ECO 302 Week 9 Quiz - Strayer
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Chapter 14 and 15
TRUE/FALSE
1. When
a country has a deficit, its debt is growing.
2. A
pay as you go social security system raises the capital stock.
3. If
government budget is in deficit, then real government saving is in surplus.
4. If
the government runs a deficit, households will feel wealthier.
5. A
budget deficit caused by changing labor income taxes changes the labor and
production.
6. The
debt-to-GDP ratio typically rises during a recession.
7. The
major peaks in the ratio of public debt to GDP in the U.S. reflect expenditures
on Social Security.
8. Real
national saving equals net investment.
9. Real
government saving is positive when the real public debt increases.
10. If
government expediture exceeds government revenue, then the government has a
budget surplus.
MULTIPLE CHOICE
1. The
governments sources of funds include:
a. taxes. c. borrowing.
b. printing money. d. all of the
above.
2. The
governments sources of funds include:
a. taxes. c. paying interest on past bonds.
b. government purchases. d. all
of the above.
3. The
governments sources of funds include:
a. transfer payments. c. paying
interest on the government debt.
b. printing money. d. all of the
above.
4. The
governments sources of funds include:
a. government purchases. c. borrowing.
b. transfer payments. d. all
of the above.
5. The
governments uses of funds include:
a. government purchases. c. paying
interest on the past government debt.
b. transfer payments. d. all
of the above.
6. The
governments uses of funds include:
a. government purchases. c. printing
money.
b. borrowing. d. all of the
above.
7. The
governments uses of funds include:
a. printing money. c. taxes.
b. transfer payments. d. all
of the above.
8. The
governments uses of funds include:
a. borrowing. c. paying
interest on the past government debt.
b. printing money. d. all of the
above.
9. A
balanced government budget is one where:
a. government purchases equal taxes. c. the
governments real savings is zero.
b. government debt is zero. d. all
of the above.
10. Total
bond holding of all households is Bgt because:
a. the quantity of all private bonds held
by the public is zero. c. the public views government bonds as
less risky than private bonds.
b. the quantity of all government bonds
held by the public is zero. d. the public views private bonds as less
risky than government bonds.
11. Total
bond holding of all households is equal to
a. the quantity of all private bonds. c. the
quantity of all private bonds plus all government bonds.
b. the quantity of all government bonds. d. the
quantity of all private bonds minus all government bonds.
12. If
money and the price level are constant, then the government’s real budget
deficit is:
a. (Bgt - Bgt-1)/P. c. (Bt +
Bgt)/P.
b. Bgt/P. d. none of the above.
13. If
money and the price level are constant, then the government’s real budget debt
is:
a. (Bgt - Bgt-1)/P. c. (Bt +
Bgt)/P.
b. Bgt/P. d. none of the above.
14. If
the government reduces taxes by $1 this year without raising taxes or printing
more money, then
a. future tax liabilities will rise by $1
plus the interest, R, that must be paid on the borrowing. c. future
tax liabilities will fall by $1 plus the interest, R, that must be paid on the
borrowing.
b. future tax liabilities will rise by $1
less the interest, R, that must be paid on the borrowing. d. future
tax liabilities will fall by $1 less the interest, R, that must be paid on the
borrowing.
15. Ricardian
equivalence implies that a government budget deficit:
a. increases current consumption. c. reduces
national saving.
b. increases future tax liabilities. d. all
of the above.
16. Ricardian
equivalence holds:
a. only for year to year changes in the
governments budget. c. only with a government deficit not a
surplus.
b. no matter how long until the bonds are
to be paid off. d. only with a government surplus not a
deficit.
17. A
strategic budget deficit is designed to:
a. increase GDP. c. constrain the
behavior of future governments.
b. increase economic activity. d. all
of the above.
18. The
standard view of the budget deficit is that it:
a. reduces the GDP in the long run. c. reduces
the capital stock in the long run.
b. reduces investment. d. all
of the above.
