Theories Chapter 13

Question 1

Country with the most gold is the best

Answer 1

Mercantilist

Question 2

Money supply changes are the primary cause of the changes in real GDP

Answer 2

Monetarists

Question 3

Workers are smart and will nullify any policy designed to end a recession

Answer 3

Rational Expectations

Question 4

Workers can usually correctly predict future economic conditions

Answer 4

Rational Expectations

Question 5

Exports are good, but imports are to be avoided

Answer 5

Mercantilist

Question 6

Cut taxes to increase economic growth

Answer 6

Supply-Siders

Question 7

Freely floating wages and prices will quickly end and shortages and surpluses

Answer 7

Classical

Question 8

People will anticipate gov’t actions to stimulate or restrain the economy, and will adjust their responses accordingly

Answer 8

Rational Expectations

Question 9

Gold should not be shipped out of the country for any reason

Answer 9

Mercantilist

Question 10

Economies should be regulated so that exports are increasing, while imports are minimal

Answer 10

Mercantilist

Question 11

Wages do NOT move quickly to end high unemployment. Gov’t action is needed.

Answer 11

Keynesian

Question 12

When the central bank attempts to increase the money supply, people will raise their wage demands to compensate.

Answer 12

Rational Expectations

Question 13

These two focus on increasing AD to end a recession

Answer 13

Keynesian

Monetarists

Question 14

This one focuses on increasing LRAS

Answer 14

Supply-siders

Question 15

Promotes deficit spending to end a recession

Answer 15

Keynesian

Question 16

Against the Balanced Budget Amendment, since necessary deficits in one year can be paid off with surpluses in years of economic expansions

Answer 16

Keynesian

Question 17

High levels of unemployment cause wages to fall and full employment to be restored

Answer 17

Classical

Question 18

When inflation is accelerating, people will anticipate higher interest rates and will attempt to borrow up to their credit capability

Answer 18

Rational Expectations

Question 19

Workers will demand an increase in pay when they hear of an upcoming expansionary fiscal policy in the works.

Answer 19

Rational Expectations

Question 20

Ronald Regan was known for this

Answer 20

Supply-Siders

Question 21

FDR and the New Deal

Answer 21

Keynesian

Question 22

When people anticipate upcoming gov’t economic policy actions, they will act rationally to better themselves and will end up nullifying the gov’t attempt to improve the economy

Answer 22

Rational Expectations

Question 23

Contract labor prevents wages from falling in a recession

Answer 23

Keynesian

Question 24

Fiscal policy is needed to end a recession

Answer 24

Keynesian

Question 25

Final policy won’t work to end a recession

Answer 25

classical, rational expectations, supply-siders, monetarists

Question 26

Monetary policy is needed to end a recession

Answer 26

Monetarists

Question 27

End gov’t regulation and lower taxes

Answer 27

supply-siders

Question 28

To end high inflation, reduced the money supply

Answer 28

Monetarists

Question 29

Leaders should restore confidence in the public after a scare so that they resume shopping and help the economy

Answer 29

Keynesian

Question 30

Reduce corporate taxes in order to spark innovation and investment in high-tech equipment

Answer 30

Supply-Siders

Question 31

Inflation and crowding out are NOT problems

Answer 31

Keynesian

Question 32

Increase gov’t spending to end a recession

Answer 32

Keynesian

Question 33

Reduce income taxes to increase the size of the labor force

Answer 33

Supply-Siders

Question 34

Sticky wages won’t allow wages to fall to end recessions

Answer 34

Keynesian

Question 35

To increase the nation’s level of output, just increase the nation’s money supply by the target amount + the target inflation rate

Answer 35

Monetarists