Original
Name: __________________________ Date: _____________
1. The hyperinflation experienced by interwar Germany illustrates how fiscal policy can be connected to monetary policy when government expenditures are financed by:
A) new taxes.
B) borrowing in the open market.
C) printing large quantities of money.
D) selling gold.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
2. An example of a real variable is the:
A) dollar wage a person earns.
B) quantity of goods produced in a year.
C) price level.
D) nominal interest rate.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
3. An example of a nominal variable is the:
A) money supply.
B) quantity of goods produced in a year.
C) relative price of bread.
D) real wage.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
4. The concept of monetary neutrality in the classical model means that an increase in the
money supply will increase:
A) real GDP.
B) real interest rates.
C) nominal interest rates.
D) both saving and investment by the same amount.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
5. To end a hyperinflation, a government trying to reduce its reliance on seigniorage
would:
A) print more money.
B) raise taxes and cut spending.
C) lower taxes and increase spending.
D) lower interest rates.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
Original
Name: __________________________ Date: _____________
1. A country’s exports may be written as equal to:
A) GDP minus consumption minus investment minus government spending.
B) GDP minus consumption of domestic goods and services minus investment of
domestic goods and services minus government purchases of domestic goods and
services.
C) imports.
D) GDP minus imports.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
2. In a small open economy, if exports equal $20 billion, imports equal $30 billion, and
domestic national saving equals $25 billion, then net capital outflow equals:
A) –$25 billion.
B) –$10 billion.
C) $10 billion.
D) $25 billion.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
3. (Exhibit: Saving and Investment in a Small Open Economy) In a small open economy if
the world interest rate is r1, then the economy has:
A) a trade surplus.
B) balanced trade.
C) a trade deficit.
D) negative capital outflows.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
4. In a small open economy, when the government reduces national saving, the equilibrium
real exchange rate:
A) rises and net exports fall.
B) rises and net exports rise.
C) falls and net exports fall.
D) falls and net exports rise.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
5. The percentage change in the nominal exchange rate equals the percentage change in the
real exchange rate plus the:
A) foreign inflation rate minus the domestic inflation rate.
B) domestic inflation rate minus the foreign inflation rate.
C) foreign exchange rate minus the domestic exchange rate.
D) domestic interest rate minus the foreign interest rate.
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
Original
Name: __________________________ Date: _____________
1. In the Keynesian-cross model, if the MPC equals .75, then a $1 billion increase in
government spending increases planned expenditures by ______ and increases the
equilibrium level of income by ______.
A) $1 billion; more than $1 billion
B) $.75 billion; more than $.75 billion
C) $.75 billion; $.75 billion
D) $1 billion; $1 billion
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
2. In the Keynesian cross model, if government purchases increase by 100, then planned
expenditures ______ for any given level of income.
A) increase by 100
B) increase by more than 100
C) decrease by 100
D) increase, but by less than 100
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
3. In the Keynesian-cross model, fiscal policy has a multiplied effect on income because
fiscal policy:
A) increases the amount of money in the economy.
B) changes income, which changes consumption, which further changes income.
C) is government spending and, therefore, more powerful than private spending.
D) changes the interest rate.
Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an answer to all
the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
4. According to the sticky-wage model, when the price level is less than the expected price
level, workers get a ______ real wage than expected, and ______ workers are hired than
expected.
A) lower; more
B) lower; fewer
C) higher; more
D) higher; fewer
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
5. (Exhibit: Keynesian Cross) In this graph, the equilibrium levels of income and
expenditure are:
A) Y1 and E1
B) Y2 and E2
C) Y3 and E3
D) Y3 and E4
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the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
Original
Name: __________________________ Date: _____________
1. The interaction of the IS curve and the LM curve together determine:
A) the price level and the inflation rate.
B) the interest rate and the price level.
C) investment and the money supply.
D) the interest rate and the level of output.
Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an answer to all
the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
2. (Exhibit: IS-LM Fiscal Policy) Based on the graph, starting from equilibrium at interest
rate r1 and income Y1, a decrease in government spending would generate the new
equilibrium combination of interest rate and income:
A) r2, Y2
B) r3, Y2
C) r2, Y3
D) r3, Y3
Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an answer to all
the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
3. (Exhibit: IS-LM Fiscal Policy) Based on the graph, starting from equilibrium at interest
rate r1 and income Y1, an increase in government spending would generate the new
equilibrium combination of interest rate and income:
A) r2, Y2
B) r3, Y2
C) r2, Y3
D) r3, Y3
Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an answer to all
the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
4. The macroeconomic model may be completed by adding either the Keynesian
assumption that ______ or the classical assumption that ______.
A) output is fixed; prices are fixed
B) prices are fixed; output is fixed
C) the interest rate is fixed; the money supply is fixed
D) prices are flexible; output varies
Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an answer to all
the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?
5. Analysis of the short and long runs indicates that the ______ assumptions are most
appropriate in ______.
A) classical; both the short and long runs.
B) Keynesian; both the short and long runs.
C) classical; the short run whereas the Keynesian assumptions are most appropriate in
the long run.
D) Keynesian; the short run whereas the classical assumptions are most appropriate in
the long run.
Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an answer to all
the following to receive full credit:
A) Why is this response the right or wrong answer?
B) Why is this response the right or wrong answer?
C) Why is this response the right or wrong answer?
D) Why is this response the right or wrong answer?

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