19. The
standard view of the budget deficit is that it:
a. reduces the GDP in the long run. c. increases
the capital stock in the long run.
b. increases investment. d. all
of the above.
20. The
standard view of the budget deficit is that it:
a. increases the GDP in the long run. c. increases
the capital stock in the long run.
b. reduces investment. d. all
of the above.
21. The
standard view of the budget deficit is that it:
a. increases the GDP in the long run. c. reduces
the capital stock in the long run.
b. increases investment. d. all
of the above.
22. The
standard view of the budget deficit is that a deficit:
a. does not affect the economy in the long
run. c. does
not affect the economy in the short run.
b. and the public debt are a burden on the
economy. d. encourages economic growth.
23. Households
may feel wealthier due to a tax cut, if:
a. they are very concerned about future
generations. c. they are using an infinite planning horizon.
b. they expect the bonds created by the
deficit to be paid off after their lifetime. d. they plan to leave a bequest to their
heirs.
24. Households
may feel wealthier due to a tax cut, if:
a. they are not able to borrow as much
against future earnings as they wish. c. they care a lot about future
generations.
b. they are not able to lend present
earnings as much as they wish. d. they plan to leave a bequest to their
heirs.
25. If
households ignore effects on future generations, a pay as you go social
security system:
a. reduces current national savings. c. reduces
the future capital stock.
b. reduces investment. d. all
of the above.
26. If
households ignore effects on future generations, a pay as you go social
security system:
a. reduces current national savings. c. raises
the future capital stock.
b. raises investment. d. all
of the above.
27. If
households ignore effects on future generations, a pay as you go social
security system:
a. raises current national savings. c. raises
the future capital stock.
b. reduces investment. d. all
of the above.
28. If
households ignore effects on future generations, a pay as you go social
security system:
a. raises current national savings. c. reduces
the future capital stock.
b. raises investment. d. all
of the above.
29. If
households ignore effects on future generations when a pay as you go social
security system starts, the then elderly:
a. have a positive income effect on their
consumption. c. receive low returns on any taxes paid into the system.
b. receive benefits that in present value
is less the present value of their contributions. d. all of
the above.
30. If
households ignore effects on future generations, when a pay as you go social
security system starts, the then elderly:
a. have a negative income effect on their
consumption. c. receive low returns on any taxes paid into the system.
b. receive benefits that in present value
is greater than the present value of their contributions to the system. d. all
of the above.
31. If
households ignore effects on future generations, a pay as you go social
security system:
a. increases consumption. c. reduces
national saving.
b. reduces the capital stock in the long
run. d. all of the above.
32. If
households ignore effects on future generations, a pay as you go social
security system:
a. increases consumption. c. increases
national saving.
b. increases the capital stock in the long
run. d. all of the above.
33. If
households ignore effects on future generations, a pay as you go social
security system:
a. decreases consumption. c. raises
national saving.
b. reduces the capital stock in the long
run. d. all of the above.
34. If
households ignore effects on future generations, a pay as you go social
security system:
a. decreases consumption. c. reduces
national saving.
b. increases the capital stock in the long
run. d. all of the above.
35. If
households ignore effects on future generations, a pay as you go social
security system:
a. reduces investment. c. reduces
private saving.
b. reduces GDP in the long run. d. all
of the above.
36. If
households ignore effects on future generations, a pay as you go social
security system:
a. reduces investment. c. increases
private saving.
b. increases GDP in the long run. d. all
of the above.
37. If
households ignore effects on future generations, a pay as you go social
security system:
a. raises investment. c. raises
private saving.
b. reduces GDP in the long run. d. all
of the above.
38. If
households ignore effects on future generations, a pay as you go social
security system:
a. raises investment. c. reduces
private saving.
b. increases GDP in the long run. d. all
of the above.
39. A
pay as you go social security system only increase consumption and reduces
investment, if:
a. households leave bequests. c. if
the planning horizon is overlapping generations.
b. if households neglect the adverse
affects on their descendants. d. households increase their savings.
