2. Which of the following does not affect long run aggregate supply? a. A change
ID: 1125773 • Letter: 2
Question
2. Which of the following does not affect long run aggregate supply? a. A change in labor force participation. b. An outward movement of aggregate demand. c. A negative trend in labor productivity. d. An increase in the marginal tax rates on wages. e. A new provision of government benefits that affect household incentives. 3. Aggregate Demand is composed of spending by households, businesses, foreigners and: a. investors. b. savers. c. bankers. d. non-profits. e. government. 4. Money illusion arises when: a. workers work harder when they know that layoffs are increasing. b. workers work harder when inflation has raised their nominal wage, even though their real wage is lower. c. workers work harder when they think their wages have fallen. d. workers are paid in a unit of account that is different from the medium of exchange. e. All of the above. 5. Without money illusion, a 10% increase in the price level will lead to a: a. 10% increase in the nominal wage. b. less than 10% increase in the nominal wage. c. more than 10% increase in the nominal wage. d. 10% increase in the real wage. e. a 10% decrease in the price level. 6. If the quantity of money is $100 million, real GDP is $200 million and the overall price index is 1.5, then income velocity of money equals: a. 1.5 b. 2.0 c. 3.0 d. 4.5 e. 6.0 7. The aggregate demand schedule represents the relationship between the quantity of goods and services demanded and: a. the overall price level. b. the market interest rate. c. the quantity of money balances. d. the bond price. e. the level of default risk. 8. According to the quantity theory of money, an increase in the quantity of money results in a: a. leftward movement along the aggregate demand schedule. b. rightward movement along the aggregate demand schedule. c. leftward shift of the aggregate demand schedule. d. rightward shift of the aggregate demand schedule. e. shifts in the aggregate demand that cannot be predicted. 9. Which of the following can be shown on the AS/AD model? a. Inflation and growth. b. Deflation and growth. c. Inflation and depression. d. Deflation and depression. e. All of the above. 10. A central bank can prevent deflation by conducting monetary policy that: a. shifts the aggregate supply schedule rightward. b. shifts the aggregate supply schedule leftward. c. shifts the aggregate demand schedule rightward. d. shifts the aggregate demand schedule leftward. e. Both B and C are true. 11. Which of the following schedules is perfectly vertical? a. Short-run aggregate demand. b. Long-run aggregate demand. c. Short-run aggregate supply. d. Long-run aggregate supply. e. Both B and C are true. For the next three questions, use the graph, above, which shows the aggregate demand (AD), the short run aggregate supply (AS-sr) and the long run aggregate supply (AS-lr) for an economy: 12. Suppose that the Fed tries to stimulate the economy so that equilibrium income/output rises to a level above Q*. Which of the points above would be consistent with a new short run equilibrium? a. Point A. b. Point B. c. Point C. d. Point D. e. None of the above. 13. Suppose that the Fed tries to stimulate the economy so that equilibrium income/output rises to a level above Q* and that economic agents do not suffer from money illusion nor is there a lag in adjusting wage levels to price changes. Which of the points above would be consistent with a new short run equilibrium? a. Point A. b. Point B. c. Point C. d. Point D. e. None of the above. 14. Suppose that the Fed has been trying to stimulate the economy so that equilibrium income/output rises to a level above Q* but it has stopped this policy. Meanwhile, economic agents have factored this policy into their decision-making and continue to do so. Which of the points above would be consistent with a new short run equilibrium? a. Point A. b. Point B. c. Point C. d. Point D. e. None of the above. 15. When nominal wages adjust more slowly than changes in the price level, then the aggregate supply schedule is: a. downward sloping. b. upward sloping. c. horizontal. d. vertical. e. shaped like a parabola. 16. In the short run, an increase in the quantity of money results in: a. a leftward shift of the aggregate demand schedule, a lower price level, and a higher real GDP. b. a rightward shift of the aggregate demand schedule, a higher price level, and a higher real GDP. c. a rightward shift of the aggregate supply schedule, a lower price level, and a higher real GDP. d. a leftward shift of the aggregate demand schedule, a higher price level, and a lower real GDP. e. shifts in both the curves leaving prices at a lower level. 