Please answer these questions. 1. Economists who believe that the economy has a
ID: 1117507 • Letter: P
Question
Please answer these questions.
1. Economists who believe that the economy has a strong self-correcting mechanism argued that, after September 11, 2001, the economy needed
a quick and expansionary monetary stimulus.
only a short time to return to equilibrium full employment.
President Bush to propose a large budget stimulus package.
a quick and expansionary fiscal policy stimulus.
2. If you divide the amount of nominal GDP by the stock of money, you have computed the
multiplier.
price level.
inflation rate.
velocity of circulation.
3. Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?
The FDIC rather than the Fed is responsible for recognizing bad lending practices.
The Fed's policies cannot be targeted at only one sector of the economy.
Price changes for one asset or one industry cannot have a substantial impact on the entire economy.
all of the above
4. It is ____ to identify an asset bubble before it bursts ____ to identify an asset bubble after it bursts.
difficult; but simple
simple; and also simple
difficult; and also difficult
simple; but difficult
5. In 2005-2006, the Fed increased interest rates in an attempt to halt inflation. What was the most likely effect of raising interest rates on velocity?
It will remain constant.
Velocity is unrelated to saving accounts.
It will increase.
It will decrease.
a.a quick and expansionary monetary stimulus.
b.only a short time to return to equilibrium full employment.
c.President Bush to propose a large budget stimulus package.
d.a quick and expansionary fiscal policy stimulus.
2. If you divide the amount of nominal GDP by the stock of money, you have computed the
a.multiplier.
b.price level.
c.inflation rate.
d.velocity of circulation.
3. Which of the following is a reason that the Fed does not traditionally attempt to limit asset price bubbles?
a.The FDIC rather than the Fed is responsible for recognizing bad lending practices.
b.The Fed's policies cannot be targeted at only one sector of the economy.
c.Price changes for one asset or one industry cannot have a substantial impact on the entire economy.
d.all of the above
4. It is ____ to identify an asset bubble before it bursts ____ to identify an asset bubble after it bursts.
a.difficult; but simple
b.simple; and also simple
c.difficult; and also difficult
d.simple; but difficult
5. In 2005-2006, the Fed increased interest rates in an attempt to halt inflation. What was the most likely effect of raising interest rates on velocity?
a.It will remain constant.
b.Velocity is unrelated to saving accounts.
c.It will increase.
d.It will decrease.
Explanation / Answer
Question 1
Economists who believe in strong self-correcting mechanism advocate no intervention policy to be pursued by government in the time of macro-economic instability because they believe that strong self-correcting mechanism of economy will pull it towards full employment in automatic manner and that also within quick time.
So, it was argued that economy needed only a short-time to return to equilibrium full employment.
The correct answer is the option (b).
Question 2
It is the velocity of circulation that is obtained when amount of nominal GDP is divided by the stock of money.
The correct answer is the option (d).