40. If
currently alive households take full account of the negative affects of a pay
as you go social security system on their descendants, then the:
a. effects are magnified. c. effects
are exponential.
b. effects are nil. d. effects
are unchanged.
41. Open
market operations amount to:
a. printing more money and raising taxes
and lowering taxes and raising the public debt. c. printing more money and raising taxes
and lowering taxes and raising the public debt.
b. printing less money and reducing taxes
and raising taxes and reducing the public debt. d. printing more money and reducing taxes
and raising taxes and reducing the public debt.
42. By
varying its budget deficit, a government can:
a. change the timing of taxes. c. avoid
accumulation of government debt.
b. avoid having to raise taxes to pay for
a deficit. d. all of the above.
43. If
the time path of government purchases does not change and the government cuts lump
sum taxes, then:
a. real GDP does not change. c. real
gross investment does not change.
b. real consumption does not change. d. all
of the above.
44. If
the time path of government purchases does not change and the government cuts
lump sum taxes, then:
a. real GDP does not change. c. real
gross investment falls.
b. real consumption increases. d. all
of the above.
45. If
the time path of government purchases does not change and the government cuts
lump sum taxes, then:
a. real GDP does rise. c. real
gross investment rises.
b. real consumption does not change. d. all
of the above.
46. If
the time path of government purchases does not change and the government cuts
lump sum taxes, then:
a. real GDP falls. c. real gross
investment does not change.
b. real consumption falls. d. all
of the above.
47. If
the time path of government purchases does not change and the government cuts
lump sum taxes, then:
a. the interest rate does not change. c. the
future capital stock does not change.
b. the real wage rate does not change. d. all
of the above.
48. If
the time path of government purchases does not change and the government cuts
lump sum taxes, then:
a. the interest rate rises. c. the
future capital stock does not change.
b. the real wage rate falls. d. all
of the above.
49. If
the time path of government purchases does not change and the government cuts
lump sum taxes, then:
a. the interest rate does not change. c. the
future capital stock falls.
b. the real wage rate rises. d. all
of the above.
50. If
the time path of government purchases does not change and the government cuts
current labor income taxes, then:
a. labor supply is shifted to the future. c. present
GDP is reduced.
b. labor supply is shifted to the present. d. future
GDP is increased.
51. If
the time path of government purchases does not change and the government cuts
current assets income taxes, then:
a. households save more and consume less
in the present. c. households save less and consume more
in the present.
b. households save and consume less in the
present. d. households save and consume more in the present.
52. The
major peaks in the ratio of public debt to GDP in the U.S. reflect
a. financing of wartime expenditures. c. major
economic expansions.
b. financing of Social Security. d. major
increases in technology.
53. In
a business cycle recession, the debt-to-GDP ratio typically
a. falls. c. does not change.
b. rises. d. either (a) or (c).
54. In
a business cycle recession, the debt-to-GDP ratio typically
a. falls because of an increase in debt. c. rises
because of an increase in debt.
b. falls because of an increase in GDP. d. rises
because of an increase in GDP.
55. In
a business cycle recession, the debt-to-GDP ratio typically
a. falls because of an increase in debt. c. rises
because of a decrease in debt.
b. falls because of an increase in GDP. d. rises
because of a decrease in GDP.
56. In
a business cycle expansion, the debt-to-GDP ratio typically
a. falls because of an increase in GDP. c. rises
because of an increase in debt.
b. falls because of a decrease in GDP. d. rises
because of a decrease in debt.
57. Assuming
that the nominal quantity of money is constant and there is no inflation, if
the real public debt decreases, the government budget shows
a. an increase in the real deficit. c. a
decrease in private bonds.
b. an increase in real saving. d. a
decrease in printing money.