17. Monetary policy can affect the price level: a. in both the short run and the long run. b. neither in the short run nor the long run. c. only in the short run. d. only in the long run. 18. When the price level falls, the level of AD rises, as illustrated by the downward sloping curve shown on a graph. This is because as the average price falls: a. our fixed income buys more stuff. b. our fixed wages buys more stuff. c. our fixed money holdings buy more stuff. d. our fixed savings frees up resources to buy more stuff. e. All of the above. 19. The classical long run view of the economy shows that changes in AD will: a. have no effect on the level of production. b. have no effect on the price level. c. have an unpredictable effect on the price level. d. Both A and B are true. e. Both A and C are true. 20. The AS/AD model is unable to show a situation in which we have _____ and _____ at the same time. a. inflation; growth b. deflation; growth c. inflation; depression d. deflation; depression e. inflation; deflation. 21. Which of the following is most associated with Monetarism? a. Flaws in the market are the cause of economic disruption. b. Investment falls because of a lack of “animal spirits.” c. Monetary rules are preferred to discretionary policy. d. Increasing government spending is the most reliable way to a successful economic recovery. e. All of the above. 22. Which of the following has been relatively stable over the last thirty years? a. The velocity of M1. b. The velocity of M2. c. The velocity of MZM. d. All of the above. e. None of the above. 23. According to the Austrian business cycle theory which of the following is true about the economy? a. The fact that there is widespread business failure does not mesh with our understanding of how markets work. b. The broad disturbance in our economy points to a monetary cause. c. It is long-term capital investments that suffer the most. d. All of the above. e. None of the above. 24. This economist won a Nobel prize in economics for his work on business cycle theory: a. Lionel Robbins. b. F. A. Hayek. c. J. M. Keynes. d. Ludwig von Mises. e. Karl Marx. 25. To illustrate the dot-com boom Woods cites the example of: a. Microsoft, whose stock prices fell by 23%. b. Apple, whose innovative Ipod caused its stock prices to triple. c. Home Depot, whose IPO was very disappointing, with prices at two-thirds of that expected. d. Toys-R-Us, which was bankrupt before the bust even began. e. Netscape, whose IPO made owners multimillionaires even though it had never made a profit. 26. To illustrate the investment problem during a bust, Mises cites the example of a: a. home builder who finds out that he doesn’t have enough bricks to finish his project. b. cattle rancher who finds out that he doesn’t have enough cowboys to keep his herd together. c. cattle rancher who finds out that he doesn’t have enough cattle and must set them free. d. circus owner who forgot to bring nets for his trapeze artists. e. rowboat with one fixed oar. 27. According to the Austrian view, the boom-bust problem originates with: a. low interest rates during the bust. b. low interest rates during the boom. c. high interest rates during the boom. d. high interest rates during the bust. e. high interest rates during both the boom and the bust. 28. Should we respond to a recession with massive public works projects, massive infusions of money and enormous debt? That has been tried and spectacularly failed in: a. Russia b. Japan c. Brazil d. Italy e. South Korea 29. The free market route to economic recovery following a recession is to: a. allow asset prices to fall. b. allow consumption to fall. c. allow saving to rise. d. All of the above. e. None of the above. 30. Woods argues that consumption is: a. the act of using things up. b. the dominant driving force in our economy. c. the key to economic growth and progress. d. the foundation of what makes us a wealthy nation. e. All of the above. 