The policy ineffectiveness proposition of the new classical model suggests that ________. A) unanticipated policy has no effect on the business cycle B) anticipated policy can have an effect on the business cycle C) anticipated policy has no effect on the business cycle D) legislative policy initiatives have little effect if the executive branch of […]
A positive relationship between the rate of change in money prices and real GDP is A) a leading relationship B) a lagging relationship. C) an example of countercyclicality. D) a Phillips curve. ANSWER D
Under a flexible exchange rate, an increase in the domestic money supply leads to A) a devaluation of the domestic currency. B) a revaluation of the domestic currency. C) a depreciation of the domestic currency. D) an appreciation of the domestic currency. ANSWER C
The provision of funds to the mortgage market through the purchase of mortgage-backed securities and mortgages is performed by ________. A) Fannie Mae and Freddie Mac B) the Federal Housing Administration C) the Federal Reserve System D) subprime borrowers ANSWER A
Demand for real money balances depends on ________. A) the price level B) the real interest rate C) the opportunity cost of holding money D) all of the above E) none of the above ANSWER C
The risk that a borrower has more information about their previous behavior than a potential lender is known as the ________. A) moral hazard problem B) adverse selection problem C) time-space discontinuity D) tertiary behavior problem ANSWER B
The federal government has encouraged home ownership through ________. A) an increase in home prices B) an increase in domestic interest rates C) a decrease in the implicit rent on residential housing D) allowing mortgage interest to be tax deductible ANSWER D
One example of a Phillips Curve would be a A) positive relationship between deviations from trend in real and nominal interest rates. B) negative relationship between deviations from trend in real and nominal interest rates. C) positive relationship between deviations from trend in the level of prices and the level of aggregate economic activity. D) […]
To assure a well-defined solution to the consumers’ intertemporal choice problems, we must assume that consumers’ preferences exhibit the properties that A) consumers are all identical and that more is always preferred to less. B) more is preferred to less and that consumers prefer diversity. C) consumers like diversity and that more is sometimes preferred […]
Which of the following demonstrates that policymakers cannot know the outcome of their decisions without knowing the public’s expectations of them? A) traditional Keynesian theory B) Post Keynesian theory C) real business cycle theory D) new classical theory ANSWER D