58. Assuming
that the nominal quantity of money is constant and there is no inflation, if
the real public debt increases, the government’s
a. rate of money printing is greater than
50%. c. real
saving is less than zero
b. real saving equals zero. d. rate
of money printing is greater than zero.
59. A
government budget surplus
a. is the same as the government’s real
saving. c. means that government saving is positive.
b. means that government revenue exceeds
its expenditure. d. all of the above.
60. Real
national saving equals
a. the change in the capital stock. c. both
(a) and (b).
b. net investment. d. net
depreciation.
61. Real
national saving is
a. the difference between government and
household saving. c. both (a) and (b).
b. the sum of government and household
saving. d. net depreciation.
62. An
open-market operation in which the Federal Reserve purchases bonds will
a. increase the money supply and increase
the price level. c. decrease the money supply and decrease
real GDP.
b. decrease the money supply and increase
the price level. d. decrease the money supply and increase
real GDP.
63. An
open-market operation in which the Federal Reserve sells bonds will
a. increase the money supply and increase
the price level. c. decrease the money supply and decrease
the price level.
b. decrease the money supply and increase
real GDP. d. decrease the money supply and increase the price level.
64. An
open-market operation in which the Federal Reserve purchases bonds will
a. decrease the money supply and increase
real GDP. c. decrease the money supply and decrease real GDP.
b. increase the money supply but not
change real GDP. d. increase the money supply and increase
real GDP.
65. An
open-market operation in which the Federal Reserve sells bonds will
a. decrease the money supply and increase
real GDP. c. decrease the money supply and decrease real GDP.
b. increase the money supply and increase
real GDP. d. increase the money supply but not change real GDP.
SHORT ANSWER
1. What
is the government budget constraint when government borrowing is allowed?
2. What
are public, private and national saving and what is the implication of real
national saving?
3. What
are the effects of the government lowering taxes by $1 for one period in the
market clearing model with no transfer payments, the money stock fixed, no
inflation and with a given time path of government purchases?
4. What
is the Ricardian equivalence theorem?
5. Why
might a budget deficit make households feel wealthier after a tax cut?
6. In
the equillibrium business cycle model, what is the impact of an open market
operation purchase by the Federal Reserve?
Chapter 15
TRUE/FALSE
1. If
households misperceive prices, they may change real decisions in response to
changes in the money supply in the long run.
2. If
the actual price level is above the expected price level, then workers’ actual
real wage will be below their expected real wage.
3. The
real effect of a given monetary shock is larger the more stable the underlying
monetary environment.
4. Money
can only effect real variables in the short run, if people expect the increase in the money
supply.
5. If
monetary authorities follow a monetary rule, then monetary policy is more
effective in affecting real variables like real GDP.
6. In
the price-misperceptions model, market prices adjust to clear markets only very
slowly.
7. In
the price-misperceptions model, an increase in the price level increases the
equilibrium labor input and capital services in the short- and long-run.
8. Discretionary
monetary policy is more likely than a policy rule to promote a reputation for
the central bank of promoting low inflation.
9. A
formal provision in the law to target inflation requires secrecy about the
central bank’s activities.
10. Discretionary
monetary policy suffers from an incentive for the central bank to sometimes
renege on its commitment to low inflation.
MULTIPLE CHOICE
1. We
would expect households to have the most complete information about:
a. their own wage rate. c. products
purchased occasionally like a automobile.
b. the wage rate available on other jobs. d. all
of the above.
2. We
would expect households to have the most complete information about:
a. the wage rate available on other jobs. c. products
purchased occasionally like a automobile.
b. products they purchase frequently. d. all
of the above.
3. We
would expect households to have incomplete information about:
a. their own wage rate. c. products
purchased occasionally like a automobile.
b. products they purchase frequently. d. all
of the above.
4. We
would expect households to have incomplete information about:
a. their own wage rate. c. wage
rates available on other jobs.
b. products they purchase frequently. d. all
of the above.
