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1 | |
All of the following are types of monetary policy except |
| | A) | a nominal money stock target |
| | B) | a balanced budget |
| | C) | an inflation target |
| | D) | the pursuit of a target real interest rate |
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2 | |
An increase in government spending will stimulate private spending by causing a reduction in interest rates |
| | A) | TRUE |
| | B) | FALSE |
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3 | |
The classical model of macroeconomics assumes |
| | A) | wages and prices are sticky |
| | B) | wages and prices are flexible |
| | C) | the economy may operate below full capacity |
| | D) | the economy is always at full capacity |
| | E) | a and c |
| | F) | b and d |
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4 | |
The AD schedule indicates that __________ inflation is associated with ___________ output |
| | A) | higher, lower |
| | B) | higher, higher |
| | C) | lower, lower |
| | D) | zero, zero |
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5 | |
In the classical model the AS schedule is vertical |
| | A) | TRUE |
| | B) | FALSE |
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6 | |
If a person thinks they are better off after a 10% wage increase, and all prices have risen 10%, then they are experiencing ___________ |
| | A) | inflation |
| | B) | a supply shock |
| | C) | crowding out |
| | D) | inflation illusion |
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7 | |
In the classical model, potential output can not be increased by |
| | A) | monetary growth |
| | B) | better technology |
| | C) | more capital |
| | D) | higher labour supply |
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8 | |
The equilibrium inflation rate is determined by the intersection of __________ and _________ |
| | A) | demand, supply |
| | B) | IS, LM |
| | C) | AD, AS |
| | D) | Labour demand, labour supply |
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9 | |
At the intersection of AD and AS equilibrium is achieved in |
| | A) | the goods market |
| | B) | the money market |
| | C) | the labour market |
| | D) | all of the above |
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10 | |
Fiscal expansion in the classical model can increase real output |
| | A) | TRUE |
| | B) | FALSE |
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11 | |
The Keynesian model is a good guide to _________ behaviour and the classical model describes behaviour in _____________ |
| | A) | long run, short run |
| | B) | flexible, imperfect markets |
| | C) | short-term, long run |
| | D) | long run, imperfect markets |
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12 | |
Temporary supply shocks alter potential output |
| | A) | TRUE |
| | B) | FALSE |
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13 | |
Expansionary fiscal policy in the classical model will cause aggregate demand to ________ potential output |
| | A) | exceed |
| | B) | fall below |
| | C) | fluctuate around |
| | D) | remain equal to |
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14 | |
In the event of an increase in the international price of oil that encouraged the central bank to accept lower real interest rates, inflation would most likely __________ |
| | A) | fall |
| | B) | increase |
| | C) | remain the same |
| | D) | fluctuate |
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15 | |
The quantity theory of money says that changes in ___________ lead to equivalent changes in __________, but have no effect on ___________ |
| | A) | prices, wages, output and employment |
| | B) | output, prices, employment |
| | C) | nominal money, the price level, output and employment |
| | D) | nominal money, output, prices |
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16 | |
Monetarists believe that a reduction in _____________can be achieved by reducing ________ |
| | A) | unemployment, prices |
| | B) | inflation, wages |
| | C) | unemployment, wages |
| | D) | inflation, the quantity of nominal money |
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17 | |
Faster nominal money growth leads to either higher inflation or higher nominal interest rates, but not both |
| | A) | TRUE |
| | B) | FALSE |
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18 | |
During periods of rising inflation and rising interest rates we expect the demand for real cash to |
| | A) | rise |
| | B) | fall |
| | C) | not change |
| | D) | fluctuate |
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19 | |
Governments may contribute to inflationary pressure on account of building up large _________ |
| | A) | numbers of employees |
| | B) | welfare plans |
| | C) | budget deficits |
| | D) | expenditure |
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20 | |
The Phillips curve shows the trade-off between ____________ and ____________ |
| | A) | the inflation rate, interest rates |
| | B) | the inflation rate, the unemployment rate |
| | C) | interest rates, output |
| | D) | output, employment |
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21 | |
Equilibrium unemployment is determined by the underlying rate of inflation |
| | A) | TRUE |
| | B) | FALSE |
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22 | |
The long-run Phillips curve is __________ at the ________________ |
| | A) | horizontal, natural rate of inflation |
| | B) | horizontal, natural rate of unemployment |
| | C) | vertical, natural rate of inflation |
| | D) | vertical, equilibrium rate of unemployment |
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23 | |
The short run Phillips curve can shift in response to changes in ____________ |
| | A) | Inflationary expectations |
| | B) | unemployment |
| | C) | the inflation rate |
| | D) | wage rates |
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24 | |
The costs of inflation are |
| | A) | shoe leather costs |
| | B) | menu costs |
| | C) | income redistribution |
| | D) | uncertainty |
| | E) | all of the above |
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25 | |
Only an incomes policy can deliver low inflation in the long run |
| | A) | TRUE |
| | B) | FALSE |
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26 | |
A person who is made redundant because of the contraction of an industry is a victim of ____________ |
| | A) | frictional unemployment |
| | B) | demand-deficient unemployment |
| | C) | classical unemployment |
| | D) | structural unemployment |
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27 | |
An advocate of the classical model of the economy would claim that unemployment is created when the ________ is above its equilibrium level in the ____________ |
| | A) | price level, aggregate economy |
| | B) | tax rate, government budget |
| | C) | wage rate, labour market |
| | D) | interest rate, market for loanable funds |
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28 | |
The natural rate of unemployment, (equilibrium unemployment), will always be zero |
| | A) | TRUE |
| | B) | FALSE |
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29 | |
We would normally expect the size of the labour force to be __________ than the number of workers willing to accept job offers at any real wage rate |
| | A) | smaller |
| | B) | larger |
| | C) | the same size |
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30 | |
The equilibrium rate of unemployment, at any real wage, is the difference between ____________ and _________ |
| | A) | those willing to work at the going wage, labour demand |
| | B) | labour demand, those willing to work at the going wage |
| | C) | labour demand, labour supply |
| | D) | those willing to work at the going wage, labour supply |
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31 | |
If somebody is prepared to work at the going wage rate but cannot find work then they are victims of |
| | A) | voluntary unemployment |
| | B) | classical unemployment |
| | C) | voluntary unemployment |
| | D) | Frictional unemployment |
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32 | |
Policies to reduce unemployment by reducing union power, tax cuts, reductions in unemployment benefit and investment subsidies are examples of _________ |
| | A) | Keynesian policies |
| | B) | Supply-side policies |
| | C) | Monetarist policies |
| | D) | Classical policies |
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33 | |
If the income tax rate changes from 30% to 40% on incomes over £30,000 and a person's income is £31,000 then her marginal tax rate is _________ |
| | A) | 30% |
| | B) | 10% |
| | C) | 70% |
| | D) | 40% |
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34 | |
The abolition of income tax would probably ___________ the number of workers in employment and __________ the equilibrium rate of unemployment |
| | A) | increase, reduce |
| | B) | increase, increase |
| | C) | reduce, increase |
| | D) | reduce, reduce |
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35 | |
Possible causes of involuntary unemployment are |
| | A) | minimum wage agreements |
| | B) | trade unions |
| | C) | scale economies |
| | D) | insider-outsider distinctions |
| | E) | efficiency wages |
| | F) | all of the above |
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36 | |
If a worker chooses not to work at the equilibrium wage rate they are involuntarily unemployed |
| | A) | TRUE |
| | B) | FALSE |
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2003 A McGraw-Hill Online Learning Centre