The quantity theory assumes that
a. velocity is constant.
b. income is constant.
c. prices are constant.
d. transactions are constant.
Question 2If the government raised taxes and reduced government spending in order to reduce the budget deficit, monetary policy could accommodate this policy by
a. increasing money demand.
b. increasing money supply.
c. decreasing money supply.
d. increase unemployment insurance.
Question 3Why might the tax multiplier be smaller than the expenditure multiplier? Under what circumstances might the reverse be true?
What will be an ideal response?
Question 4In theory, differences in output across economies and over time might be the result of differences in either capital input, labor input, or productivity.
The evidence points clearly to productivity as a more likely and powerful source of growth differences. Which aspects of the Solow growth model help to explain why the inputs of capital and labor contribute little to growth of output, relative to productivity?
Question 5When World War II (194145) came,
(a) the labor force expanded by very little despite the high unemployment of 1941.
(b) unemployment was still high enough that the armed forces could be expanded and
war production expanded without a large increase in the labor force.
(c) a large increase in the labor force occurred in all categories, including men
over 65 and women.
(d) none of the above occurred.
Question 6The majority of blacks were shipped from West Africa, but some also came from Madagascar and Zanzibar.
Indicate whether the statement is true or false
Question 7Apply the concept of tax smoothing to the debate over tax-based versus spending-based fiscal stimulus.
What will be an ideal response?
Question 8A major contribution of the Solow model is its ________.
A) insight into what distinguishes rich economies from poor economies
B) explanation of why productivity grows over time
C) demonstration that the key to sustained growth is a high level of saving
D) encouragement of policies to limit population growth
Question 9According to the quantity theory of money, inflation results when excessive paper money is in circulation.
Indicate whether the statement is true or false
Question 10Those economists who believe that monetary policy is more powerful than fiscal policy argue that the
a. LM curve is vertical.
b. IS curve is horizontal.
c. interest rate elasticity of investment is large.
d. interest rate elasticity of investment is small.
Question 11The rules of strict constitutionality apply even during times of war in the U.S.
Indicate whether the statement is true or false
Question 12What does a successful protective tariff do?
(a) It forces foreign manufacturers to pay higher wages.
(b) It re-enforces competition.
(c) It creates an economic rent that goes to the competing domestic industries producing the
taxed imported goods.
(d) It mandates accelerated technological advance in the domestic economy.
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