1.Fiscal policy is: is known as:

A/The Federal Reserve changing taxes and/or spending to fight unemployment or inflation

B/The Federal Government changing taxes and/or spending to fight unemployment or inflation

C/The Federal Government changing tariffs (taxes on imports) to fight unemployment or inflation

D/The Federal Reserve changing interest rates to fight unemployment or inflation

2.The Federal government has had budget deficits for many years.If the Federal government were to cut taxes and/or raise spending, this would:

A/decrease the Federal government budget deficit

B/increase the Federal government budget deficit

C/have no direct impact on the Federal government budget deficit

3.To fight inflation, the Federal Reserve would:

A/increase the supply of money in the economy by buying bonds.

B/decrease the supply of money in the economy by selling bonds.

C/increase the supply of money in the economy by selling bonds.

D/decrease the supply of money in the economy by buying bonds.

4.Which of the following policies would be most contractionary (that is would cause GDP todecreasethe most)?

A/decrease in government spending and an increase in taxes.

B/decrease in both government spending and taxes

C/increase in both government spending and taxes

D/increase in government spending and a decrease in taxes

5.Last year the Federal government budget deficit changed from $450 billion to more than $550 billion.At the same time the Federal Reserve has been raising interest rates.This means that:

A/The Federal government policy would lower the unemployment rate while the Federal Reserve policy would lower the inflation rate.

B/The Federal government policy would lower the inflation rate while the Federal Reserve policy would lower the unemployment rate.

C/The Federal government and the Federal Reserve are both focused on lowering the unemployment rate.

D/The Federal government and the Federal Reserve are both focused on lowering the inflation rate.

6.MOSCOWRussia's central bank raised its key interest rate for the second time in four months in a surprise decision Friday that aims to underpin the ruble ahead of further moves by the U.S. Federal Reserve and potential new Western sanctions.

Central banks in a number of emerging markets countries have followed the Fed in tightening their monetary policy this year, hoping to avoid an outflow of capital to the U.S. that would see their currencies weaken, and inflation accelerate as prices of imported goods rise. The Fed is widely expected to lift its key interest rate for a ninth time since late 2015when policy makers meet next week(Links to an external site.)

, and twice more in 2019.

The Bank of Russia lifted its key rate to 7.75% from 7.5%, having previously raised borrowing costs in September, a shift in policy that brought an end to a series of cuts dating back to the end of 2014.

In a statement, the central bank said it would "consider the necessity of further increases in the key rate," pointing to an expected pickup in inflation during 2019 caused by an increase in sales tax in January.

The central bank said the monetary policy needs to remain tight to protect against elevated external risks, such as the simmering U.S.-China trade dispute, lower oil prices and potential newWestern sanctions against Russia(Links to an external site.)

.

"In the current environment, it is very important for us to maintain a conservative approach when evaluating risks," Bank of Russia's head Elvira Nabiullina told reporters following the rate decision. "We must make sure that inflation remains under control."

The new rate increase is likely to increase pressure on the central bank from parts of the Russian government and big business, who believe Ms. Nabiullina's dogged focus on inflation is stifling growth. Ms. Nabiullina has made inflation targeting a pillar of central bank's independence, defying government's attempts to interfere in the monetary policy since taking office in 2013.

"Our approach will become less conservative when inflationary expectations [in Russia] will become more anchored," she said.

Ms. Nabiullina said Russian economy is adapting to sanctions and that any new putative measures by the U.S. and Europe would have "limited impact" on the country.

The central banks also announced that it will resume buying foreign currency for the government's reserve funds in January, a move that could weaken the ruble.

The central bank aims to keep the annual rate of inflation at 4%, but now expects consumer prices to be rising by between 5% and 5.5% at the end of next year, even after taking account of the impact of Friday's rate rise on the economy. It expects inflation to fall back to the target 4% by the end of 2020.

"The tone of today's communications make clear that it wouldn't take much to trigger another hike," analysts at Capital Economics in London wrote in a note to clients after the rate decision.

