Tackle the Test: Multiple-Choice Questions

1. Question

   Which of the following is an example of an opinion on which economists have reached a broad consensus?

   
   

   
   

   1. The natural rate hypothesis holds true.

      
      
   
   

   2. Discretionary fiscal policy is usually counterproductive.

      
      
   
   

   3. Monetary policy is effective, especially in a liquidity trap.

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   Which of the following is an example of an opinion on which economists have reached a broad consensus?

2. Question

   In the FYI box in this module, you learned about supply-side economics. Which of the following is stressed by supply-siders?

   A.

   Taxes should be increased.

   B.

   Lower taxes will lead to lower tax revenues.

   C.

   It is important to increase incentives to work, save, and invest.

   D.

   The economy operates on the upward-sloping section of the Laffer curve.

   E.

   Supply-side views are widely supported by empirical evidence.

   In the FYI box in this module, you learned about suppl

3. Question

   Which of the following was one of the main arguments against using fiscal stimulus during the Great Recession?

   A.

   Monetary policy could no longer be used because interest rates were so low.

   B.

   The crowding out of private investment was no longer a problem in the depressed economy.

   C.

   Implementation lags were less of a concern than usual because the economy was likely to be depressed for an extended period.

   D.

   Consumers would see an increase in government spending as a signal that the tax burden would decrease in the future, and therefore they would spend more.

   E.

   Spending programs might undermine investors’ faith in the government’s ability to repay its debts, leading to an increase in long-term interest rates.

   Which of the following was one of the main arguments against using fiscal stimulus during the Great Recession?
4. Page 358

   Question

   Which of the following is a major source of disagreement among macroeconomists?

   A.

   The Fed conducted the appropriate amount of quantitative easing during the Great Recession.

   B.

   The central bank should be independent, insulated from political pressures.

   C.

   Discretionary fiscal policy should be used sparingly.

   D.

   Monetary policy should play the main role in stabilization policy.

   E.

   Budget deficits caused high rates of inflation shortly after the Great Recession.

   Which of the following is a major source of disagreement among macroeconomists?

5. Question

   Which of the following best describes the 23 years prior to the Great Recession?

   A.

   a period of growing disagreement among macroeconomists

   B.

   a period of high inflation

   C.

   a period of consensus building among economists

   D.

   a period of consistently high unemployment

   E.

   the Great Depression

   Which of the following best describes the 23 years prior to the Great Recession?