20 + Mcqs in Roots of Modern Macroeconomics Page 1 McqOptions

1.	The regarding the new classical macroeconomics is hoe realistic is the assumption ?
A.	that monetary policy affects aggregates demand
B.	that markets do not clear quickly
C.	that fiscal policy affects aggregate demand
D.	of rational expectations.
Answer» E.

Discussion

2.	The rational-expectation hypothesis suggests that the forecasts that people make concerning future inflation rates ?
A.	consistently overestimate the actual rate of inflation in the future.
B.	are always correct
C.	consistently underestimate the actual rate of inflation in the future
D.	are correct on average, but are subject to errors that are distributed randomly
Answer» E.

Discussion

3.	The quantity theory of money implies that a given percentage change in the money supply will cause ?
A.	an equal percentage change in nominal DGP.
B.	an equal percentage change in real GDP
C.	a larger percentage change in nominal GDP
D.	a smaller percentage change in nominal
Answer» B. an equal percentage change in real GDP

Discussion

4.	The persistence of a phenomenon such as unemployment, even then its causes have been removed is called ?
A.	the fallacy of composition
B.	negative entropy.
C.	hysteresis.
D.	ceteris paribus
Answer» D. ceteris paribus

Discussion

5.	The nation that the government can establish the macroeconomic is known as ?
A.	fine tuning
B.	monestarism
C.	microeconomics foundations of macroeconomics
D.	the classical model
Answer» B. monestarism

Discussion

6.	The hypothesis that people know the true model of the economy and that they use this model to form their expectations of the future is the ?
A.	Rational-expectations hypothesis
B.	Passive-expectations hypothesis
C.	adaptive expectations hypothesis
D.	lagged-expectations hypothesis.
Answer» B. Passive-expectations hypothesis

Discussion

7.	The government increase government spending to try to reduce unemployment This is an example of ?
A.	laissez-faire.
B.	monetary policy
C.	fine tuning
D.	automatic stablisers
Answer» D. automatic stablisers

Discussion

8.	The economists who emphasised wage flexibility as a solution for unemployment were ?
A.	new-Keynesian.
B.	post-Keynesian.
C.	classical economists.
D.	Keynesian.
Answer» D. Keynesian.

Discussion

9.	Rapid increase in the price level during periods of recession of high unemployment are known as ?
A.	slump
B.	inflation
C.	stagflation
D.	stagnation
Answer» D. stagnation

Discussion

10.	Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are ?
A.	market prices
B.	sticky prices
C.	fixed prices
D.	regulatory prices
Answer» C. fixed prices

Discussion

11.	People are said to have rational expectations if they ?
A.	assume that this year’s inflation rate will be the same as last year’s inflation rate
B.	merely guess at the inflation rate.
C.	assume that this year’s inflation rate will be equal to the average inflation rate over the past 10 years
D.	Use all available information in forming their expectations.
Answer» E.

Discussion

12.	New classical theories were an attempt to explain ?
A.	how unemployment could have persisted for so long during the Great Depression
B.	The increase in the growth rate of real output in the 1950s
C.	the stagflation of the 1970s
D.	Why policy changes that are perceived as permanent have more of an impact on a person’s behaviour than policy changes that are viewed as temporary.
Answer» D. Why policy changes that are perceived as permanent have more of an impact on a person’s behaviour than policy changes that are viewed as temporary.

Discussion

13.	Keynesian economics became popular because it was able to explain ?
A.	stagflation in the late 1970s
B.	demand-pull inflation in the 1960s
C.	low growth rates in the 1950s
D.	The prolonged existence of high unemployment during the Great depression
Answer» E.

Discussion

14.	It is difficult to determine if the velocity of money is constant over time because ?
A.	it is difficult to measure the value of nominal GDP over time
B.	there has been very little fluctuation in the money supply over time.
C.	it is difficult to measure the demand for money over time
D.	whether velocity is constant or not may depend on how the money supply is measure.
Answer» E.

Discussion

15.	If the demand for money depends on the interest rate the velocity of circulation is ?
A.	not constant and the quantity theory of money does hold.
B.	constant and the quantity theory of money does hold.
C.	not constant and the quantity theory of money does not hold.
D.	constant and the quantity theory of money does not hold.
Answer» D. constant and the quantity theory of money does not hold.

Discussion

16.	According to the classical economists the economy ?
A.	requires fine tuning to reach full employment
B.	can never deviate from full employment
C.	will never be at full employment
D.	is self-correcting.
Answer» E.

Discussion

17.	According to classical models, the level of employment is determined primarily by ?
A.	the level of aggregate demand for goods and services.
B.	prices and wages
C.	interest rates
D.	the quantity of money
Answer» C. interest rates

Discussion

18.	According of Keynes, the level of employment is determined by ?
A.	the behaviour of trade unions.
B.	the quantity of money
C.	price and wages
D.	the level of aggregate demand for goods and services
Answer» E.

Discussion

19.	A group of modern economists who believe that markets clear very rapidly and that expanding the money supply will always increase prices rather than employment are the ?
A.	Keynesians
B.	post-keynesians
C.	monetarists
D.	new classical school
Answer» E.

Discussion

20.	A group of modern economists who believe that institutional factors and confidence strongly influence business behaviour and that expanding demand will usually increase output rather than prices are the ?
A.	monetarists.
B.	keynesians
C.	post-keynesians
D.	new classical school
Answer» D. new classical school

Discussion

Explore topic-wise MCQs in Economics.

The regarding the new classical macroeconomics is hoe realistic is the assumption ?

The rational-expectation hypothesis suggests that the forecasts that people make concerning future inflation rates ?

The quantity theory of money implies that a given percentage change in the money supply will cause ?

The persistence of a phenomenon such as unemployment, even then its causes have been removed is called ?

The nation that the government can establish the macroeconomic is known as ?

The hypothesis that people know the true model of the economy and that they use this model to form their expectations of the future is the ?

The government increase government spending to try to reduce unemployment This is an example of ?

The economists who emphasised wage flexibility as a solution for unemployment were ?

Rapid increase in the price level during periods of recession of high unemployment are known as ?

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are ?

People are said to have rational expectations if they ?

New classical theories were an attempt to explain ?

Keynesian economics became popular because it was able to explain ?

It is difficult to determine if the velocity of money is constant over time because ?

If the demand for money depends on the interest rate the velocity of circulation is ?

According to the classical economists the economy ?

According to classical models, the level of employment is determined primarily by ?

According of Keynes, the level of employment is determined by ?

A group of modern economists who believe that markets clear very rapidly and that expanding the money supply will always increase prices rather than employment are the ?

A group of modern economists who believe that institutional factors and confidence strongly influence business behaviour and that expanding demand will usually increase output rather than prices are the ?