Per the article, the Bank of Russia is conducting what type of policy?

A/contractionary quantitative easing

B/expansionary fiscal policy

C/expansionary austerity measure

D/contractionary fiscal policy

E/expansionary quantitative easing

F/contractionary monetary policy

G/contractionary austerity measure

H/expansionary monetary policy

7.Workers at a car-manufacturing plant are let go because automated machinery has been installed that requiresfewer employeesto operate. What type of unemployment describes the workers' situation?

A/full unemployment.

B/structural unemployment.

C/frictional unemployment.

D/cyclical unemployment.

8.Using the Aggregate Supply and Aggregate Demand model, if the price level increases then consumers feel wealthier. Due to this, the economy's GDP will increase. Look at this question from the consumer's point of view.

A/True

B/False

9.Workers at a car-manufacturing plant in Flint Michigan are laid off because the economyis weakand GM cars aren't selling well. GM isn't sure when the plant will reopen. What type of unemployment describes the workers' situation?

A/cyclical unemployment.

B/structural unemployment.

C/frictional unemployment.

D/full unemployment.

10.This is regarding the distributional effect of inflation.

Suppose inflation is expected to be 4 percent but is in fact only 3 percent. This:

A/helps lenders and borrowers.

B/hurts lenders and borrowers.

C/helps borrowers but hurts lenders.

D/helps lenders but hurts borrowers.

11.The short-run aggregate supply is most likely to shift down when actual output:

A/is not equal to potential output, regardless of whether it's above or below.

B/ is greater than potential output.

C/is equal to potential output.

D/is less than potential output

12.This is regarding the distributional effect of inflation.

During the 1990s Japan experienced a falling price level, or deflation. Assuming that the deflation was unexpected, it benefited:

A/both borrowers and lenders.

B/only lenders.

C/only borrowers.

D/neither borrowers nor lenders.

13.This is regarding the distributional effect of inflation.

Suppose inflation is expected to be 5 percent but it is actually 7 percent. The people who lose from the difference between actual and expected inflation are most likely to be the:

A/workers and lenders.

B/owners of firms and borrowers.

C/owners of firms and lenders.

D/workers and borrowers.

14.The short-run aggregate supply curve will shift up if:

A/productivity increases.

B/wages are increasing faster than productivity.

C/productivity is increasing faster than wages.

D/wages decrease.

15.If productivity growth is 5 percent and nominal wages increase at a rate of 6 percent, then inflation will most likely be:

A/11 percent.

B/-1 percent.

C/-11 percent.

D/1 percent.

16.Country X experienced a 5 percent increase in nominal wages while its productivity rate grew 3 percent. The short run aggregate supply curve of this economy will:

A/shift upward, resulting in inflation.

B/shift downward, resulting in deflation.

C/not move at all

17.According to the quantity theory of money, if the money supply increases by 12 percent, then in the long run prices go:

A/down by 12 percent.

B/up by less than 12 percent.

C/up by more than 12 percent.

D/up by 12 percent.

18.The institutionalist theory of inflation differs from that of the quantity theory by focusing on:

A/the institutions that determine how the money supply is determined.

B/the equation of exchange.

C/the rate of growth in the money supply.

D/how firms and individuals determine wages and prices.

19.According to the institutionalist theory of inflation, once nominal wage and price levels have risen, the two options available to government are to:

A/increase the money supply and accept both unemployment and inflation or decrease the money supply and eliminate both.

B/increase the money supply and accept inflation or leave the money supply fixed and cause a recession and unemployment.

C/increase the money supply and accept unemployment or leave the money supply fixed and cause inflation.

D/decrease the money supply and accept inflation or increase the money supply and cause unemployment.

20.With respect to the unemployment problem, Classical economists generally take the position that:

A/individuals should be responsible for finding their own jobs.

B/government should eliminate structural and cyclical unemployment.

C/each person should have a job commensurate with their training or past job experience.

D/government should guarantee each person a job.