Quiz Chapters 16 & 17 In Tutorial Library

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TITLE: Quiz Chapters 16 & 17

CLASS / COURSE: BA 206

QUESTION DESCRIPTION:

 BA 206 Quiz Chapters 16 &17

1.  According to the active policy position, eliminating a contractionary gap

A) can only be achieved by decreasing wages
B) requires a public policy of wage and price controls
C) should be accomplished by stimulating aggregate demand
D) will increase unemployment
E) will cause a recession

2.If real output and velocity are stable and predictable, then the equation of exchange can be used to derive a simple relationship between

A) the money supply and the price level
B) the money supply and the interest rate
C) the money supply and the foreign exchange rate
D) velocity and real GDP
E) velocity and nominal GDP

3. The opportunity cost of holding money is measured by the

A) interest rate
B) liquidity lost by holding money
C) money supply curve
D) inflation rate
E) cost of cashing in financial assets

 

 

4.The average U.S. recession (after World War II) has lasted

A) a few months
B) about half a year
C) just under a year
D) about three weeks
E) about two years

5.One often-cited rationale for a fixed-growth-rate monetary policy is that

A) it is too expensive to pay a staff to continually make adjustments in policy
B) although it's possible to determine what's happening in the economy, it's not possible to determine what to do about it
C) it is not possible to determine with any certainty what's happening in the economy, so it's easy to make a mistake with active policy
D) we know that the economy is increasing at a fixed rate year after year, so a fixed rate of growth in the money supply is justified
E) then the Federal Reserve would be superfluous and we could eliminate one large bureaucracy

6.According to those who favor a passive approach to policy, a contractionary gap will be eliminated because

A) prices and wages rise rapidly
B) prices and wages are flexible
C) the aggregate demand curve will shift to the right
D) the economy automatically slows down
E) the aggregate demand curve will shift to the left

7.The reason why self-correction works to close a contractionary gap is because

A) a labor shortage causes money wages to increase
B) a labor surplus causes money wages to increase
C) a labor shortage causes money wages to fall
D) a labor surplus causes money wages to fall
E) falling money wages shift the short-run aggregate supply curve to the left

8. As a result of expansionary monetary policy,

A) both aggregate expenditure and aggregate demand increase
B) both aggregate expenditure and aggregate demand decrease
C) aggregate expenditure increases and aggregate demand decreases
D) aggregate expenditure decreases and aggregate demand increases
E) aggregate expenditure remains unchanged; aggregate demand increases

9.If the money supply is $10,000 and the nominal GDP is $40,000, then the velocity of money is:

A) 4
B) 1/4
C) 3
D) 1/3
E) 1

10.The money demand curve describes how the quantity of money demanded varies with

A) nominal GDP
B) real GDP
C) the price level
D) the interest rate
E) consumption

 

11. A movement upward and to the left along the money demand curve is caused by

A) an increase in the interest rate
B) a decrease in the interest rate
C) a decrease in real GDP
D) an increase in real GDP
E) an increase in the average price level

12.An increase in the money supply causes interest rates to __________, investment spending to __________ and aggregate demand to __________.

A) rise; rise; rise
B) rise; fall; rise
C) rise; fall; fall
D) fall; rise; fall
E) fall; rise; rise

13.

https://angel.grantham.edu/AngelUploads/QuestionData/0d762465-ff15-4a0e-a094-c889a1f6053a/16_2.png#{925FD363-F3DD-4E66-997B-81AC2CB6FBFB}

According to those who favor a passive approach to policy, how will the economy shown in Exhibit 16-2 attain equilibrium at potential output?

A) The SRAS curve will shift to the left.
B) The SRAS curve will shift to the right.
C) Either the money supply or government spending should be increased.
D) Either the money supply or government spending should be decreased.
E) Aggregate demand should be decreased.

14.People will hold __________ money as the interest rate __________ because they will __________ other financial assets.

A) more; decreases; buy
B) more; increases; sell
C) more; decreases; sell
D) less; increases; sell
E) less; decreases; buy

15.If the quantity of money supplied exceeds the quantity of money demanded,

A) this is evidence of a failed fiscal policy
B) this indicates that the supply of money curve is horizontal
C) the interest rate will fall
D) the quantity of money demanded will increase
E) the transactions money demand curve will shift to the right

16.In total, the lags associated with discretionary policy can extend from the time a

A) problem occurs in the economy through the time it is recognized by the government
B) problem is recognized by the government through the time an agreed-on policy is approved
C) policy is approved through the time the policy is implemented
D) policy is implemented through the time its impact is felt in the economy
E) problem occurs in the economy through the time a corrective policy has an impact on the economy
 

17.According to the rational expectations school, people base their expectations about inflation on

A) the announcement of a change in policy
B) weighted averages of previous inflation rates, with the most distant getting the heaviest weight
C) all information available to them
D) changes in monetary policy only
E) changes in both monetary and fiscal policy

18.Problems facing active policy decisions include

A) both c and d
B) all of the following
C) timing problems related to lags and self-correction
D) that the natural unemployment rate is uncertain
E) the self-correcting forces in the economy don't work well

19.According to the natural rate hypothesis,

A) government policy makers can influence the tradeoff between inflation and unemployment in the long run but not in the short run
B) government policy makers can target both stable interest rates and a stable money supply in the long run but not in the short run
C) government policy makers can target both stable interest rates and a stable money supply in the short run but not in the long run
D) the economy tends toward the natural rate of unemployment only when the government provides the appropriate demand stimulus
E) government policy makers can influence the tradeoff between inflation and unemployment in the short run but not in the long run

 

 

20.If the short-run aggregate supply curve is positively sloped and the Fed increases the money supply, aggregate demand

A) increases, which increases real GDP and the price level
B) increases, which decreases real GDP and the price level
C) falls, which decreases real GDP and increases the price level
D) increases, which decreases real GDP and increases the price level
E) falls, which increases real GDP and the price level

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SUBJECTS / CATEGORIES:
1. Finance
2. Financial Management
3. Accounting
4. Corporate Finance
5. Investment and Portfolio Management
6. Business Economics
7. Economics
8. Microeconomics
9. Macroeconomics

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