If income falls without any change in interest rates, then according to the IS-LM model it may be true that: a. money demand fell and government spending declined. b. the money supply increased and taxes declined. c. tight monetary policy and easy fiscal policy. d. easy monetary policy and easy fiscal policy. ANSWER D
All of the following are true of the gold standard except (a) It requires international trading partners to strictly accept gold payments for imports and exports (b) It supported stable and fixed exchange rates throughout most of the 19th century (c) It encouraged international trade (d) It integrated the U.S. monetary system into the world […]
When the theory of mercantilism was superseded by the theory of “classical liberalism” of Adam Smith around the time of the American Revolution, (a) the colonies had shifted toward laissez faire, governmental noninvolvement in the private economy, but the new nation rejected the philosophy of laissez faire. (b) governmental involvement in the private economy persisted […]
New Keynesian explanations for sticky prices and wages include a. menu costs. b. efficiency wages. c. insider-outsider distinctions. d. productivity shocks. e. all but d. ANSWER E
The growth rate of which of the following is not a component of the growth accounting equation? A) the capital stock B) labor C) depreciation D) available technology ANSWER C
Intermediation entities include which of the following? (a) Life and fire insurance companies (b) Stock exchanges (c) Mutual saving banks (d) All of the above ANSWER (d)
In the IS-LM model, an easy monetary in conjunction with a tight fiscal policy a. increases exports and decreases imports. b. decreases exports and increases imports. c. encourages foreign capital inflows to the U.S. d. both b and c. d. None of the above ANSWER D
The organized labor movement was held back by the law of conspiracy. Indicate whether the statement is true or false ANSWER TRUE
In terms of unemployment, hysteresis models try to explain why a. cyclical unemployment is always present. b. structural unemployment cannot be eradicated. c. high unemployment persists even after its initial cause is long past. d. frictional unemployment is the cause of hysteresis. ANSWER C
Suppose that most government spending was on capital goods that contribute to economic growth. How would that affect the Ricardian equivalence debate? What will be an ideal response? ANSWER A key link in the logic of Ricardian equivalence is that tax cuts today must result in tax increases in the future. If instead it […]
