1) Supply-side economics involves policy measures designed to

Choices

A-encourage technological progress

B-remove unnecessary government regulations

C-give investment tax credits to stimulate specific capital investments

D-all of the above

E-none of the above

2)The aggregate demand and supply model in this chapter

choices

A-differs in terms of underlying economics from the demand and supply model used in microeconomics

B-uses the term "price" for the average price level of all the goods and services we buy

C-uses an AS-curve that is relatively more price elastic in the medium run than in the long run

D-uses an AS-curve that is vertical in the long run and horizontal in the very short run

E-all of the above

3)The AD-curve has a negative slope since

choices

A-firms will produce less if they have to lower their prices

B-lower prices mean higher real wages so firms can no longer afford to produce as many goods and services

C-a decrease in the price level increases real money balances, leading to lower interest rates and increased spending

D-lower prices drive up the demand for goods since buyers fear future market shortages

E-lower prices increase consumer confidence, which encourages spending

4)If government purchases and taxes are both increased by the same lump sum, we can expect the following in the medium run:

choices

A-output, prices, and interest rates will all remain unchanged

b-output, prices, and interest rates will all decrease

c-output, prices, and interest rates will all increase

d-output and prices will remain the same but interest rates will increase

e-output and prices will increase but interest rates will remain the same

5)The income velocity of money can be calculated using the following formula

choices

a-V = M/(PY)

b-V = (MY)/P

c-V = (PY)/M

d-V = MY

e-none of the above

6)Given the Keynesian AS-curve, expansionary monetary policy will

choices

a-increase the level of output but leave the price level unchanged

b-increase the price level but leave the level of output unchanged

c-increase both the level of output and the price level

d-leave the level of output and the price level unchanged

e-increase the level of output but decrease the price level

7)Which of the following is FALSE for the United States from 1960 to 2015?

choices

a-black workers had consistently higher unemployment rates than white workers

b-teenagers had consistently higher unemployment rates than adult workers

c-male workers had consistently higher unemployment rates than female workers

d-the unemployment rate of teenage workers was never below 10 percent

e-the unemployment rate of white workers was never above 10 percent

8)Assume that the share of whites in the labor force is 85% and their unemployment rate is 10%. The share of non-whites in the labor force is 15%, and their unemployment rate is 14%.What is the overall unemployment rate?

choices

a-12.4%

b-12.0%

c-11.6%

d-10.6%

e-10.4%

9)Which of the following can affect the frequency of unemployment?

choices

a-the availability of unemployment benefits

b-the variability of the demand for labor across different employers

c-the rate at which new workers enter the labor force

d-both A) and B)

e-both B) and C)

10)Which of the following countries had the lowest unemployment rate in 2011?

choices

a-France

b-Norway

c-Sweden

d-The United Kingdom

e-The United States

11)In 2009, the high unemployment rate in the U.S. caused a loss in real GDP of roughly

choices

a-$68 billion

b-$168 billion

c-$680 billion

d-$1,168 billion

e-none of the above

12)When we look at the unemployment rates in the United States for the period 1948 to 2010, which of the following statements is the most accurate?

choices

a-flows into and out of the unemployment pool tend to be fairly small relative to the actual number of unemployed people

b-variations in the unemployment rates are fairly small across groups defined by age, gender, or race

the average duration of unemployment for the majority of the unemployed tends to be more than half a year long

c-the average duration of unemployment was higher in the period between 1975 and 1985 than it was between 1995 and 2005

d-the unemployment rates during the recessions of 1981-82 and 2001-02 were lower than the rate e-during the Great Recession of 2007-09

13)If we look at U.S. unemployment by duration we can see that in 2009

choices

a-more than half of the unemployed stayed unemployed for more than half a year

b-less than 20 percent of the unemployed were unemployed for more than half a year

c-the mean duration of unemployment was less than 12 weeks

d-the mean duration of unemployment was more than 24 weeks

e-none of the above

14)Generous unemployment benefits may actually lead to an increase in the measured rate of unemployment since

choices

a-people who are not really looking for jobs may report themselves as unemployed to collect unemployment benefits

b-receiving unemployment benefits reduces the opportunity costs of looking for a better job even after a job offer may have been made

c-firms are more likely to lay off workers knowing that the consequences of being unemployed are not too severe

d-unemployment benefits increase the replacement ratio and that, in turn, affects the reservation wage

e-all of the above

15)The concern over inflation

choices

a-is not justified since gains and losses from real wealth transfers cancel out over time for the economy as a whole

b-is irrational since high inflation generally means high growth

c-is attributable primarily to increased transfers arising from cost-of-living adjustments

d-stems from the fact that inflation is rarely predictable and those households who hold fixed dollar assets will experience a loss in wealth

e-none of the above

16)If the yearly inflation rate could be always be perfectly anticipated, then

choices

a-currency holders would still have a negative rate of return

b-menu costs would still arise

c-people would still have to worry about shoe-leather costs

d-the costs of inflation to society would be small

e-all of the above

17)Economists tend to agree that

choices

a-the best inflation target is a zero percent inflation rate

b-the best inflation target is a two percent inflation rate

c-policy makers should never set inflation targets

d-any inflation target is fine, as long as policy makers announce it in advance

e-it is silly to think that all economists will ever agree on anything

18)When inflation rises unexpectedly, it is generally the case that

Group of answer choices

a-nominal interest rates and real interest rates will both rise at the same rate

b-nominal interest rates will rise while real interest rates will decline

c-real interest rates will rise while nominal interest rates will decline

d-all nominal wages will immediately be adjusted upwards

e-real wages will have to be adjusted upwards

19)In which time period was the average real yield on a ten-year Treasury bond the lowest?

Group of answer choices

a-1960 to 1969

b-1970 to 1979

c-1980 to 1989

d-1990 to 1999

e-2000 to 2009

20)An unanticipated increase in inflation will lead to a redistribution of wealth but

Group of answer choices

a-people who hold liquid assets will not suffer any losses

b-will not benefit borrowers in any way

c-will not lead to a change in the real wage rate

d-will not lead to a change in real interest rates

e-none of the above

21)In the Taylor rule, if the output coefficient is set to zero, then the central bank

Group of answer choices

a-is mostly concerned with maintaining a low inflation rate

b-will lower interest rates whenever it goes above 2 percent

c-will aggressively increase interest rates as soon as the rate of inflation increases

d-engages in inflation targeting

e-none of the above

22)A central bank that wants to stabilize an economy in the short run should try to

Group of answer choices

a-establish a clear inflation target and always stick to it

b-affect aggregate supply through open market operations

c-affect aggregate demand through open market operations

d-maintain a stable growth rate of money supply

e-concentrate only on long-run goals

23)The Taylor rule

Group of answer choices

a-advocates lowering interest rates in response to higher output levels

b-advocates a strict monetary growth rule

c-advocates stable interest rates

d-helps a central bank in setting its target interest rates based on current economic conditions

e-is of little help in the short-term stabilization of an economy

24)Assume the Fed wants to stimulate economic activity through expansionary monetary policy. Which of the following is FALSE?

Group of answer choices

a-investment spending will increase

b-spending on durable goods will increase

c-aggregate demand will be stimulated

d-the expansionary effect will only be temporary

e-real money balances will increase as we move along the AD-curve from left to righr

25)The Taylor rule

Group of answer choices

a-is an activist monetary policy rule

b-states that monetary growth should be decreased by 1% for every 1.5% increase in inflation

c-states that real interest rates should be increased by 0.5% for every 1% increase in inflation

d)both A) and B)

e)both A) and C)