When the theory of mercantilism was superseded by the theory of classical liberalism of Adam Smith ...

When the theory of mercantilism was superseded by the theory of classical liberalism of Adam Smith around the time of the American Revolution,
 
  (a) the colonies had shifted toward laissez faire, governmental noninvolvement in the private economy, but the new nation rejected the philosophy of laissez faire.
  (b) governmental involvement in the private economy persisted in both the colonies and the new nation; the U.S. Constitution adopted the common law from England which sanctioned certain types of governmental involvement.
  (c) governmental involvement had already been largely abandoned in the colonies and laissez faire was officially adopted by the new nation.
  (d) government involvement was strong down to the time of the Revolution; it was then abandoned and laissez faire was enshrined in the Constitution and became part of the law of the land.

Question 2

In the IS-LM model, an easy monetary in conjunction with a tight fiscal policy
 
  a. increases exports and decreases imports.
  b. decreases exports and increases imports.
  c. encourages foreign capital inflows to the U.S.
  d. both b and c.
  d. None of the above

Question 3

The growth rate of which of the following is not a component of the growth accounting equation?
 
  A) the capital stock
  B) labor
  C) depreciation
  D) available technology

Question 4

If income falls without any change in interest rates, then according to the IS-LM model it may be true that:
 
  a. money demand fell and government spending declined.
  b. the money supply increased and taxes declined.
  c. tight monetary policy and easy fiscal policy.
  d. easy monetary policy and easy fiscal policy.

Question 5

All of the following are true of the gold standard except
 
  (a) It requires international trading partners to strictly accept gold payments for imports and exports
  (b) It supported stable and fixed exchange rates throughout most of the 19th century
  (c) It encouraged international trade
  (d) It integrated the U.S. monetary system into the world market

Question 6

According to the classical model, money influences
 
  a. only prices.
  b. nominal and real variables in both the long and short-run.
  c. both nominal and real variables but only in the short-run.
  d. only nominal variables.

Question 7

What does Ricardian equivalence imply about the relative size of the expenditure and tax multipliers?
 
  What will be an ideal response?

Question 8

Menu costs suggest that sticky prices are ____ for firms but _____ for the economy as a whole.
 
  a. optimal; suboptimal
  b. bad; good
  c. natural; unnatural
  d. suboptimal; optimal.
  e. suboptimal; suboptimal

Question 9

Consistent with the mercantilist theory, the colonies had
 
  (a) a trade deficit with England.
  (b) a trade surplus with England.
  (c) a balance of trade with England.
  (d) about an equal number of annual trade deficits and surpluses over the years.

Question 10

Which of the following hypotheses about voter behavior have been advanced in public-choice literature?
 
  a. Voters are myopic
  b. Unemployment is more likely to result in vote loss than is higher inflation
  c. Deficit bias of the budget process
  d. Both a and c
  e. All of the above

Question 11

The label 'Asian Tigers' describes the following economies ________.
 
  A) China, South Korea, Singapore and Taiwan
  B) Hong Kong, Taiwan, South Korea and Singapore
  C) Singapore, Taiwan, Hong Kong, and China
  D) South Korea, Singapore, China and Hong Kong

Question 12

The organized labor movement was held back by the law of conspiracy.
 
  Indicate whether the statement is true or false

Question 13

In the classical model the interest rate is determined by
 
  a. real investment demand.
  b. real saving.
  c. government spending.
  d. tax revenues.
  e. all of the above.