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CLEP Macroeconomics: Monetary And Fiscal Policy

Subjects : clep, economics
  • Answer 48 questions in 15 minutes.
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  • Match each statement with the correct term.
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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. Prices adjust in a natural way to bring the markets for goods and labor into equilibrium

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

3. A sudden and drastic change in the supply curve

4. Inflation accompanied by simultaneous increases in prices and unemployment

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

6. According to Keynesian theory - AS curve is __________

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

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

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

10. Encourage foreign investment

11. Accumulation of government deficits

12. 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

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

14. 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

15. Keynesian economics believes that AD is ________

16. Money is at the root of aggregate demand

17. Basic Keynesian economic equation

18. Rational Expectations Theorists

19. The budget must be balanced each year

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

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

22. _________ will prefer to consume than to save

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

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

25. Fundamental equation of monetarism

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

27. The price level rises and money loses value

28. Relationship between inflation and unemployment

29. This consequence of national debt may lead to inflation

30. One source of public debt

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

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

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

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

35. Classical economists believe that the AS curve is _______

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

37. The competition in the marketplace provides economic stability

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

39. Keynesian economists believe that monetary policy is a ____ tool for economic stability

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

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

42. Inflation that results from an initial increase in costs

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

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

45. Relation between inflation and unemployment

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

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

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