Credit card balances are:
a. included in both M1 and M2.
b. included in M1 but not M2.
c. included in M2 but not M1.
d. not included in either M1 or M2.
Question 2_____ is the theory that was popular before _____ changed the face of economics post Great Depression in the 1930s.
a. Classical economics; Milton Friedman
b. Keynesian economics; Monetarists
c. Classical economics; Keynes
d. Monetarist economics; Adam Smith
e. Keynesian economics; Milton Friedman
Question 3Ceteris paribus, if a 4 increase in price leads to a 6 increase in the quantity supplied, then:
a. supply is elastic.
b. supply is unit elastic.
c. supply is inelastic.
d. the supply curve is perfectly vertical.
Question 4Checkable deposits are:
a. included in both M1 and M2.
b. included in M1 but not M2.
c. included in M2 but not M1.
d. not included in either M1 or M2.
Question 5In case of the classical model, increase in aggregate expenditure would:
a. shift the aggregate demand curve upward leading to an increase in real GDP and prices.
b. shift the aggregate demand curve downward leading to an increase in real GDP and prices.
c. shift the aggregate demand curve upward leading to a decrease in real GDP and prices.
d. shift the aggregate demand curve downward leading to a decrease in real GDP and prices.
e. shift the aggregate demand curve upward leading to an increase in prices and no change in real GDP.
Question 6If the estimated elasticity of supply coefficient equals 0.85, then:
a. the supply curve is vertical.
b. the demand curve is horizontal.
c. supply is unit elastic.
d. supply is relatively inelastic.
Question 7Other things constant, a decrease in credit card balances would ____ M1 and ____ M2.
a. increase; increase.
b. not change; increase.
c. decrease; decrease.
d. not change; not change.
Question 8The school of thought that assumes that real GDP is determined by aggregate supply, whereas the equilibrium price level is determined by aggregate demand is known as _____.
a. neoclassical economics
b. classical economics
c. new Keynesian economics
d. Keynesian economics
e. Marxist economics
Question 9If the supply curve for a product is horizontal, then the elasticity of supply is:
a. equal to zero.
b. equal to one.
c. greater than one but less than infinity.
d. equal to infinity.
Question 10An increase in demand deposits would ____ M1 and ____ M2.
a. increase; increase.
b. not change; increase.
c. decrease; decrease.
d. not change; decrease.
Question 11_____ believe that a government that takes an active role in the economy may do more harm than good because economic policy operates with a long and variable lag.
a. Traditional Keynesians
b. Keynesians
c. Monetarists
d. Classical economists
e. New classical economists
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