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CLEP Macroeconomics: Monetary And Fiscal Policy

Subjects : clep, economics
  • Answer 48 questions in 15 minutes.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Keynesian economists believe that monetary policy is a ____ tool for economic stability

2. According to RET - cost of this depends on whether or not it is expected

3. ______ ______ is most important in a monetarist's view for determining output - price and employment levels

4. Inflation that results from an initial increase in costs

5. The use of monetary policy by the central bank to cushion the blow of aggregate supply shocks

6. Which kind of inflation avoids some of the costs?

7. Large annual debts create this - promoting imports and stifling exports

8. Keynesian economics believes that AD is ________

9. This consequence of national debt may lead to inflation

10. According to classical economics - AD curve is stable if....

11. The government must go to the money markets and compete with the private sector for funds

12. Taxes and transfer payments that stabilize GDP without requiring policymakers to take explicit actions

13. Encourage foreign investment

14. Money supply - velocity - price level - physical volume of goods and services

15. Basic Keynesian economic equation

16. This kind of budget exerts counter-cyclical pressure on the economy - balancing the budgets in the bad times with the surpluses of the good times

17. _____ tend to alter the behaviour of the public when imposed by the government

18. New Classical Economists assert that households and firms pursue economics for their own ____-_________

19. Money is at the root of aggregate demand

20. The price level rises and money loses value

21. The economy may stagnate in the absence of proper work - saving and investment incentives

22. Relationship between inflation and unemployment

23. In the short-run prices and wages are downwardly inflexible

24. Inflation accompanied by simultaneous increases in prices and unemployment

25. Modern fiscal policy favors this kind of budgets for the purpose of economic stabilization

26. Rational Expectations Theorists

27. This kind of fiscal policy is necessary for a balanced budget - would tend to magnify the changes in the economy - and make the business cycle more pronounced

28. Using taxes and spending to influence the level of GDP in the short run

29. Accumulation of government deficits

30. Inflation that results from an initial increase in aggregate demand

31. One source of public debt

32. Prices adjust in a natural way to bring the markets for goods and labor into equilibrium

33. A sudden and drastic change in the supply curve

34. Amount spent = amount received - which is equation of exchange

35. According to Keynesian economists - this could pull the economy out of a recession or depression

36. Balancing the budget is secondary to ensuring that the economy runs at a non-inflationary full employment level

37. According to Keynesian theory - AS curve is __________

38. _________ will prefer to consume than to save

39. Classical economists believe that the AS curve is _______

40. The budget must be balanced each year

41. Three ways the government could reduce deficit: increase/decrease (1) taxes - (2) spending - and (3) interest rates

42. Fundamental equation of monetarism

43. Believe that markets are highly competitive and adjust prices quickly to changes in supply and demand

44. Feeds on interest payments & limits a government's ability to use discretionary stabilization policies

45. PQ or price level times physical volume of goods and services - is equal to...

46. The competition in the marketplace provides economic stability

47. NCE/RET imply that the aggregate supply curve is _______

48. Relation between inflation and unemployment