31. In the example that Woods cites from Adam Smith, it is the consumption of food and clothing by the _____ that benefits us, not the consumption by the _____. a. merchant; soldier b. blacksmith; merchant c. ploughman; soldier d. soldier; bureaucrat e. merchant; ploughman 32. Among Woods’ suggestions for what we can do to improve our situation is/are: a. allow big firms (like Enron) to fail. b. strengthen regulations on Fannie Mae and Freddie Mac. c. cut government spending. d. Both A and B are correct. e. Both A and C are correct. 33. Among Woods’ suggestions for what we can do to improve our situation is/are: a. improve oversight of government management of money. b. increase reliance on the Fed to steer the economy along a sustainable path. c. lower the requirements for how big a firm has to be to fall under the “Too Big To Fail” policy. d. All of the above. e. None of the above. 34. With regard to money, which of the following accurately characterizes Woods’ view? a. We need a gold standard. b. The history of money is the history of government efforts to destroy it. c. The purpose of government control of money is to support and maintain “good” money. d. Legal tender laws are crucial to our continued use of money. e. Government control of money confers enormous social benefit to us. 35. Banks found their situations increasingly precarious from 1931 to 1932 because: a. depositors wanted to move their currency into savings accounts. b. the Fed was raising interest rates. c. the value of large corporate bonds, which banks held, were falling in value. d. All of the above. e. None of the above. 36. What positive signs were there in 1932 that indicated that the depression was over? a. Prices in the stock market bottomed out and were rising. b. The money supply was expanding. c. By the end of the year, unemployment was falling. d. In the middle of the year, industrial production was up by more than 10%. e. All of the above. 37. Before becoming president, FDR was the governor of: a. New York. b. Massachusetts. c. Virginia. d. Georgia e. Illinois. 38. The bank “holiday” was declared by FDR in his first days in office. The soundest banks in the twelve Federal Reserve cities opened back up in about: a. two days. b. one week. c. one month. d. two months. e. three months. 39. Which of the following was not among the alphabet-soup list of agencies, or legislative acts, created, passed, or in place during Roosevelt’s first year in office? a. AAA b. FERA c. TVA d. RFC e. EEOC 40. To deal with a presumed “underconsumption” problem, the NIRA: a. set production quotas. b. established maximum wages. c. required firms to cut prices by 3%-5% per year. d. All of the above. e. None of the above. 41. There was a mini-economic recovery in the second quarter of 1933, which we observe by noting: a. significant increases in non-durable goods production. b. significant increases in durable goods production. c. declines in the unemployment rate. d. All of the above. e. Only A and C of the above. 42. The depression of 1937-38: a. saw unemployment back up to 20%. b. occurred even through real GDP kept growing, albeit slowly. c. was attributed, in part, to the Fed’s reduction in the required reserve ratio. d. All of the above. e. None of the above. 43. According to Smiley, which of the following is false? a. FDR believed that businesses would be hurt by the loss of the NRA and would exert pressure for a new version of the NRA. b. FDR’s acceptance speech for his party’s nomination for a second term was characterized as an attack on free enterprise. c. FDR claimed that inefficient government programs were the main cause of the 1937-1938 depression. d. The Fed raised the required reserve ratio on banks in 1936 and 1937 that led to a severe decrease in the money supply. e. All of the above are false. 44. According to Smiley, which of the following is true? a. Before the Great Depression, federal budget deficits were normal. b. Prior to the Great Depression, the states received most of their revenue from the federal government. c. Old Age Assistance was a larger program than Social Security until the early 1970s. d. According to Smiley, the lesson of the Great Depression is that “governments failed, not markets.” e. All of the above are true. 45. According to Smiley, which of the following is false? a. FDR’s second New Deal policies were so popular that Democrats made major gains in the 1938 elections. b. The idea behind using fiscal policy to combat a depression is that low interest rates are insufficient to boost investment by enough to restore full employment. c. From data reconstructions after the fact, it is clear that the Fed had a very strong “tight money” policy throughout the 1930s. d. During World War II, increases in investment were insufficient to offset depreciation, so America’s capital stock declined. e. All of the above are false. 