5. The
workers’ perceived real wage rate is:
a. their nominal wage rate divided by the
actual price level. c. their nominal wage rate divided by the
expected price level.
b. the actual price level divided by their
nominal wage rate. d. the expected price level divided by
their nominal wage rate.
6. If
the nominal wage is $10 per hour and the expected price level is 2 and the
actual price level is 4, then:
a. the expected real wage rate is greater
than the actual real wage rate. c. the expected real wage rate is greater
than the actual nominal wage rate.
b. the expected real wage rate is less
than the actual real wage rate. d. the actual real wage rate is greater
than the actual nominal wage rate.
7. If
the nominal wage is $10 per hour and the expected price level is 2 and the
actual price level is 4, then expected real wage rate is:
a. $10. c. $2.50.
b. $5. d. none of the above.
8. If
the nominal wage is $10 per hour and the expected price level is 2 and the
actual price level is 4, then actual real wage rate is:
a. $10. c. $2.50.
b. $5. d. none of the above.
9. If
the nominal wage is $10 per hour and the expected price level is 2 and the
actual price level is 4, then actual nominal wage rate is:
a. $10. c. $2.50.
b. $5. d. none of the above.
10. If
the nominal wage is $10 per hour and the expected price level is 5 and the
actual price level is 4, then:
a. the expected real wage rate is greater
than the actual real wage rate. c. the expected real wage rate is greater
than the actual nominal wage rate.
b. the expected real wage rate is less
than the actual real wage rate. d. the actual real wage rate is greater
than the actual nominal wage rate.
11. If
the nominal wage is $10 per hour and the expected price level is 2 and the
actual price level is 4, then actual real wage rate is:
a. $10. c. $2.
b. $2.50. d. none of the above.
12. If
the nominal wage is $10 per hour and the expected price level is 5 and the
actual price level is 4, then expected real wage rate is:
a. $10. c. $2.
b. $2.50. d. none of the above.
13. If
the nominal wage is $10 per hour and the expected price level is 5 and the
actual price level is 4, then actual nominal wage rate is:
a. $10. c. $2.
b. $2.50. d. none of the above.
14. If
the nominal wage rises from $10 per hour in period one to $15 per hour in period 2 as the expected
price level rises from 1 to 3 while the actual price level rises from 4 to 5,
then from period 1 to period 2:
a. the nominal wage is rising. c. the
actual real wage is falling.
b. the expected real wage is rising. d. all
of the above.
15. If
the nominal wage rises from $10 per hour in period 1 to $15 per hour in period 2 as the expected
price level rises from 1 to 3 while the actual price level rises from 4 to 5,
then from period 1 to period 2:
a. the nominal wage is falling. c. the
actual real wage is falling.
b. the expected real wage is falling. d. all
of the above.
16. If
the nominal wage rises from $10 per hour in period one to $15 per hour in period 2 as the expected
price level rises from 1 to 3 while the actual price level rises from 4 to 5,
then from period 1 to period 2:
a. the nominal wage is rising. c. the
actual real wage is rising.
b. the expected real wage is falling. d. all
of the above.
17. If
the nominal wage rises from $10 per hour in period one to $15 per hour in period 2 as the expected
price level rises from 1 to 3 while the actual price level rises from 4 to 5,
then from period 1 to period 2:
a. the nominal wage is falling. c. the
actual real wage is rising.
b. the expected real wage is rising. d. all
of the above.
18. In
the current period a perceived increase in the real wage, will cause households
to:
a. work more. c. consume less
leisure.
b. consume more goods. d. all
of the above.
19. In
the current period a perceived increase in the real wage, will cause households
to:
a. work more. c. consume more
leisure.
b. consume fewer goods. d. all
of the above.
20. In
the current period a perceived increase in the real wage, will cause households
to:
a. work less. c. consume more
leisure.
b. consume more goods. d. all
of the above.
21. In
the current period a perceived increase in the real wage, will cause households
to:
a. work less. c. consume less
leisure.
b. consume fewer goods. d. all
of the above.
