Question 1

If the stock of money is $100 billion, velocity is 4, and the price level is 5, what is income?

Accepted Answer

A)   $5 billion
B)   $80 billion
C)   $125 billion
D)   $2,000 billionE) None of the above
F) A) and D)

Question 2

Which of the following statements is not consistent with the quantity theory of money?

Accepted Answer

A)   The velocity of money can be affected by how frequently workers are paid.
B)   The velocity of money can be affected by the development of new financial instruments, such as interest-bearing checking accounts.
C)   The velocity of money can be affected by the manner in which the banking system clears transactions between banks.
D)   Velocity can change with changes in the interest rate.E) None of the above
F) A) and B)

Question 3

The rational-expectations hypothesis implies that there is no need for government stabilization policies.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the information provided in Figure 17.2 below to answer the questions that follow. 1, but does not change the price level. C)  increases the price level above P1, but does not change equilibrium output. D)  increases equilibrium output above Y1 and decreases the price level below P1." class="answers-bank-image d-inline" rel="preload" > Figure 17.2
-Refer to Figure 17.2. According to monetarists, an expansionary fiscal policy in the long run and after all the adjustments have been made

Accepted Answer

A)   does not increase equilibrium output or the price level.
B)   increases equilibrium output above Y1, but does not change the price level.
C)   increases the price level above P1, but does not change equilibrium output.
D)   increases equilibrium output above Y1 and decreases the price level below P1.E) B) and D)
F) B) and C)

Question 5

Because people may change how they react when economic policies are changed, comparing macroeconomic models is

Accepted Answer

A)   difficult.
B)   impossible.
C)   not attempted by legitimate economists.
D)   only effective for long-run analysis.E) B) and D)
F) A) and C)

Question 6

A price surprise is equal to the expected price level minus the actual price level.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the information provided in Figure 17.2 below to answer the questions that follow. 1, but does not change equilibrium output. A)  Keynes; contractionary B)  Keynes; expansionary C)  monetarists; expansionary D)  the new classicals; contractionary" class="answers-bank-image d-inline" rel="preload" > Figure 17.2
-Refer to Figure 17.2. According to ________, a(n)  ________ fiscal policy in the long run and after all the adjustments have been made increases price level above P1, but does not change equilibrium output.

Accepted Answer

A)   Keynes; contractionary
B)   Keynes; expansionary
C)   monetarists; expansionary
D)   the new classicals; contractionaryE) All of the above
F) A) and B)

Question 8

Increases in government spending are consistent with supply-side economic policies.

Accepted Answer

A) True 
 B)False

Question 9

Lowering taxes is a contractionary Keynesian policy.

Accepted Answer

A) True 
 B)False

Question 10

If the demand for money depends on the interest rate, then a 15% increase in the money supply will increase

Accepted Answer

A)   nominal GDP by 15%.
B)   nominal GDP by less than 15%.
C)   nominal GDP by more than 30%.
D)   real GDP by 30%.E) A) and B)
F) A) and C)

Question 11

The Lucas supply function states that real output is a function of the price surprise.

Accepted Answer

A) True 
 B)False

Question 12

According to the Lucas supply function, workers who experience a positive price surprise will work more hours when

Accepted Answer

A)   there is no substitution effect from a positive price surprise.
B)   there is no income effect from a positive price surprise.
C)   the substitution effect dominates the income effect.
D)   the income effect dominates the substitution effect.E) All of the above
F) None of the above

Question 13

According to the Lucas supply function, if the expected price level is larger than the actual price level

Accepted Answer

A)   real output increases.
B)   real output decreases.
C)   nominal output increases.
D)   nominal output decreases.E) C) and D)
F) All of the above

Question 14

The velocity of money is the ratio of

Accepted Answer

A)   real GDP to the stock of money.
B)   the overall price level to the stock of money.
C)   nominal GDP to the stock of money.
D)   nominal GDP to the overall price level.E) B) and D)
F) B) and C)

Question 15

According to the quantity theory of money, nominal GDP will ________ if the money supply ________.

Accepted Answer

A)   fall by 50%; rises by 50%
B)   rise by 50%; falls by 50%
C)   double; doubles
D)   rise by 100%; falls by 50%E) A) and D)
F) A) and B)

Question 16

According to the Lucas supply function, when the income effect dominates the substitution effect, workers who experience a ________ price surprise will work ________ hours.

Accepted Answer

A)   positive; more
B)   positive; fewer
C)   negative; fewer
D)   negative; the same number ofE) C) and D)
F) A) and D)

Question 17

Supporters of supply-side economics claim that ________ tax policies were quite successful in stimulating the economy because throughout most of the 1980s, federal receipts continued to rise even though tax rates had been cut.

Accepted Answer

A)   Jimmy Carter's
B)   Gerald Ford's
C)   Ronald Reagan's
D)   Richard Nixon'sE) B) and C)
F) C) and D)

Question 18

Most empirical testing in macroeconomics uses data beginning from about 1950.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the information provided in Figure 17.1 below to answer the questions that follow.  Figure 17.1
-Refer to Figure 17.1. At point B

Accepted Answer

A)   an increase in tax rates will increase tax revenue.
B)   a decrease in tax rates will increase tax revenue.
C)   any change in tax rates will decrease tax revenue.
D)   any change in tax revenue will increase tax revenue.E) A) and D)
F) A) and B)

Question 20

A velocity of ________ means money changes hands, on average, every 2 months.

Accepted Answer

A)   6
B)   2
C)   1.5
D)   0.5E) None of the above
F) B) and C)

Exam 17: Alternative Views in Macroeconomics

According to the Lucas supply function, workers who experience a positive price surprise will work more hours when

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Most empirical testing in macroeconomics uses data beginning from about 1950.

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A price surprise is equal to the expected price level minus the actual price level.

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If the stock of money is $100 billion, velocity is 4, and the price level is 5, what is income?

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Increases in government spending are consistent with supply-side economic policies.

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The velocity of money is the ratio of

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Refer to the information provided in Figure 17.1 below to answer the questions that follow. Figure 17.1 -Refer to Figure 17.1. At point B

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If the demand for money depends on the interest rate, then a 15% increase in the money supply will increase

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The Lucas supply function states that real output is a function of the price surprise.

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Lowering taxes is a contractionary Keynesian policy.

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According to the Lucas supply function, if the expected price level is larger than the actual price level

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Because people may change how they react when economic policies are changed, comparing macroeconomic models is

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According to the Lucas supply function, when the income effect dominates the substitution effect, workers who experience a ________ price surprise will work ________ hours.

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Supporters of supply-side economics claim that ________ tax policies were quite successful in stimulating the economy because throughout most of the 1980s, federal receipts continued to rise even though tax rates had been cut.

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Refer to the information provided in Figure 17.2 below to answer the questions that follow. Figure 17.2 -Refer to Figure 17.2. According to monetarists, an expansionary fiscal policy in the long run and after all the adjustments have been made

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The rational-expectations hypothesis implies that there is no need for government stabilization policies.

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According to the quantity theory of money, nominal GDP will ________ if the money supply ________.

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Which of the following statements is not consistent with the quantity theory of money?

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A velocity of ________ means money changes hands, on average, every 2 months.

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According to the Lucas supply function, when the income effect dominates the substitution effect, workers who experience a price surprise will work hours.

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According to the quantity theory of money, nominal GDP will if the money supply .

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