Question 1
Which of the following represents a Keynesian point of view of macroeconomics?
a) aggregate supply is the primary determinate of economic output
b) creating increases in aggregate demand to reduce unemployment
c) focus on long-term growth in the economy
d) vertical aggregate supply

Question 2
Which of the following government policies would be supported by neoclassical macroeconomic assumptions?
a) focus on combating depression and cyclical unemployment
b) focus on real GDP and cyclical unemployment
c) focus on short-term recession and controlling inflation
d) focus on long-term growth and on controlling inflation

Question 3
________________ economists place an emphasis on __________ run economic performance.
a) Keynesian; long
b) Neoclassical; long
c) D. Says; short
d) Phillips; short

Question 4
At a macroeconomic level, the theory of rational expectations points out that if the ______________________ is vertical over time, then people should rationally expect this pattern.
a) GDP
b) aggregate demand curve
c) Phillips curve
d) aggregate supply curve

Question 5
From a neoclassical viewpoint, government should focus less on:
a) aggregate supply.
b) long-term growth.
c) controlling inflation.
d) cyclical unemployment.

Question 6
In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment.
a) wage levels
b) aggregate demand
c) tax levels
d) aggregate supply
Question 7
From a neoclassical view, which of the following is a true statement?
a) A surge in aggregate demand ends up as a rise in output, but does not increase price levels.
b) Because wages are flexible, they are unaffected by high rates of unemployment.
c) Lower wages will cause an economy-wide increase in the price of a key input.
d) The economy cannot sustain production above its potential GDP in the long run.

Question 8
A typical Keynesian aggregate supply (AS) curve _______________ and a typical Keynesian Phillips curve _____________.
a) slopes downward; slopes downward
b) slopes upward; slopes upward
c) slopes upward; slopes downward
d) is vertical; is vertical

Question 9
A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of:
a) aggregate demand.
b) real unemployment.
c) inflationary pressures.
d) cyclical unemployment.

Question 10
If aggregate supply is vertical, then aggregate demand does not affect:
a) inflationary pressures that accompanies any rise in output.
b) the causes of inflationary changes in price level.
c) either wages or prices.
d) the quantity of output.

Question 11
In the neoclassical model, the AS curve shifts to the right over time as_______________________ and potential GDP expands.
a) productivity increases
b) the level of real output drops
c) the macroeconomy adjusts back to real GDP
d) aggregate demand increases
Chapter 13 mandatory

Question 12
Referring to the diagram, complete the following sentence: Any increase in aggregate demand in the short-run will lead to:
a) a 45 degree supply curve, which will lead to increasing unemployment.
b) an increase in output (Q1 to Q2), but it will also lead to prices increasing.
c) a 45 degree supply curve, which will lead to recession.
d) an increase in output (Q1 to Q2), but it will also lead to a recession.
Chapter 15 Random

Question 13
Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run.
a) tight monetary policy
b) contractionary monetary policy
c) expansionary monetary policy
d) reverse quantitative easing policy

Question 14
____________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect?
a) Altering the discount rate
b) Long and variable time lags
c) Quantitative easing
d) Reserve requirements

Question 15
Which of the following is considered to be a relatively weak tool of monetary policy?
a) quantitative easing
b) altering the discount rate
c) reserve requirements
d) reducing the money supply

Question 16
Which of the following institutions determines the quantity of money in the economy as its most important task?
a) Federal Open Market Committee
b) Federal Reserve Board of Governors
c) U.S. Department of the Treasury
d) Central Bank

Question 17
If the economy is in recession with high unemployment and output below potential GDP, then __________________ would cause the economy to return to its potential GDP?
a) a loose monetary policy
b) fewer loanable funds
c) higher interest rates
d) a tight monetary policy

Question 18
Which of the following is a traditional tool used by the Fed during recessions?
a) higher interest rates
b) open market operations
c) coins and paper currency
d) quantitative easing

Question 19
If the original level of aggregate demand is AD0, then an expansionary monetary policy that shifts aggregate demand to AD1 will only:
a) create a deflationary loss in price level.
b) create an inflationary increase in price level.
c) create an increase in unemployment.
d) create an increase in GDP.

Question 20
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?
a) Fed rate
b) reserve requirement
c) open market rate
d) discount rate
Chapter 15 important

Question 21
A central bank that desires to reduce the quantity of money in the economy can:
a) raise the reserve requirement.
b) buy bonds in open market operations.
c) engage in quantitative easing.
d) lower the discount rate.

Question 22
A central bank that wants to increase the quantity of money in the economy will:
a) buy bonds in open market operations.
b) raise the discount rate.
c) reverse quantitative easing.
d) sell bonds in open market operations.

Question 23
When banks hold excess reserves because they don't see good lending opportunities:
a) it negatively affects contractionary monetary policy.
b) contractionary monetary policy is unaffected.
c) expansionary monetary policy is unaffected.
d) it negatively affects expansionary monetary policy.
Chapter 15 Problems Monetary policy

Question 24
If the economy is at equilibrium as shown in the diagram above, then a contractionary monetary policy will
a) increase unemployment, but have little effect on inflation.
b) have no effect on output, but increase inflation.
c) increase unemployment and decrease inflation.
d) increase output and increase inflation.
Chapter 15 Money velocity

Question 25
If GDP is 1800 and the money supply is 300, then what is the velocity?
a) 18.3
b) 8
c) 4.57
d) 6.