According to monetarists, the natural rate theory
a. denies the tradeoff between inflation and output.
b. argues that there is a stable tradeoff between inflation and output.
c. shows that activist policies work best.
d. believes that the Phillips curve relationship breaks down when policymakers attempt to use it.
Question 2The two main sources of U.S. population increase between Independence and the Civil War were natural increases in population and immigration.
Indicate whether the statement is true or false
Question 3Economic history shows that stock market averages are useful predictors of the future.
Indicate whether the statement is true or false
Question 4The percentage of foreign-born people living in the U.S. continued to rise after the Civil War.
Indicate whether the statement is true or false
Question 5In the neoclassical growth model, an increase in the saving rate will
a. increase the long-run equilibrium rate of growth in output.
b. reduce the long-run equilibrium rate of growth in output.
c. leave the long-run equilibrium rate of growth in output unchanged.
d. affect the long-run equilibrium rate of growth in output but the direction of the effect is uncertain.
Question 6Under perfect capital mobility and a floating exchange rate system, expansionary fiscal policy leads to
a. an increase in income and the interest rate.
b. no change in the interest rate and a fall in the trade balance.
c. no change in the interest rate and a decrease in income.
d. an increase in interest rates and a fall in the trade balance.
e. no change in interest rates and the exchange rate.
Question 7Monetarists maintain that the increase in the money supply can explain the inflation of the 1970s and 1980s when one considers the bonds purchased by the Fed to finance the federal deficits of the period.
Indicate whether the statement is true or false
Question 8Economies of scale refer to
a. costs rising as the scale of production increases.
b. costs falling as the scale of production increases.
c. output rising as the level of inputs rises.
d. the marginal product of labor diminishes as the quantity of labor increases.
Question 9Children can be viewed as retirement insurance and thus provide individuals with incentive to create large families.
Indicate whether the statement is true or false
Question 10The Great Depression is still the subject of controversy, including the question(s) of
(a) what caused the initial downturn.
(b) why the economy contracted for so long (1929 to 1932) and why it contracted so much
(real GNP fell about 30).
(c) whether government policy helped or hindered the recovery attempt.
(d) all of the above.
Question 11In a closed economy, there should be a close positive relationship between
a. budget deficits and interest rates.
b. trade deficits and budget deficits.
c. savings and investment.
d. investment and consumption.
e. Both a and c.
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