eco pretest ch 13-17

eco pretest ch 13-17 - Chapter 13 Feedback: Gold receipts...

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Chapter 13  
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Feedback: Gold receipts were essentially circulating as paper money. As these receipts were rarely redeemed for the gold in the  vault, goldsmiths learned that additional receipts could be issued in exchange for a promise to repay with interest. Thus the gold in  the vault became only a fraction of the receipts in circulation.
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CORRECT Mainstream economists claim the increased instability of the economy over the last 40 years supports their "hands-off"  policy prescription. A) True B) False Feedback: The macroeconomy has been much more stable over the past 40 years than previously and mainstream  economists point to several policy successes over this period. CORRECT "A recession became the Great Depression because the Fed allowed the money supply to fall by 35% during the 1930s."  This statement is most closely associated with which school of thought? A) Keynesianism B) Real business cycle theory C) Rational expectations theory D) Monetarism Feedback:  According to monetarists, business cycles—including the Depression—are caused by inappropriate monetary  policy. CORRECT The inability of outsiders to underbid insiders for jobs suggests that: A) the economy will self-correct slowly, if at all B) the natural rate of unemployment will fall during a recession C) the Phillips curve will be vertical D) work-place morale can be improved with "two-tier" wage systems Feedback: If this theory is correct, wages will be inflexible downward during a recession, undercutting the  economy's self-correction mechanism. CORRECT The new classical view suggests that: A) wages are inflexible downward B) coordination failures lead to persistent unemployment C) the long-run aggregate supply curve is vertical D) the long-run Phillips curve is downward sloping Feedback: The new classical view holds that wages and prices are flexible in either direction so the economy  always produces its potential output in the long run. CORRECT Real business cycle theorists conclude that the primary reason for cyclical changes in real GDP is inappropriate fiscal  and monetary policy. A) True B) False Feedback: According to this view, macro instability arises more from shocks to aggregate supply than to  aggregate demand. CORRECT Suppose nominal GDP is $5000 billion, real GDP is $4000 billion, and the money supply is $1000 billion. In this  hypothetical economy, the velocity of money is:
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A) 5 B) 4 C) 4.5 D) $1000 Feedback: The velocity of money is defined as the number of times per year the average dollar is spent on nominal  GDP, or V = PQ / M.
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This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.

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eco pretest ch 13-17 - Chapter 13 Feedback: Gold receipts...

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