QUESTION 1

1. Changes in the money supply to achieve macroeconomic goals is:
2. A.fiscal policy
3. B.budgetary policy
4. C.monetary policy
5. D.currency policy

0.5 points

QUESTION 2

1. Monetary policy is conducted by:
2. A.the President
3. B.Congress
4. C.the Fed
5. D.the Department of the Treasury

0.5 points

QUESTION 3

1. The velocity of money is equal to:
2. A.the money supply times the CPI
3. B.Real GDP divided by the CPI
4. C.nominal GDP divided by the money supply
5. D.the CPI divided by the money supply

0.5 points

QUESTION 4

1. If nominal GDP is $12,025 billion and the money supply is $1,300 billion, the velocity of money is:
2. A.9.25
3. B.10.8
4. C.11.1
5. D.12.0

0.5 points

QUESTION 5

1. If the money supply increases by 12%, Real GDP is constant, and velocity is constant, the price level must:
2. A.decrease by 12%
3. B.increase by 12%
4. C.remain constant
5. D.Any of the above is possible

0.5 points

QUESTION 6

1. In the actual economy:
2. A.velocity has been constant
3. B.there has been a directly proportional relationship between the money supply and the price leve
4. C.increases in the money supply tend to cause increases in the price level, in the long run
5. D.All of the above

0.5 points

QUESTION 7

1. A difference between monetarism and classical theory is:
2. A.monetarism is based on Keynesian theory
3. B.monetarism holds that velocity isnotconstant in the short run
4. C.monetarism holds that AD affects Real GDP in the long run
5. D.All of the above

0.5 points

QUESTION 8

1. According to Keynesian theory:
2. A.monetary policy affects the supply side of the economy
3. B.an increase in the money supply directly increases Real GDP
4. C.changes in the money supply affect Real GDP indirectly, through a series of steps
5. D.None of the above

0.5 points

QUESTION 9

1. According to the Keynesian monetary transmission mechanism:
2. A.an increase in the money supply leads to a decrease in interest rates
3. B.a decrease in interest rates leads to a decrease in investment
4. C.a decrease in investment leads to an increase in Real GDP
5. D.All of the above

0.5 points

QUESTION 10

1. The Keynesian monetary transmission mechanism may fail:
2. A.because investment may be interest-insensitive
3. B.because of the liquidity trap
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 11

1. The liquidity trap:
2. A.means that interest rates will only fall so low
3. B.may cause an increase in the money supply to have no effect on interest rates
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 12

1. Expansionary monetary policy:
2. A.means a decrease in the money supply
3. B.would be used to close a recessionary gap
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 13

1. Contractionary monetary policy:
2. A.means a decrease in the money supply
3. B.would be used to close an inflationary gap
4. C.according to Keynesian theory, would cause interest rates to rise
5. D.All of the above

0.5 points

QUESTION 14

1. Keynesians:
2. A.call for the use of expansionary monetary policy to close recessionary gaps
3. B.call for the use of expansionary fiscal policy to close recessionary gaps
4. C.put more confidence in fiscal policy than in monetary policy
5. D.All of the above

0.5 points

QUESTION 15

1. Monetarists:
2. A.favor activist monetary policy to stabilize the economy
3. B.believe that activist monetary policy may be biased toward expansionary monetary policy
4. C.believe that activist monetary policy is the best way to avoid continued inflation
5. D.All of the above

0.5 points

QUESTION 16

1. A monetary rule:
2. A.requires a return to the gold standard
3. B.would require rapid growth in the money supply to keep interest rates low
4. C.would link money supply growth to Real GDP growth
5. D.All of the above

0.5 points

QUESTION 17

1. At the lowest point of the Great Depression, the unemployment rate:
2. A.exceeded 50%
3. B.was about 25%
4. C.was about 14%
5. D.was about 10%

0.5 points

QUESTION 18

1. Between 1929 and 1933, investment spending:
2. A.decreased by 90%
3. B.decreased by 50%
4. C.decreased by 25%
5. D.increased by only 5%

0.5 points

QUESTION 19

1. According to Keynesian economists, the Great Depression:
2. A.was caused by the inherent instability of a market economy
3. B.was ended by the government's expansionary fiscal and monetary policy
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 20

1. According to classical economists:
2. A.the Great Depression was caused by government policy mistakes
3. B.the government should have imposed higher tariff rates than were enacted with the Smoot-Hawley Tariff
4. C.the Federal Reserve System created inflation which slowed the recovery from the Great Depression
5. D.All of the above