C. durable goods consumption rises.

D. military spending falls.

20. According to John Taylor's (and Alan Greenspan's?) monetary rule, the nominal federal funds rate should increase if inflation is
A. below 2 percent and GDP is at its natural rate.
B. at 2 percent and GDP is below its natural rate.
C. above 2 percent and GDP is above its natural rate.
D. below 2 percent and GDP is below its natural rate.

4. Automatic stabilizers largely eliminate
A. the business cycle.
B. active policy.
C. the outside lag.
D. the inside lag.

5. All of the following can definitely be considered an automatic stabilizer, EXCEPT a(n)
A. income tax.
B. investment tax credit.
C. sales tax.
D. corporate tax.

6. A fall in the index of leading indicators is supposed to predict that
A. a downturn in the business cycle is likely in the near future.
B. fiscal policy is getting less contractionary.
C. monetary policy is getting less contractionary.
D. inflation is likely to fall in the near future.

9. A monetary policy that SPECIFIES IN ADVANCE different levels of monetary growth corresponding to different economic conditions is called a(n)
A. active discretionary monetary policy.
B. passive discretionary monetary policy.
C. active monetary rule.
D. passive monetary rule.

11. A political business cycle is said to exist when
A. the economy is managed by Congress.
B. politicians manipulate the economy for electoral gain.
C. economic policy is guided by the interests of the corporate sector.
D. business people go into politics and affect the way economic policy is conducted.

2. According to the Mundell-Fleming model, an appreciation of the exchange rate would
A. decrease both import demand and export demand.
B. increase import demand and decrease export demand.
C. decrease import demand and increase exports demand.
D. increase both import demand and export demand.

8. According to the Mundell-Fleming model, in a small country with a floating exchange rate, a tax cut will cause the exchange rate to
A. rise.
B. rise in the same proportion as inflation.
C. remain constant.
D. fall.

18. All of the following represent supply/price shocks EXCEPT
A. the discovery of a new oil field under the Arctic that lowers oil prices.
B. an innovation in agricultural technology that results in an increase in the supply of agricultural products.
C. the introduction of a debit card, increasing the velocity of money.
D. the destruction of the corn crop by an insidious pest.

9. All of the following are possible explanations for the worldwide slowdown in economic growth during the 70's and 80's EXCEPT
A. measurement problems.
B. worker quality.
C. depletion of ideas.
D. scarcity of non-petroleum raw materials.

13. Advocates of the Y=AK model interpret capital as
A. consisting solely of the stock of plants and equipment.
B. being inversely related to technological progress.
C. including knowledge.
D. being determined by exogenous forces.

4. A permanent change in the growth rate of total output can arise from a change in the
A. rate of technological progress.
B. saving rate.
C. ratio of capital per worker.
D. number of workers.

13. At the Golden Rule level of capital accumulation, the marginal product of capital equals the
A. real interest rate.
B. depreciation rate.
C. savings rate.
D. marginal product of labor.

11. A war has wrecked the economy of Baloneya: both the capital stock and the work force have been reduced by 50 percent. If the economy's production function has constant returns to scale, how will the postwar level of output per worker compare to the prewar level?
A. It will be lower.
B. It will be higher.
C. It will be the same.
D. It could be higher or lower.

15. An economy starts off in a steady state with less capital than at the Golden Rule level. Now the saving rate changes to the level that will achieve the Golden Rule. What is the path of consumption during the transition to the Golden Rule steady state?
A. It is lower, then higher than in the initial steady state.
B. It is higher, then lower than in the initial steady state.
C. It is always lower than in the initial steady state.
D. It is always higher than in the initial steady state.

16. An economy is in a steady state with capital higher than the Golden Rule level. Now the saving rate falls to a level that will achieve the Golden Rule capital stock in the long run. What will happen to the level of consumption between the initial and new steady states?
A. It will rise gradually.
B. It will fall instantly and then will rise gradually.
C. It will rise instantly and then will fall gradually.
D. It will rise instantly and then will remain constant.

12. A teenager is not able to find a job because the legal minimum wage is higher than the wage that firms are willing to offer.This situation is an example of
A. frictional unemployment.
B. structural unemployment.
C. cyclical unemployment.
D. efficient unemployment.

12. An increase in aggregate demand, such as that due to an increase in government purchases increases
A. both output and prices in the long run.
B. output in the long run.
C. prices in the short run and output in the long.
D. output in the short run and prices in the long run.

7. According to the data
A. the real wage is somewhat countercyclical.
B. the real wage is somewhat procyclical.
C. the real wage is neither procyclical or countercyclical.
D. the real wage is both procyclical or countercyclical.

10. All three models of aggregate supply presented in Chapter 13 share the feature that, if the price level is above the expected price level, then
A. nominal wages will fall.
B. nominal wages will rise.
C. output will be below its natural rate.
D. output will be above its natural rate.

23 Assume that the nominal exchange rate for the euro is .75 euros per dollar. Suppose that a Volkswagen Golf costs 10,000 euros in Germany, while it costs $12,000 in the United States. What is the real exchange rate?
A. 0.75
B. 0.9
C. 1.2
D. 1.1

33. According to the classical dichotomy, which of these magnitudes is affected by monetary policy?
A. The price level
B. The real wage
C.The real interest rate
D. The rate of growth of real GDP

24. An example of a person who is counted as unemployed is a

A. retired worker below the mandatory retirement age.

B. part-time worker who would like to work full-time.

Date: 2015-12-11; view: 953