46. According to Smiley, which of the following are important lessons to learn from the Great Depression? a. FDR’s able handling of the economy saved capitalism. b. World War II finally brought an end to the Great Depression. c. The Great Depression led to a decline in the regulatory state. d. The Great Depression was quite severe because of regime uncertainty. e. All of the above. 47. When did the U.S. go totally off the gold standard? a. 1913. b. 1929. c. 1933. d. 1971. e. 2001. 48. To stop the outflow of gold from the U.S., the Federal Reserve would: a. raise the prime rate of interest. b. lower the discount rate of interest. c. keep the 30 year mortgage rate of interest constant and steady. d. inflate our money supply. e. None of the above. 49. Before affecting the United States, the Great Depression started in: a. Southeast Asia. b. Germany and Poland. c. Brazil and Argentina. d. Canada. e. All of the above. 50. From December 1932 through March 1933, the economy worsened as shown by these statistics: a. manufacturing production was down almost 20%. b. unemployment was down to about 15%. c. the money supply was growing about 10%. d. All of the above. e. None of the above. 51. From 1930 to 1940, net investment (gross investment minus depreciation) changed by: a. +$300 b. b. +$200 b. c. +$100 b. d. +$10 b. e. -$3 b. 52. The NRA lasted until May of 1935 because: a. it had served its purpose and was no longer needed. b. the Congress refused to reauthorize its budget. c. the President fired the director and closed it down. d. the Supreme Court ruled it unconstitutional. e. 90% of the top management were indicted on charges of criminal conspiracy. 53. What is the correct order of passage of the following six Congressional acts from earliest date to latest date? [Except for these two, you should know what the acronyms stand for: EBA = Emergency Banking Act; WA = Wagner Act.] a. AAA EBA FERA NRA RFC WA b. EBA NRA RFC AAA WA FERA c. RFC AAA NRA EBA FERA WA d. NRA WA RFC FERA EBA AAA e. FERA EBA AAA NRA WA RFC 54. The Austrian view of the business cycle holds that: a. the actions of the central bank are the cause of our recessions. b. underconsumption is primary cause of recessions. c. recessions will worsen over time. d. recessions are mostly felt in the retail sector of the economy. e. we need government to stabilize the economy. 55. According to the Austrian argument, a coherent theory of the business cycle must explain: a. why cycles are repetitive. b. why there is a “cluster” of entrepreneurial errors leading to a recession. c. why the recession most intense in the service sector of the economy. d. All of the above. e. Only A and B of the above. 56. According to the Austrian business cycle theory which of the following is true about the economy? a. The fact that there is widespread business failure does not mesh with our understanding of how markets work. b. The broad disturbance in our economy points to a monetary cause. c. It is long-term capital investments that suffer the most. d. All of the above. e. None of the above. 57. This economist won a Nobel prize in economics for his work on business cycle theory: a. Murray Rothbard. b. F. A. Hayek. c. J. M. Keynes. d. Ludwig von Mises. e. Karl Marx. 58. According to the Austrian view, the boom-bust problem originates with: a. low interest rates during the bust. b. low interest rates during the boom. c. high interest rates during the boom. d. high interest rates during the bust. e. high interest rates during both the boom and the bust. 59. When time preference rises, we do not expect to see: a. consumption goods prices fall. b. us wanting more current consumption. c. us saving less. d. interest rates rise. e. None of the above. 60. A business cycle theory must explain all of the following except for: a. the tendency towards repetitive cycles. b. the “mammoth" cluster of entrepreneurial errors. c. the rise in unemployment compensation. d. why the depression is more intense in capital goods. e. why retail is the least and last to fall. 61. If our time preference rises and we want more current consumption, we will: a. save less, and the interest rate will rise. b. save less, and the interest rate will fall. c. save more, and the interest rate will rise. d. save more, and the interest rate will fall. e. not change how much we save and the interest rate will remain unchanged. 