ECON 104 FINAL EXAM QUESTIONS WITH
VERIFIED ANSWERS NEW UPDATE EXAM
TESTED AND APPROVED
which economic policy model is not true for the various school of macro
thought?
a. Keynesian -- policy--economy--economic stabilization
b. Monetarist -- policy-- economy-- short run effect on nominal, long run effect
on reals
c. Rational expectations -- policy--economy adjusts -- no effect
d. supply side -- policy-- economy adjusts-- no effect
e. all of the above are true -- ANSWER--b. Monetarist -- policy-- economy--
short run effect on nominal, long run effect on reals
Roberty Lucas would disagree with which aspect of business cycles?
a. real adjustment costs are present
b. random distortions are shocking the economy
c. inflexible prices
d. a long run Phillips curve vertical at the natural rate of unemployment
e. the short run Phillips curve is not really a curve at all since every point on its
represent expectational errors or shocks -- ANSWER--c. flexible prices
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,Which of the following does not describe why Say's law is important?
a. to prevent us from assuming real sources come from nowhere
b. to prove that supply equals demand in all markets simultaneously
c. to connect microeconomic logic to macroeconomic theory
d. to separate "effective demand" from "notional demand"
e. to restate the fundamental truth of the Quantity Theory of Money --
ANSWER--b. to prove that supply equals demand in all markets simultaneously
Suppose the natural rate of unemployment is 5% and the overall economy-wide
unemployment rate is 2%. The would not indicate:
a. an unexpected inflation "shock"
b. the economy is in an economic "boom"
c. the economy is in the short run
d. the economy is off its long-run growth rate trend
e. the economy is inside its production possibilities frontier\ -- ANSWER--b.
the economy is in an economic "boom"
What is not part of the basic orginal Keynesian model?
a. workers with no expectations
b. a monetary theory of interst
c. a functioning price system in labor, commodity, and capital markets
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,d. a condition of underemployment equilibrium (recession)
e. general over production and under consumption -- ANSWER--c. a
functioning price system in labor, commodity, and capital markets
which of the following is not true with respect to the classical macro model?
a. the foundation for effective demand is constituted in a former source of
supply
b. unemployment resources are "idle" or in surplus because their price is too
high
c. nominals affect nominals and reals affect reals
d. the interest rate is purely a nominal monetary variable
e. prices should move to correct supply and demand imbalances -- ANSWER--
d. the interest rate is purely a nominal monetary variable
which of the following not true?
a. when a country runs large merchandise trade deficit the country will enter a
recession.
b. when a country runs a merchandise trade deficit, the country is running a
capital account surplus.
c. the capital account counts the value of all net foreign investment
d. services are generally under-counted in the currect account
e. when foreign governments subsidize exports to the USA those countries are
giving foreign aid to the USA -- ANSWER--a. when a country runs large
merchandise trade deficit the country will enter a recession.
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, Suppose the money supply decreases by 6%, velocity increases by 3%, and real
output decreases by 5%. what is the rate of inflation of deflation?
a. 4% inflation
b. 4% delfation
c. 2% inflation
d. 14% inflation
e. none of the above -- ANSWER--c. 2% inflation
what is true with respect to supply side economics?
a. tax cuts always increase government revenue
b. incentives are important for the production side of the economy
c. tax increases always increase government revenue
d. supply side economics has never been demonstrated to work in practice
e. Keynesians anticipated the supply side revolution because they focused on
fiscal policy (tax and spend) -- ANSWER--b. incentives are important for the
production side of the economy
what occurred during the neoclassical synthesis?
a. keynesians agreed with Arthur Laffer that tax cuts sometimes increase
government revenues.
b. the keynesians agreed with Irving Fisher that government causes the business
cycle in the long run.
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VERIFIED ANSWERS NEW UPDATE EXAM
TESTED AND APPROVED
which economic policy model is not true for the various school of macro
thought?
a. Keynesian -- policy--economy--economic stabilization
b. Monetarist -- policy-- economy-- short run effect on nominal, long run effect
on reals
c. Rational expectations -- policy--economy adjusts -- no effect
d. supply side -- policy-- economy adjusts-- no effect
e. all of the above are true -- ANSWER--b. Monetarist -- policy-- economy--
short run effect on nominal, long run effect on reals
Roberty Lucas would disagree with which aspect of business cycles?
a. real adjustment costs are present
b. random distortions are shocking the economy
c. inflexible prices
d. a long run Phillips curve vertical at the natural rate of unemployment
e. the short run Phillips curve is not really a curve at all since every point on its
represent expectational errors or shocks -- ANSWER--c. flexible prices
Page | 1
,Which of the following does not describe why Say's law is important?
a. to prevent us from assuming real sources come from nowhere
b. to prove that supply equals demand in all markets simultaneously
c. to connect microeconomic logic to macroeconomic theory
d. to separate "effective demand" from "notional demand"
e. to restate the fundamental truth of the Quantity Theory of Money --
ANSWER--b. to prove that supply equals demand in all markets simultaneously
Suppose the natural rate of unemployment is 5% and the overall economy-wide
unemployment rate is 2%. The would not indicate:
a. an unexpected inflation "shock"
b. the economy is in an economic "boom"
c. the economy is in the short run
d. the economy is off its long-run growth rate trend
e. the economy is inside its production possibilities frontier\ -- ANSWER--b.
the economy is in an economic "boom"
What is not part of the basic orginal Keynesian model?
a. workers with no expectations
b. a monetary theory of interst
c. a functioning price system in labor, commodity, and capital markets
Page | 2
,d. a condition of underemployment equilibrium (recession)
e. general over production and under consumption -- ANSWER--c. a
functioning price system in labor, commodity, and capital markets
which of the following is not true with respect to the classical macro model?
a. the foundation for effective demand is constituted in a former source of
supply
b. unemployment resources are "idle" or in surplus because their price is too
high
c. nominals affect nominals and reals affect reals
d. the interest rate is purely a nominal monetary variable
e. prices should move to correct supply and demand imbalances -- ANSWER--
d. the interest rate is purely a nominal monetary variable
which of the following not true?
a. when a country runs large merchandise trade deficit the country will enter a
recession.
b. when a country runs a merchandise trade deficit, the country is running a
capital account surplus.
c. the capital account counts the value of all net foreign investment
d. services are generally under-counted in the currect account
e. when foreign governments subsidize exports to the USA those countries are
giving foreign aid to the USA -- ANSWER--a. when a country runs large
merchandise trade deficit the country will enter a recession.
Page | 3
, Suppose the money supply decreases by 6%, velocity increases by 3%, and real
output decreases by 5%. what is the rate of inflation of deflation?
a. 4% inflation
b. 4% delfation
c. 2% inflation
d. 14% inflation
e. none of the above -- ANSWER--c. 2% inflation
what is true with respect to supply side economics?
a. tax cuts always increase government revenue
b. incentives are important for the production side of the economy
c. tax increases always increase government revenue
d. supply side economics has never been demonstrated to work in practice
e. Keynesians anticipated the supply side revolution because they focused on
fiscal policy (tax and spend) -- ANSWER--b. incentives are important for the
production side of the economy
what occurred during the neoclassical synthesis?
a. keynesians agreed with Arthur Laffer that tax cuts sometimes increase
government revenues.
b. the keynesians agreed with Irving Fisher that government causes the business
cycle in the long run.
Page | 4
