Central bank lending to bail out troubled firms is known as ________, while allowing troubled firms to conceal the true value of their assets is called ________. A) crony capitalism; larceny B) liquidity provision; regulatory forbearance C) securitization; nonconventional monetary policy D) subprime lending; regulatory arbitrage ANSWER B
In the Keynesian consumption function a. consumption is a constant fraction of income. b. the marginal propensity to consume is constant. c. disposable income determines consumption. d. All of the above e. None of the above ANSWER D
Suppose Y = 100, P = 80, and V = 3.2. If Y rises to 105, and the inflation rate is 10 percent, what is the new value of M? What will be an ideal response? ANSWER 105 × 88 = 9,240 = M × 3.2. M = 2,887.5. Equivalently, 100 × 80 = […]
A.W. Phillips’ study of unemployment and inflation in the United Kingdom specifically looked at the empirical relationship between the unemployment rate and the A) rate of change in prices. B) rate of change in nominal wages. C) rate of change in real wages. D) level of nominal wages. ANSWER B
Which of the following shows a negative relationship between the output and unemployment gaps? A) the AS curve B) the Phillips curve C) Okun’s law D) the classical dichotomy E) none of the above ANSWER C
The direct cause of the hyperinflation that plagued Zimbabwe in the 2000s is ________. A) printing of too much money by the central bank B) government expenditures greatly above revenues C) outlawing of price increases on many commodities D) allowing the use of foreign currencies E) the issuance of a $100 billion bank note […]
If the money demand function is given by Md = 10 + 0.2Y − 10r then a 10-unit increase in the quantity of money will cause the LM schedule to shifts to a. to the right by 10 units. b. the right by 50 units. c. to the left by 40 units. d. to the […]
New classical economists a. accept the monetarist notion that markets are perfectly competitive except for a lack of perfect information. b. do accept the difference between the short-run and long-run results in the monetarist analysis of the effects of aggregate demand on output and employment. c. accept the difference between the short-run and long- run […]
An decrease in the velocity of money for given levels of income and the interest rate would shift the a. LM curve up. b. IS curve up. b. IS curve down. c. LM curve down. ANSWER A
Are all categories of government expenditures included in gross domestic product? What government activities are not included in GDP? What will be an ideal response? ANSWER No, all categories of government spending do not represent a demand for currently produced goods and services. For instance, government spending on transfer payment programs like social security […]