62. Which of the following do Austrians economists believe helps to stabilize the economy? a. Printing more money. b. More government involvement. c. Little to no government involvement. d. The Keynesian model. e. The Monetarist model. 63. Which of the following is not one of the lessons of capital structure in the ABCT? a. To consume, you must produce. b. To consume, you must first purchase goods. c. To consumer more you must save. d. Saving creates resources for investment in capital. e. Adding more money doesn't create more capital. 64. Why can’t Robinson Crusoe build the "Net and Stick" right away? a. It is too expensive and he doesn’t have enough money to buy it. b. It will take too long and he can’t save up enough berries. c. He needs to trade in the stick first in order to get the “Net and Stick.” d. He lacks the knowledge to actually build the “Net and Stick.” e. All of the above. 65. Time preference is a way to show: a. the extent to which people value current consumption over future consumption. b. Buying things tomorrow c. Saving d. Borrowing money e. Buying stock of new companies 66. According to the Austrian Business Cycle Theory, an economic collapse is the result of an: a. unsustainable boom. b. unsustainable recession. c. unsustainable trough. d. many market mechanisms that all fail at once. e. All of the above. 67. According to von Mises and the Austrians, there are business cycles because: a. the central bank lowers interest rates. b. low interest rate lead to unsustainable increase in investment. c. capital wears out at an unusually fast rate. d. All of the above. e. Only A and B of the above. 68. According to the Austrian school of thought, what should the government do to address business cycles? a. Stop inflating money. b. Don’t bail out firms. c. Don’t encourage consumption. d. All of the above. e. Only A and B of the above. 69. What role does the Federal Reserve play in the performance of our economy according to the Austrian Business Cycle Theory? a. It distorts our view of savings, making it impossible to tell whether we have enough resources to complete all of our investment projects. b. It helps to match the investments made by the investors with resources needed to carry out these investments. c. It generates savings directly, making it possible to complete our investment projects faster. d. It protects savings with a guarantee that money will be worth more when you use it later than it is worth now. e. It protects savings with a guarantee that money will be worth only 10% less when you use it later than it is worth now . 70. What conclusion(s) are drawn from the Austrian Business Cycle theory? a. There is a market mechanism that causes inflation. b. There is a market mechanism that causes business cycles. c. Inflation is the real problem that we face, not a symptom. d. All of the above. e. None of the above. 71. As Rothbard explains, with the Bretton Woods system in place: a. Europe and the U.S. were restored to a gold standard. b. foreign countries were allowed to maintain dollar reserves to back their currencies. c. the U.S. refused to sell gold on the market even if the price rose. d. the U.S. redeemed gold for dollars only to foreign central banks at $100 per ounce. e. All of the above. 72. Rothbard believed that an accurate measure of the money supply: a. would include saving accounts in banks. b. would include life insurance surrender values. c. would include money market mutual funds. d. All of the above. e. Only A and B of the above. 73. To restore “sound money” Rothbard argues that: a. we need a combination of gold and silver to back up our currency. b. the job of printing currency should be transferred to the U.S. Mint. c. the Federal Reserve should be abolished. d. FDIC premiums should be increased by between 50% and 100%. e. All of the above. 74. Why does the Fed want to stimulate spending by decreasing interest rates? a. Because they are Keynesians. b. Because they are Monetarists. c. Because they are Austrians. d. Because they are gold bugs. e. None of the above. 