Question 1

Which of the following best explains the Phillips curve relationship?

Accepted Answer

A)  Inflation increases at a faster rate as the economy moves toward full employment.
B)  Unemployment falls as the economy moves toward full employment.
C)  Inflation decreases as the economy moves closer to full employment.
D)  As unemployment decreases,so does the rate of inflation.E) A) and D)
F) A) and C)

Question 2

Why,according to some economists,should Canada adopt the U.S.dollar as its currency?

Accepted Answer

A)  Because it would maximize foreign long-term investment in Canada
B)  Because it would enhance the Bank of Canada's monetary policy
C)  Because it would eliminate the need for active fiscal policy
D)  Because it would eliminate inflationE) A) and D)
F) B) and C)

Question 3

Why have fiscal and monetary policies been criticized as tools to fight stagflation?

Accepted Answer

A)  Because they are able to cure unemployment but not inflation.
B)  Because they are able to cure inflation but not unemployment.
C)  Because they are unable to cure either unemployment or inflation.
D)  Because they are unable to cure both unemployment and inflation at the same time.E) B) and C)
F) All of the above

Question 4

The Laffer curve relates income levels with unemployment rates.

Accepted Answer

A) True 
 B)False

Question 5

Why would Canadian monetary policy be ineffective if we fixed the value of our dollar to that of the U.S.dollar?

Accepted Answer

A)  Expanding the money supply in Canada would crowd out investment spending.
B)  Contracting the money supply in Canada would crowd out investment spending.
C)  Expanding the money supply in Canada would cause a rise in interest rates and an outflow of Canadian dollars and thereby frustrate the money expansion.
D)  Expanding the money supply in Canada would cause a fall in interest rates and an outflow of Canadian dollars and thereby frustrate the money\expansion.E) C) and D)
F) A) and B)

Question 6

The Laffer Curve is a central concept in:

Accepted Answer

A)  monetarism.
B)  Keynesianism.
C)  the expectation theory.
D)  supply-side economics.E) C) and D)
F) B) and C)

Question 7

What characterized the economic conditions in Canada from 1990-2008?

Accepted Answer

A)  Low inflation and steady economic growth
B)  Stagflation
C)  Rising levels of unemployment but low inflation
D)  Low unemployment and high inflation.E) B) and C)
F) A) and B) A

Question 8

The Canadian dollar has not fallen below $0.80 U.S.for over twenty years.

Accepted Answer

A) True 
 B)False

Question 9

Over the last 20 years,Canada's inflation has been,

Accepted Answer

A)  more than 4%
B)  less than 5%
C)  less than 2%
D)  less than 3%E) C) and D)
F) B) and D)

Question 10

One of the major criticisms of the supply-side emphasis on tax cuts as a way to stimulate the economy is that such cuts affect aggregate demand more than they do aggregate supply.

Accepted Answer

A) True 
 B)False  True

Question 11

Stagflation is the simultaneous occurrence of both

Accepted Answer

A)  A recession and deflation
B)  A recession and inflation
C)  Inflation and rapid growth in GDP
D)  Recession and rapid growth in GDPE) A) and B)
F) All of the above B

Question 12

-What is the name of the curve shown in Figure 12.7 above?

Accepted Answer

A)  Phillips curve
B)  Aggregate supply curve
C)  Laffer curve
D)  Production possibilities curveE) None of the above
F) A) and B)

Question 13

If Canadian policy-makers wish to maintain the value of the dollar relative to the U.S.dollar,what should they do?

Accepted Answer

A)  Keep the money supply constant
B)  Continually adjust the money supply to keep interest rates in line with American rates
C)  Increase the money supply whenever the U.S.dollar starts to appreciate against the Canadian dollar
D)  Purchase American dollarsE) All of the above
F) A) and C)

Question 14

Deflation means that the rate of inflation is falling.

Accepted Answer

A) True 
 B)False

Question 15

The crowding-out effect of expansionary fiscal policy suggests that:

Accepted Answer

A)  tax increases are paid primarily out of saving and therefore are not an effective fiscal device.
B)  increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
C)  it is very difficult to have excessive aggregate spending in the U.S.economy.
D)  consumer and investment spending always vary inversely.E) A) and C)
F) A) and B)

Question 16

According to supply-siders,what is one of the keys to curbing stagflation?