22. If
the perceive real wage goes up, workers will supply more labor:
a. unless the actual real wage remains the
same or falls. c. in the short run.
b. in the long run. d. all of
the above.
23. If
the perceive real wage goes up, real GDP increases:
a. unless the actual real wage remains the
same or falls. c. in the short run.
b. in the long run. d. all of
the above.
24. While
price misperceptions can cause an increase labor supply and GDP in the
short-run, in the long run:
a. money is neutral. c. labor
supply returns to its initial position.
b. money does not affect real GDP. d. all
of the above.
25. While
price misperceptions can cause an increase in labor supply and GDP in the
short-run, in the long run:
a. money is no longer neutral in the
model. c. labor supply returns to its initial position.
b. money negatively impacts real GDP. d. all
of the above.
26. While
price misperceptions can cause an increase in labor supply and GDP in the
short-run, in the long run:
a. money is neutral. c. labor
supply ultimately declines.
b. money negatively affects real GDP. d. all
of the above.
27. While
price misperceptions can cause an increase in labor supply and GDP in the
short-run, in the long run:
a. money is no longer neutral in the
model. c. labor supply falls by more than its initial increase.
b. money does not affect real GDP. d. all
of the above.
28. An
increase in the money supply:
a. can affect real variables temporarily
in the short run. c. can affect nominal variables in the
long run.
b. can not affect real variables in the
long run. d. all of the above.
29. An
increase in the money supply:
a. can affect real variables temporarily
in the short run. c. can affect real variables in the long
run.
b. can not affect nominal variables in the
short run. d. all of the above.
30. An increase in the money supply:
a. can not affect real variables
temporarily in the short run. c. can not affect nominal variables in the
long run.
b. can not affect real variables in the
long run. d. all of the above.
31. An
increase in the money supply:
a. can not affect real variables
temporarily in the short run. c. can affect nominal variables in the
long run.
b. can affect real variables in the long
run. d. all of the above.
32. An
increase in the money supply and inflation can only affect real variables only:
a. if households perceive it is happening. c. in
the long run.
b. if households do not perceive all of
the inflation. d. if households expect it.
33. In
the short run if households’ perceived money growth and inflation equals the
actual money growth and inflation, then
a. money affects real variables like labor
supply. c. the model is still neutral even in the
short run.
b. money affects real variables like GDP. d. all
of the above.
34. Monetary
policy authorities can only affect the real economy, if:
a. their actions are anticipated by the
public. c. their actions are fully communicated to the public.
b. their actions are consistent and
predictable. d. their actions systematically fool the public.
35. A
monetary shock of a given size has a larger real effect:
a. the more it is anticipated by the
public. c. the more fully it is explained and communicated to the
public.
b. the more stable the underlying monetary
environment. d. all of the above.
36. Price
misperception during a positive technology shock would cause:
a. output or GDP to rise by less than it
would without price misperception. c. the expected price level to fall less
than the actual price level falls.
b. labor supply to rise by less than it
would without price misperception. d. all of the above.
37. Price
misperception during a positive technology shock would cause:
a. output or GDP to rise by less than it
would without price misperception. c. the expected price level to fall more
than the actual price level falls.
b. labor supply to fall by more than it
would without price misperception. d. all of the above.
38. Price
misperception during a positive technology shock would cause:
a. output or GDP to fall by more than it
would without price misperception. c. the expected price level to fall more
than the actual price level falls.
b. labor supply to rise by less than it
would without price misperception. d. all of the above.
39. Price
misperception during a positive technology shock would cause:
a. output or GDP to fall by more than it
would without price misperception. c. the expected price level to fall less
than the actual price level falls.
b. labor supply to fall by more than it
would without price misperception. d. all of the above.
40. Discretionary
monetary policy is when the monetary authority:
a. does not commit to future monetary actions.
c. never produces a monetary surprise to households.
b. commits to future monetary actions. d. always
behaves in a predictable way.
