Download Ch. 15 / 16 StudyGuide Multiple Choice ____ 1. You are President

Ch. 15 / 16 StudyGuide
Multiple Choice
____
1. You are President Obama’s economic advisor. In order to get the U.S. economy moving out of the recent
recession, you advise the President to pursue expansionary fiscal and monetary policies. The President
should:
A. increase taxes and increase government
C. lower interest rates and raise taxes
spending
B. decrease taxes and increase government
D. increase interest rates and raise taxes
spending
____
2. The purpose of expansionary fiscal policy is to
A. increase output.
B. prevent hyperinflation.
C. slow the growth of the GDP.
D. increase the separation between government and private industry.
____
3. Milton Friedman is most closely associated with which of the following?
A. laissez faire
C. monetary policy
B. fiscal policy
D. hyperinflation
____
4. What is the relationship between interest rates and demand for money?
A. As interest rates decrease, demand for money increases.
B. As interest rates increase, demand for money increases.
C. Interest rates are determined by demand for money.
D. Interest rates and demand for money are unrelated.
____
5. An example of contractionary fiscal policy would be
A. cutting taxes.
B. decreasing government spending.
C. increasing production of consumer goods.
D. expanding the government’s role in regulating private industry.
____
6. Which of these tools in an example of monetary policy?
A. reducing income taxes
C. increasing government spending
B. raising interest rates to fend off inflation D. borrowing money through deficit spending
____
7. Which of these is a contractionary fiscal policy?
A. The federal government builds a new medical research center at a prestigious state
university.
B. The President and Congress pass a new two-cent-per-gallon gasoline tax.
C. The federal government sends taxpayers up to $300 each in the form of an income tax
rebate.
D. The sales tax on clothing is lifted for one week before the school year begins.
____
8. In contrast with classical economics, Keynesian economics
A. reduces the role of government.
B. increases the role of the government.
C. relies more heavily on the laws of supply and demand.
D. more strongly emphasizes the importance of individual businesses to the overall health of
the economy.
____
9. How did the Great Depression relate to the school of classical economics?
A. The end of the Great Depression in the 1940s confirmed many of the theories of classical
economics.
B. Crises like the Great Depression were predicted by Adam Smith.
C. The Great Depression appeared to disprove the classical theory that demand and supply
could return to a healthy equilibrium through market forces alone.
D. The issues of the Great Depression had no connection to classical economics.
____ 10. The U.S. economy experienced double digit inflation in the 1980’s. To bring prices down, aggregate (total)
demand needed to be reduced. Accordingly, what 2 actions should the government have taken?
A. raise interest rates and reduce government spending
B. lower interest rates and reduce government spending
C. raise interest rates and lower taxes
D. drop back 15 yards and punt
____ 11. An example of expansionary fiscal policy would be
A. cutting taxes.
C. cutting production of consumer goods.
B. cutting government spending.
D. cutting prices of consumer goods.
____ 12. All of the following are features of classical economics EXCEPT
A. a free market economy.
B. the law of supply and demand.
C. the idea of achieving market equilibrium.
D. a significant role for government in the running of the economy.
____ 13. Which ONE of the following economists would NOT likely be included in a study of classical economists?
A. Adam Smith
C. Thomas Malthus
B. David Ricardo
D. John Maynard Keynes
Short Answer
You are an economic advisor to the President. Briefly explain what course of action the President should take
in order to bring the unemployment rate in the country down by creating jobs.
Ch. 15 / 16 StudyGuide
Answer Section
MULTIPLE CHOICE
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