Which of the following is true about a liquidity trap situation:
a. Quantitative easing might be a more effective strategy to stimulate the economy than buying short term government securities.
b. Quantitative easing may be able to affect long term interest rates even when the Fed is unable to appreciably lower short term interest rates.
c. The Fed cannot easily reduce the fed funds interest rate.
d. All of the above are true.
Question 2The development of a financial market is not important in determining the economic growth of a nation.
a. True
b. False
Indicate whether the statement is true or false
Question 3Other things equal, a price ceiling will increase consumer surplus by allowing customers to buy more at the lower price.
a. True
b. False
Indicate whether the statement is true or false
Question 4Which of the following is false about a liquidity trap situation:
a. The Fed could not appreciably raise short term interest rates.
b. If the Fed added reserves to the banking system, it would have little effect on investment.
c. Traditional monetary policy would be relatively weak in its effects on aggregate demand.
d. Expansionary monetary policy would tend to increase excess reserves in the banking system.
Question 5Productivity in the services industry may be underestimated because measurements of productivity do not take into account the quality of the service provided.
a. True
b. False
Indicate whether the statement is true or false
Question 6A subsidy in an industry would be likely to increase the consumer surplus for buyers in that industry and increase the producer surplus for sellers in that industry.
a. True
b. False
Indicate whether the statement is true or false
Question 7In a liquidity trap situation:
a. The Fed could not appreciably lower short term interest rates.
b. If the Fed added reserves to the banking system, it would have little effect on investment.
c. Traditional monetary policy would be relatively weak in its effects on aggregate demand.
d. All of the above are true.
Question 8U.S. labor productivity had slowed down in the 1970s and 1980s, but recent data shows that labor productivity has once again increased in the country.
a. True
b. False
Indicate whether the statement is true or false
Question 9If a customer had to pay a 5 entry charge to get into a roller coaster theme park, and then pay 2 per ride, she would get less consumer surplus than if she was able to pay 2 per ride with no entry charge.
a. True
b. False
Indicate whether the statement is true or false
Question 10The implementation lag is _____ for fiscal than for monetary policy; the lag before the effects of monetary policy on real output and unemployment is ____ than for its effects on real output and unemployment:
a. Longer, long and variable
b. Longer; relatively short and predictable
c. Shorter; long and variable.
d. Shorter; relatively short and predictable
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