75. As a response to the 2001 recession, the Fed lowered the federal funds rate down to a low of about: a. 3% b. 2.5% c. 2% d. 1% e. 0.25% 76. Which of the following financial intermediaries had the highest valued amount of assets when they failed? a. Washington Mutual b. Lehman Brothers c. IndyMac d. WaMu e. Jos. A. Bank 77. As a response to the 2008 recession, the Fed lowered the federal funds rate down to a low of about: a. 3% b. 2.5% c. 2% d. 1% e. 0.25% 78. Since 2009, ___ has grown faster than ___ which has grown faster than ___. a. M2; the CPI; the MB b. M2; the MB; the CPI c. the CPI; the MB; M2 d. the MB; M2; the CPI e. the CPI; M2; the MB 79. From 2008 to 2017, the Fed's holding of mortgage-backed securities went from zero to about: a. $1.7 trillion. b. $2.5 trillion. c. $2.7 trillion. d. $4 trillion. e. None of the above. 80. To deal with a problem of rapidly rising inflation the Fed is likely to have to act in a way that Dr. Foster likened to the: a. Hunger games. b. Ender's gambit. c. Joker policy. d. Texas Hold 'em strategy. e. Armageddon option. 81. Prior to the recession Fed chairman Ben Bernanke argued that: a. there was no housing bubble. b. housing prices would stabilize. c. housing problems were local in nature and wouldn't affect the national economy. d. All of the above. e. None of the above. 82. Under which president(s) did our economic recovery enjoy the highest average annual growth in real GDP? a. Reagan. b. Obama. c. Bush/Clinton. d. Bush. e. Trump. 83. According to Rickards, the collapse of the dollar: a. may lead to inflation reminiscent of the 1970s. b. may lead to deflation. c. will likely have no price effects on the U.S. d. All of the above. e. Only A and B of the above. 84. Rickards maintains that the U.S. dollar nearly ceased being the world’s reserve currency in: a. 1952. b. 1965. c. 1978. d. 1984. e. 1999. 85. According to Salerno, the government of Greece will be able to impose negative interest rates on people’s deposits by: a. requiring that old currency be exchanged for new currency at a discount. b. imposing a fee on cash withdrawal from bank accounts. c. hiding it in the income tax. d. automatically shrinking these deposits by 0.25% per month. e. eliminating all cash transactions. 86. Salerno maintains that the so-called “war on cash” in the United States began with the passage of: a. the National Banking Act of 1863. b. the Federal Reserve Act of 1913. c. the Smoot-Hawley tariff of 1930. d. the Glass-Steagall Act of 1933. e. the Bank Secrecy Act of 1970. 87. Which of the following is true about median home prices in the United States? a. They fell sharply during both of the last two recessions. b. They rose sharply during both of the last two recessions. c. They rose by about $50,000 between 1999 and 2006. d. Following the recession of 2008 they fell dramatically, but have since risen. e. From 2009 to 2017 they have been stagnant. 88. Which of the following is true about Bear Stearns? a. The Fed brokered a deal that allowed Goldman Sachs to buy out Bear. b. The Fed lend Bear $13 billion for three days while a sale was being arranged. c. In the year prior to its collapse, its stock price peaked at about $65. d. The final sale of Bear was made at $6.50 per share. e. All of the above. 89. The widespread failure of the financial system is known as: a. systemic failure. b. wholesale failure. c. financial mania. d. the “dollar doldrums.” e. the Fisher Folly. 90. An asset bubble can occur only in: a. financial assets, like bonds. b. real assets, like cotton. c. money assets, like gold. d. land and other natural resources. e. None of the above. 91. If the Fed sells bonds, then which of the following will occur? a. Bank reserves will rise. b. Interest rates will rise. c. Investment will rise. d. Income will rise. e. All of the above. 92. The aggregate demand slopes down to the right because as the price level falls: a. our income will buy more goods. b. our money will buy more goods. c. we buy less of other goods and more of these goods. d. our expectations change and we decide it is a good time to buy more goods. e. All of the above. 93. Who said that “inflation is always and everywhere a monetary phenomenon”? a. Adam Smith. b. Ludwig von Mises. c. John Maynard Keynes. d. Friedrich Hayek. e. Milton Friedman. 94. Suppose that we are at a long-run equilibrium and suddenly aggregate demand rises. In the short run this will: a. increase prices. b. increase output. c. increase real wages. d. All of the above. e. Both A and B are correct. 95. Monetary policy is likely to be less effective if: a. policies are unexpected. b. wage and price rigidities exist. c. the liquidity effect is weak. d. investment is very responsive to changes in the interest rate. e. velocity is stable. 