Roots of Modern Macroeconomics Mcqs - Set 2

1)   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  Explanation 

ANSWER: new classical school

Explanation:
No explanation is available for this question!


2)   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  Explanation 

ANSWER: the stagflation of the 1970s

Explanation:
No explanation is available for this question!


3)   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  Explanation 

ANSWER: not constant and the quantity theory of money does not hold.

Explanation:
No explanation is available for this question!


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  Explanation 

ANSWER: hysteresis.

Explanation:
No explanation is available for this question!


5)   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  Explanation 

ANSWER: are correct on average, but are subject to errors that are distributed randomly

Explanation:
No explanation is available for this question!


6)   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  Explanation 

ANSWER: stagflation

Explanation:
No explanation is available for this question!


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  Explanation 

ANSWER: fine tuning

Explanation:
No explanation is available for this question!


8)   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  Explanation 

ANSWER: The prolonged existence of high unemployment during the Great depression

Explanation:
No explanation is available for this question!


9)   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  Explanation 

ANSWER: is self-correcting.

Explanation:
No explanation is available for this question!


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  Explanation 

ANSWER: sticky prices

Explanation:
No explanation is available for this question!