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

2. 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

3. Accumulation of government deficits

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

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

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

7. One source of public debt

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

9. Relationship between inflation and unemployment

10. The competition in the marketplace provides economic stability

11. 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

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

13. Encourage foreign investment

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

15. Keynesian economics believes that AD is ________

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

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

18. Money is at the root of aggregate demand

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

20. According to Keynesian theory - AS curve is __________

21. Inflation accompanied by simultaneous increases in prices and unemployment

22. Basic Keynesian economic equation

23. Rational Expectations Theorists

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

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

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

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

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

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

30. Inflation that results from an initial increase in costs

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

32. Classical economists believe that the AS curve is _______

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

34. Relation between inflation and unemployment

35. The budget must be balanced each year

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

37. The price level rises and money loses value

38. Fundamental equation of monetarism

39. _________ will prefer to consume than to save

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

41. This consequence of national debt may lead to inflation

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

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

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

45. A sudden and drastic change in the supply curve

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

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

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