96. During the 1970s, the velocity of money, as measured by M1, was: a. relatively constant. b. grew at a relatively constant rate. c. fell at a relatively constant rate. d. was very erratic, rising and falling but higher at the end of the 1970s. e. was very erratic, rising and falling but lower at the end of the 1970s. 97. Which of the following is more associated with the Keynesian view than the Monetarist view? a. Recessions are primarily the result of a falling money supply. b. Markets can rebound from a recession rather quickly. c. Monetary policy is weak in fighting a recession in that it works by affecting investment. d. Monetary policy rules should guide monetary policy. e. Balancing the federal government budget while raising spending is likely to be counterproductive. 98. Which of the following combats inflation from the demand side? a. The “cold turkey” approach. b. The use of wage and price contols. c. Tax-based incomes policies. d. Removing barriers that keep wages and prices from falling. e. All of the above. 99. Among the myths about the Great Depression, according to Smiley, is that: a. capitalism failed. b. markets worked quite well. c. the New Deal did little to help the economy. d. Herbert Hoover was actively using government to combat the depression. e. All of the above. 100. Following the initiation of the bank holiday in 1933: a. nearly two in five national banks failed to reopen. b. most big city banks were closed for about sixty days. c. bank depositors continued to withdraw their funds until late in 1935. d. the crisis for the banking sector, for all intents, was over. e. about 99% of all state chartered banks were able to reopen. 101. Which of the following is/are true about the Agricultural Adjustment Administration? a. It established minimum prices on many agricultural crops. b. It killed off millions of pigs and cattle in order to keep prices high. c. It generally transferred wealth from non- farmers to farmers. d. It was struck down as unconstitutional by the Supreme Court. e. All of the above. 102. Christoff-Kurapovna characterizes the “international monetary culture” of the pre-1914 world as: a. gold-based. b. wary of credit. c. contemptuous of public debt. d. contemptuous of private debt. e. All of the above. 103. As noted by Christoff-Kurapovna, the abandonment of the gold standard was the result of the: a. Treaty of Versailles. b. gold exchange pact. c. Bretton Woods agreement. d. Angel of Verdun Accords. e. Rio conference. 104. According to Murphy, whether you agree with the Austrian argument or the Friedman theory, you are agreeing that the Great Depression: a. was caused by the Federal Reserve. b. occurred despite the policies of the Fed. c. was caused by corrupt political processes. d. would have been averted if Presidents Hoover and Roosevelt had worked harder to keep wages from falling. e. would have been worse if we didn’t have the Federal Reserve. 105. To say that the Fed is run by Keynesians means that they: a. believe in using tax cuts to stimulate the economy. b. believe in using government spending to stimulate the economy. c. believe that economic recovery is driven by the demand side. d. believe that economic recovery is driven by the supply side. e. Both A and B of the above. 106. Which of the following is not true about Bear Stearns? a. In their last year in business their stock price peaked at about $65. b. The Federal Reserve lent them $13 billion for a three day period. c. J. P. Morgan ended up taking over Bear Stearns. d. Existing stockholders in Bear would only get $10 per share from J. P. Morgan. e. In their last year in business, Bear lost billions on subprime mortgages. 107. The TV personality that questioned Bernanke’s statement that the Fed wasn’t printing money was: a. Johnny Carson. b. Bill Maher. c. Conan O’Brien. d. Jon Stewart. e. Jay Leno.
Explanation / Answer
2. Ans: An outward movement of aggregate demand.
3. Ans: government.
4. Ans: workers work harder when inflation has raised their nominal wage, even though their real wage is lower.
5. Ans: less than 10% increase in the nominal wage.
6. Ans: 3.0
7. Ans: the overall price level.
8. Ans: rightward shift of the aggregate demand schedule
9. Ans: Inflation and growth.
Explanation:
Because the AS/AD model studies the relationship between the price level and real GDP.
10. Ans: shifts the aggregate demand schedule rightward.
11. Ans: Long-run aggregate supply
For next question graph is missing. So, can not be answered.
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