1. Unlike fiscal policy, monetary policy has a very short __________ lag.

a.recognition

b.impact

c.implementation

d. feedback

2.A real business cycle results from shifts in aggregate __________ induced by __________.

a.demand; fiscal policy

b. supply; fiscal policy

c. demand; technological change

d. supply; technological change

3.The Great Recession occurred in __________.

a.1929-1933

b. 1937-1939

c. 1953-1955

d. 2007-2009

4.Dr. Louise Atwater is an economist who believes that market imperfections are large and, as a result, short run can be very long. To which school of thought does Dr. Atwater most likely belong?

a.classical

b.Keynesian

c. monetarist

d. new classical

5.In the mid-1970s, when inflation rates rose rather quickly and surprisingly, what occurred?

a.Nominal wages and unemployment fell.

b.Real wages and employment rose.

c. Nominal wages and the value of personal assets rose.

d. Real wages and the value of personal assets fell.

6.The money supply fell during the Great Depression because __________.

a.the monetary base also fell

b.the public held less currency, and the banks held less excess reserves

c.the public held more currency, and the banks held more excess reserves

d. the Fed did not yet exist

7.Which of the following men believed that "there is always a temporary trade-off between inflation and unemployment; there is no permanent trade-off"?

a.A. W. Phillips

b.Milton Friedman

c.Thomas Schelling

d.John M. Keynes

8.Most Keynesians believe that monetary policy is best used to control __________.

a. balance of payments

b.interest rates

c. minimum wages

d. the federal budget

9.When the Fed sets an interest rate target, on what interest rate does it specifically focus?

a. the T-bill rate

b. the nominal rate

c. the prime rate

d. the federal funds rate

10.If the sum of individual and collective decisions leads to a level of output, prices, and employment that most people do not find satisfactory, Keynesians believe that __________.

a.market forces will automatically and quickly correct mistaken decisions

b.this outcome may persist because corrective market forces are ineffective

c.government intervention will make things worse, so the role of government should be minimized

d.government intervention is not necessary because market forces, although slow, move in the right direction