41. A
monetary policy rule is when the monetary authority:
a. does not commit to future monetary
actions. c. often produces a monetary surprise to
households.
b. commits to future monetary actions. d. always
behaves in unpredictable ways.
42. The
price misperception model predicts:
a. the price level will be procyclical
while in US data the price level is
countercyclical. c. the real wage is countercyclical while
in US data the real wage is procyclical.
b. the nominal quantity of money is
procyclical and in US data money is weakly procyclical. d. all of
the above.
43. The
price misperception model predicts:
a. the price level will be procyclical
while in US data the price level is
countercyclical. c. the real wage is procyclical and in US
data the real wage is procyclical.
b. the nominal quantity of money is
countercyclical while in US data money is weakly procyclical. d. all
of the above.
44. The
price misperception model predicts:
a. the price level will be countercyclical
while in US data the price level is
countercyclical. c. the real wage is procyclical and in US
data the real wage is procyclical.
b. the nominal quantity of money is
procyclical and in US data money is weakly procyclical. d. all of
the above.
45. The
price misperception model predicts:
a. the price level will be countercyclical
and in US data the price level is countercyclical. c. the real wage
is countercyclical while in US data the real wage is procyclical.
b. the nominal quantity of money is
countercyclical while in US data money is weakly procyclical. d. all
of the above.
46. Real
variables can only be affected by:
a. unperceived changes in the price level. c. expected
changes in the price level.
b. perceived changes in the price level. d. actual
changes in the price level.
47. Monetary
policy can affect real variables in the short run if monetary policy:
a. surprises households. c. is
unpredictable.
b. is random. d. all of the
above.
48. Monetary
policy can affect real variables in the short run if monetary policy:
a. surprises households. c. is
predictable.
b. is consistent. d. all of the above.
49. Monetary
policy can affect real variables in the short run if monetary policy:
a. is fully explained to households. c. is predictable.
b. is random. d. all of the
above.
50. Monetary
policy can affect real variables in the short run if monetary policy:
a. is fully communicated to households. c. is
unpredictable.
b. is consistent. d. all of the above.
51. In
the price-misperceptions model, market prices of goods, wage rates, and rental
prices
a. adjust rapidly to clear markets. c. give
households complete information.
b. adjust slowly to clear markets. d. give
households perfect information.
52. The
price-misperceptions model differs from the equilibrium business cycle model in
that households
a. no longer serve as providers of capital
services. c. find that market-clearing prices move
to equilbrium slowly.
b. sometimes misinterpret changes in
nominal prices as changes in real prices. d. typically face disequilibrium because
prices fail to clear markets.
53. Empirical
evidence suggests that money is not always neutral, which is consistent with
a. an equilibrium business-cycle model. c. a
price-misperceptions model.
b. a real business-cycle model. d. a
wage-imperfections model.
54. In
the price-misperceptions model, employers have
a. inaccurate information about wages and
accurate information about the price of the output. c. accurate
information about wages and the price of the output.
b. inaccurate information about wages and
the price of the output. d. accurate information about wages and
inaccurate information about the price of the output.
55. In
the price-misperceptions model, workers have
a. inaccurate information about wages and
accurate information about the price level. c. accurate information about wages and
the price level.
b. accurate information about wages and
inaccurate information about the price level. d. inaccurate information about wages and
the price level.
56. In
the price-misperceptions model, a rise in the real wage rate makes the demand
curve for labor, in the short run, to
a. become steeper than in an equilibrium
business-cycle model. c. depend about expectations about prices,
not the actual price used in an equilibrium business-cycle model.
b. become less steep than in an
equilibrium business-cycle model. d. remain the same as in an equilibrium
business-cycle model.
57. In
the price-misperceptions model, a rise in the nominal wage rate makes the
supply curve of labor, in the short run,
a. shift to the right compared to an
equilibrium business-cycle model. c. shift to the left compared to an
equilibrium business-cycle model.
b. become less steep than in an
equilibrium business-cycle model. d. remain the same as in an equilibrium
business-cycle model.
