Tackle the Test: Multiple-Choice Questions

1. Question

   Which of the following was a point made in Keynes’s influential work?

   
   

   
   

   1. In the short run, shifts in aggregate demand affect aggregate output.

      
      
   
   

   2. Animal spirits are an important determinant of business cycles.

      
      
   
   

   3. In the long run we’re all dead.

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   Which of the following was a point made in Keynes’s influential work?
2. Page 352

   Question

   Which of the following is a central point of monetarism?

   A.

   Business cycles are associated with fluctuations in money demand.

   B.

   Activist monetary policy is the best way to address business cycles.

   C.

   Discretionary monetary policy is effective while discretionary fiscal policy is not.

   D.

   The Fed should follow a monetary policy rule.

   E.

   All of the above.

   Which of the following is a central point of monetarism?

3. Question

   The natural rate hypothesis says that the unemployment rate should be

   A.

   below the NAIRU.

   B.

   high enough that the actual rate of inflation equals the expected rate.

   C.

   as close to zero as possible.

   D.

   5%.

   E.

   left wherever the economy sets it.

   The natural rate hypothesis says that the unemployment rate should be

4. Question

   The main difference between the classical model of the price level and Keynesian economics is that

   A.

   the classical model assumes a vertical short-run aggregate supply curve.

   B.

   Keynesian economics assumes a vertical short-run aggregate supply curve.

   C.

   the classical model assumes an upward-sloping long-run aggregate supply curve.

   D.

   Keynesian economics assumes a vertical long-run aggregate supply curve.

   E.

   the classical model assumes that aggregate demand cannot change in the long run.

   The main difference between the classical model of the price level and Keynesian economics is that

5. Question

   That fluctuations in total factor productivity growth cause the business cycle is the main tenet of which theory?

   A.

   Keynesian

   B.

   classical

   C.

   rational expectations

   D.

   real business cycle

   E.

   natural rate

   That fluctuations in total factor productivity growth cause the business cycle is the main tenet of which theory?