Accepted Answer

A)  An increase in the money supply and a cut in government spending
B)  A decrease in the money supply and an increase in government spending.
C)  An increase in aggregate demand
D)  Convincing people to buy domestic rather than foreign-produced goods
E)  A cut in tax ratesF) B) and E)
G) B) and D)

Question 17

Based on the Laffer Curve,a cut in the tax rate from 100 percent to a point before the maximum level of tax revenue will:

Accepted Answer

A)  decrease real GDP.
B)  increase tax revenues.
C)  decrease tax revenues.
D)  have no effect on tax revenues.E) A) and C)
F) A) and B)

Question 18

The Phillips Curve suggests a tradeoff between:

Accepted Answer

A)  price level stability and income equality.
B)  the level of unemployment and price level stability.
C)  unemployment and income equality.
D)  economic growth and full employment.E) All of the above
F) C) and D)

Question 19

Which of the following statements regarding monetary policy is true?

Accepted Answer

A)  Monetary policy is ineffective if a country has a fixed exchange rate.
B)  Monetary policy is more effective if a country has a fixed exchange rate rather than a flexible exchange rate.
C)  Monetary policy is equally effective whether a country has a fixed or a flexible exchange rate.
D)  Monetary policy is very effective if a country has a fixed exchange rate in times of a recession but not during an inflationary boom.E) B) and C)
F) All of the above

Question 20

-The curve in the figure above is known as the:

Accepted Answer

A)  tax "wedge" curve.
B)  Okun Curve.
C)  Laffer Curve.
D)  Phillips Curve.E) A) and B)
F) A) and D)

Exam 12: Macroeconomic Policy Revisited

Which of the following best explains the Phillips curve relationship?

Correct AnswerverifiedShow Answer

Why,according to some economists,should Canada adopt the U.S.dollar as its currency?

Correct AnswerverifiedShow Answer

Why have fiscal and monetary policies been criticized as tools to fight stagflation?

Correct AnswerverifiedShow Answer

The Laffer curve relates income levels with unemployment rates.

Correct AnswerverifiedShow Answer

Why would Canadian monetary policy be ineffective if we fixed the value of our dollar to that of the U.S.dollar?

Correct AnswerverifiedShow Answer

The Laffer Curve is a central concept in:

Correct AnswerverifiedShow Answer

What characterized the economic conditions in Canada from 1990-2008?

Correct AnswerverifiedA

The Canadian dollar has not fallen below $0.80 U.S.for over twenty years.

Correct AnswerverifiedShow Answer

Over the last 20 years,Canada's inflation has been,

Correct AnswerverifiedShow Answer

One of the major criticisms of the supply-side emphasis on tax cuts as a way to stimulate the economy is that such cuts affect aggregate demand more than they do aggregate supply.

Correct AnswerverifiedTrue

Stagflation is the simultaneous occurrence of both

Correct AnswerverifiedB

-What is the name of the curve shown in Figure 12.7 above?

Correct AnswerverifiedShow Answer

If Canadian policy-makers wish to maintain the value of the dollar relative to the U.S.dollar,what should they do?

Correct AnswerverifiedShow Answer

Deflation means that the rate of inflation is falling.

Correct AnswerverifiedShow Answer

The crowding-out effect of expansionary fiscal policy suggests that:

Correct AnswerverifiedShow Answer

According to supply-siders,what is one of the keys to curbing stagflation?

Correct AnswerverifiedShow Answer

Based on the Laffer Curve,a cut in the tax rate from 100 percent to a point before the maximum level of tax revenue will:

Correct AnswerverifiedShow Answer

The Phillips Curve suggests a tradeoff between:

Correct AnswerverifiedShow Answer

Which of the following statements regarding monetary policy is true?

Correct AnswerverifiedShow Answer

-The curve in the figure above is known as the:

Correct AnswerverifiedShow Answer

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A

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True

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B

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