Keynes argued that business leaders made their investment decisions largely based on __________________ and __________________

a.Herding and extrapolation

b.Real interest rates and tax rates

c.Entrepreneurship and guts

d.The quantity theory of money and the circular flow

Group of answer choices

a

b

c

d

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Question 2

1pts

What was the first explicit Keynesian policy undertaken in the U.S.?

a. Roosevelt's pump priming

b. The Kennedy-Johnson Tax Cut

c. The Reagan Tax Cut

d. Clinton's Health Care Initiative

e. Obama's first budget

f. The landing of the Hindenburg

Group of answer choices

a

b

c

d

e

f

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Question 3

1pts

J.M. Keynes and President Roosevelt met once in 1934. How did the meeting go?

a.Very well

b.Very poorly

c.It went well, but it was interrupted by World War II

d.Not bad, and both parties suggested a second meeting to improve cooperation

e.Just the same way that most family gatherings go in my family (Note: this is not the answer - even if it is true.)

Group of answer choices

a

b

c

d

e

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Question 4

1pts

Did Keynes think that wages were flexible enough to cushion or correct a recession?

a.Yes

b.No

c.Only if government left the labor market alone

d.Only if they suffered from money illusion

Group of answer choices

a

b

c

d

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Question 5

1pts

Keynes insisted that he was most interested in the _________ run. Classical economists tended to be interested primarily in the __________ run.

a.The short run; and the long run

b.The short run; and the short run

c.The long run; and the long run

d.The long run; and the short run

Group of answer choices

a

b

c

d

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Question 6

1pts

According to Keynesian economists, an increase in the money supply will cause nominal interest rates to ________.

a.Rise

b.Fall

c.Remain the same due to money illusion

d.Fluctuate in a cyclical manner

Group of answer choices

a

b

c

d

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Question 7

1pts

According to Classical economists, which type of fiscal policy financing was the most dangerous for the economy?

a.financing with higher taxes

b.financing with true borrowing

c.financing with monetized debt

d.financing with an increase in the money supply

e.financing with real goods and services

Group of answer choices

a

b

c

d

e

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Question 8

1pts

Pick the two correct answers: According to Classical economists, can any expansionary fiscal policy permanently increase the level of real GDP? _____. Can it permanently increase the level of employment? _______

a. yes/yes

b. yes/no

c. no/yes

d. no/no

Group of answer choices

a

b

c

d

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Question 9

1pts

According to Classical economists, which type of fiscal policy financing produces "crowding out?"

a.financing with higher taxes

b.financing with true borrowing

c.financing with monetized debt

d.financing with an increase in the money supply

e.financing with real goods and services

Group of answer choices

a

b

c

d

e

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Question 10

1pts

According to Friedman and Schwartz, what was the consequence for the U.S. money supply of the Federal Reserves "crime of commission?"

a.It taught banks to better manage their reserves and thereby helped end the depression

b.It dramatically reduced the money supply and turned a bad recession into a terrible depression

c.It had little effect because the money supply never affects real GDP

d.It made many banker criminals because they went along with the crime

Group of answer choices

a

b

c

d

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Question 11

1pts

The Bank of the United States failed in December, 1930. Friedman and Schwartz argued that this failure had such a profound impact on the public's confidence in the banking system because a large part of the public mistakenly thought that the Bank of the United States was

a.The U.S. Central bank

b.The largest private bank in the United States

c.The most profitable bank in the United States

d.The oldest bank in the United States and the last private bank that the public thought would ever face a bank run

Group of answer choices

a

b

c

d

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Question 12

1pts

According to Milton Friedman and Anna Schwartz, what was the Federal Reserve's "crime of commission" that occurred in the Summer/Fall of 1931 that had a devastating effect on the course of the Great Depression?

a.The Federal Reserve did not comply with its primary mandate when it failed to deal with the bank crisis and runs created by the failure of a large foreign bank

b.The Federal Reserve raised interests in an effort to cool off the economy

c.The Federal Reserve decides to support the Gold Standard with higher interest rates and a large reduction in the money supply

d.The Federal Reserve let the Bank of the United States fail

e.The Federal Reserve increased the money supply too quickly

f.The Federal Reserve tried to make an omelet without breaking any eggs

Group of answer choices

a

b

c

d

e

f

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Question 13

1pts

Below is the breakdown of holders of the U. S. public debt as of December 2016. Based on these figures, how much of the U.S. public debt had been monetized?

(This is not an essay - simply calculate the amount of monetized debt from these figures.)

• Foreign - $6.004 trillion
• Federal Reserve - $2.465 trillion
• Mutual funds - $1.671 trillion
• State and local government, including their pension funds - $905 billion
• Private pension funds - $553 billion
• Banks - $663 billion
• Insurance companies - $347 billion
• S. savings bonds - $166 billion
• Other (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) - $1.662 trillion.