58. In
the price-misperceptions model, an increase in the price level in the short
run,
a. lowers the quantity of labor supplied
at a given real wage. c. leaves the quantity of labor supplied
unchanged.
b. lowers the quantity of labor supplied
at a given nominal wage. d. increases the quantity of labor
supplied at a given real wage.
59. In
the price-misperceptions model, an increase in the price level will, in the
long run,
a. lower the quantity of labor supplied at
a given real wage. c. leave the quantity of labor supplied
unchanged.
b. lower the quantity of labor supplied at
a given nominal wage. d. increase the quantity of labor supplied
at a given real wage.
60. In
the price-misperceptions model, an increase in the price level will, in the
short run,
a. increase the equilibrium quantity of
labor input and real GDP. c. leave the equilibrium quantity of labor
input and real GDP unchanged.
b. lower the equilbirum quantity of labor
input and increase real GDP. d. lower the equilibrium quantity of labor
input and real GDP.
61. In
the price-misperceptions model, an increase in the price level in the short-run
a. decreases the equilibrium quantity of
labor input and capital services. c. leaves the equilibrium quantity of
labor input and capital services unchanged.
b. increases the equilibrium quantity of
labor input and capital services. d. increases the equilibrium quantity of
labor input and decreases the equilibrium quantity of capital services.
62. In
the price-misperceptions model, an increase in the price level in the long-run
a. decreases the equilibrium quantity of
labor input and capital services. c. increases the equilibrium quantity of
labor input and decreases the equilibrium quantity of capital services.
b. increases the equilibrium quantity of
labor input and capital services. d. leaves the equilibrium quantity of
labor input and capital services unchanged.
63. The
Lucas hypothesis on monetary shocks says that the real effect of a given size
monetary shock is
a. larger, the more stable the underlying
monetary environment. c. larger, the less stable the underlying
monetary environment.
b. smaller, the more stable the underlying
monetary environment. d. independent of the stability of the
underlying moentary environment.
64. Empirical
evidence shows that, for countries such as the U.S., a monetary shock has
a. little or no relation to real GDP. c. little
or no relation to nominal GDP.
b. a significant positive relation to real
GDP. d. a signficant negative relation to real GDP.
65. In
the price-misperception model, money is
a. endogenous, just as it is in the
equilibrium business-cycle model. c. exogenous, but it is endogenous in the
equilibrium business-cycle model.
b. exogenous, just as it is in the
equilibrium business-cycle model. d. endogenous, but it is exogenous in the
equilibrium business-cycle model.
66. Friedman
and Schwartz’s Monetary History concludes that the procyclical pattern for
money
a. does not exist in historical data for
the U.S. from 1867 to 1960. c. cannot be explained entirely by
endogenous money.
b. can only be explained during the times
the U.S. used a commodity money. d. can be explained entirely by exogenous
money.
67. One
reason for preferring a rule for monetary policy is that a rule
a. allows for additional discretionary
policy. c. ensures that the economy would have a negative rate of
inflation.
b. ensures that the economy would have a
positive rate of inflation. d. improves the credibility of the
monetary authority.
68. Which
of the following is likely to promote low and stable inflation?
a. inflation targeting c. a
large benefit from temporarily reneging on a stated policy
b. discretionary monetary policy d. none
of the above
SHORT ANSWER
1. On
what types of prices do households have the best information and on what types
of products may they have incomplete information?
2. What
are the short run effects of a real wage misperception in the market clearing
model?
3. Why
even with the possibility of real wage misperceptions is the market clearing
model still neutral in the long run?
4. Under
what conditions do monetary policy changes have the larger real effects on an
economy?
5. What
is the difference between discretionary monetary policy and monetary policy
under a policy rule?
6. Why
might a monetary-policy rule be more likely than discretionary policy to
promote low inflation?
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