monetary policy lags? a. the recognition lag, the identification lag, and the implementation lag b. the recognition lag, the inflation lag, and the impact lag c. the recognition lag, the implementation lag, and the government lag d. the recognition lag, the implementation lag, and the impact lag
d. the recognition lag, the implementation lag, and the impact lag
The lag in realizing that a macroeconomic problem exists is called: a. the implementation lag. b. the market lag. c. the impact lag. d. the recognition lag.
d. the recognition lag.