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Question 14

1pts

What specific action by a central bank produces "monetized debt?"

a. The Federal Reserve issues more currency

b. The U.S. Treasury buys debt issued by the Federal Reserve

c. The World Bank buys U.S. debt and issues Certificated Of Deposit based on the debt collateral

d. The Federal Reserve buys bonds issued by the U.S. Treasury

e. China returns surplus dollars to the U.S.

f. Foreign governments buy bonds issued by the U.S. Treasury Department

Group of answer choices

a

b

c

d

e

f

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Question 15

1pts

As the German Hyperinflation continued, what happened to velocity? Why?

a.Velocity decreased as the German government assured people that there was no cause for alarm

b.Velocity increased because the German government mandated it

c.Velocity increased as Germans sped up their purchases to protect themselves from rapidly rising prices

d.Velocity declined as Germans put more money into savings in order to protect themselves from shrinking real incomes

e.Velocity increased because the foreign exchange rate declined

Group of answer choices

a

b

c

d

e

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Question 16

1pts

Suppose that you are asked what caused the German Hyperinflation? Your best answer would be that the massive increase in prices was caused by

a.Unrealistic demands by workers for higher wages

b.An excess demand for goods and services from Germans would had lived with severe restrictions during World War I

c.A massive decline in the money supply

d.The failure of German wage and price controls

e.A massive increase in the money supply due to debt monetization

f.Massive tax cuts

Group of answer choices

a

b

c

d

e

f

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Question 17

1pts

Did Keynes think that money illusion was common and prevalent? _ ______. Did Keynes think that people tended to learn quickly and get rid of their money illusion? ___________ (Choose the answer that fills in both blanks.)

a.Yes; and yes

b.Yes; and no

c.No; and yes

d.No; and no

Group of answer choices

a

b

c

d

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Question 18

1pts

According to Classical economists, which type of fiscal policy financing produces "crowding out?"

a.Tax increases

b.Monetizing debt

c.True Borrowing

d.Charging user fees to those who use government services

Group of answer choices

a

b

c

d

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Question 19

1pts

Classical economists understood that people who loose their job in a recession must reduce their spending. This reduced spending spread the recession through the economy. However, Classical economists argued that this effect might be minimized because these affected workers would try to

a.seek relief from the government

b.declare bankruptcy and get rid of their debts

c.maintain, if possible, their lifestyles and their consumption

d.seek relief in money illusion

e.strike at the prospects of mass lay-offs

Group of answer choices

a

b

c

d

e

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Question 20

1pts

According to Classical economists, the permanent income hypothesis was an argument supporting their view that, during a recession, the economy would

a.decline rapidly

b.be able to avoid a recession completely

c.stay out of a recession, but only at the cost of higher inflation

d.tend to self-correct and the decline would be cushioned

e.spiral out of control into a depression

Group of answer choices

a

b

c

d

e

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Question 21

1pts

Choose the answer to each: Regarding laissez-faire, Classical economists argued that laissez-faire was a ___________ policy. Keynes argued that laissez-faire was ____________ policy.

a.good / good

b.good / bad

c.bad / good

d.bad / bad

Group of answer choices

a

b

c

d

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Question 22

1pts

In the 14th century, the Arab historian al-Hadrami observed that kings who raised taxes ended up with

a. a larger and stronger kingdom kingdom

b. more tax revue

c. less tax revenue

d. the same tax revenue, but happier subjects

Group of answer choices

a

b

c

d

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Question 23

1pts

U. S. President Grover Cleveland was presented with a number of bills (proposed laws) meant to deal with the depression of the 1890s. What did he do with these bills?

a.He approved them all

b.He vetoed them all

c.He approved the relief bills, but vetoed the bills for policies to end the depression

d.He approved the bills for policies to end the depression, but vetoed the relief bills that could have helped working class people

e.He took the cowards way out by signing them all into law, but then had the Supreme Court declare them unconstitutional

Group of answer choices

a

b

c

d

e

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Question 24

1pts

What is the "implicit" (that is, unspoken) assumption regarding timing in Arthur Laffer's tax cut argument?

a.We are in the short run

b.We are in the long run

c.Producers react to tax changes rapidly and the tax base expands rapidly

d.Producers react to tax changes very slowly and the tax base expands slowly

e.There is wide-spread money illusion

f.Real interest rates are less than nominal interest rates

Group of answer choices

a

b

c

d

e

f

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Question 25

1pts

Classical economists looked at the nature of the business cycle, the self-correcting mechanisms in the economy, and the effectiveness (or ineffectiveness) of fiscal and monetary policies and concluded the best economic policy for government to pursue was ________________. This economic policy fit in well with their political beliefs that good government should be __________ government. (Choose the answer that fills in both blanks.)

a.Active government intervention in the economy; and big

b.Active government intervention in the economy; and big

c.Laissez-faire; and small

d.Laissez-faire; and big

e.Laissez-faire; and no

f.Active government intervention in the economy; and no

Group of answer choices

a

b

c

d

e

f

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Question 26

1pts

Why does Prof. St. Clair think that the Bayer Heroin case relates to Classical macroeconomics?

a.Prof. St. Clair is a closet addict

b.Prof. St. Clair is not a closet addict, but many Classical economists were and they always found this example appealing

c.Prof. St. Clair argues that even though there is no connection between Classical macroeconomics and heroin, there is nonetheless a striking similarity in terms of the cyclical nature of recessions and the conditions that Bayer's Heroin was marketed to treat

d.Prof. St. Clair argues that even though there is no connection between Classical macroeconomics and heroin, the seriousness of recessions mirrors the seriousness of heroin addiction and explains why Classical economists were eager to combat both

e.Prof. St. Clair argues that even though there is no connection between Classical macroeconomics and heroin, recessions produce money illusion and heroin produces a very similar memory lapse

f.Prof. St. Clair has watched too many episodes of the TV showThe Simpsons

Group of answer choices

a

b

c

d

e

f