Deck 35: Lessons From Japan and Canada

Question 1

Following World War II,the Japanese economy

A)grew slowly and experienced frequent recessions.
B)grew at about the same rate as the United States prior to 1990.
C)achieved a remarkable growth rate of about 6 percent for nearly four decades prior to 1990.
D)was strong and prosperous for nearly two decades,but growth fell sharply beginning in the 1970s.

Answer 1

C

Question 2

Why might Japan have been misled into believing it was following an expansionary monetary policy during the 1990s?

A)The M1 money supply was expanding at a rapid rate during the 1990s.
B)The general level of prices continued to rise in Japan throughout the 1990s.
C)When decision-makers expect inflationary conditions,nominal interest rates will be low,as they were in Japan during the 1990s.
D)Low interest rates are often indicative of expansionary monetary policy,but if deflation is expected,this will not be the case.

Answer 2

D

Question 3

Demographic and economic analysis indicates that as a nation's population age 65 and older

A)declines,the tax burden on the current work force will increase.
B)expands,the tax burden on the current work force will decrease.
C)expands,the overall productivity of the population will increase.
D)expands,the overall productivity of the population will decline.

Answer 3

D

Question 4

Why does the Japanese experience of the 1990s offer some insight with regard to the 2008-2009 recession in the United States?

A)Japan was able to recover from World War II into an economic power and used a similar blueprint to recover from the recession in the 1990s.
B)The structure of the Japanese labor market is much like that of the United States.
C)Japan experienced a rapid increase in real estate and other asset prices followed by a sharp reduction in those prices much like the U.S.prior to 2008.
D)Following the Japanese recession beginning in 1992,Japan used monetary and fiscal policy to effectively promote a quick recovery.

Question 5

The Japanese experience of the 1990s indicates that

A)restrictive monetary policy during a recovery will prevent inflation and promote stable economic growth.
B)increases in government spending will promote a faster and stronger recovery from an economic recession.
C)housing and stock prices are unlikely to rebound quickly when the economy moves toward recovery.
D)large budget deficits and temporary tax cuts will stimulate aggregate demand and real output.

Question 6

As Japan shifted from budget surpluses to budget deficits in response to the economic slowdown of the 1990s,this resulted in

A)an increase in aggregate demand and strong economic growth.
B)a sharp increase in Japanese stock prices.
C)a substantial increase in the inflation rate.
D)a substantial increase in government debt as a share of the economy.

Question 7

Which of the following is a characteristic of Japan's labor market?

A)high labor mobility
B)a labor force that is getting younger
C)high rates of unemployment
D)low rates of labor mobility and business start-ups

Question 8

Like the U.S.during 2002-2004,Japan increased the money supply significantly and pushed interest rates to low levels during the late 1980s.This policy contributed to

A)deflation during the late 1980s.
B)a high rate of unemployment.
C)upward pressure on asset prices,such as real estate.
D)a decline in stock prices during the late 1980s.

Question 9

Which of the following is a similarity between the Japanese experience of the 1990s and the U.S.economic downturn in 2008-2009?

A)Stable real estate and stock market prices eventually led to an economic downturn.
B)Both Japan and the U.S.tightened lending standards and this eventually led to a substantial decline in real estate prices.
C)The collapse of stock and real estate prices led to the failure of highly leveraged banking and financial institutions.
D)Neither Japan nor the U.S.had experienced a recession since the time of the Great Depression.

Question 10

When a company or industry is subsidized because it is not profitable,a secondary effect of the subsidies will likely be that

A)jobs will be saved,so the subsidies will promote economic efficiency.
B)resources that are used unproductively will remain in low productivity areas.
C)the company or industry will stabilize and become profitable.
D)the subsidies will direct resources toward highly productive projects.

Question 11

The "catch up phenomenon" refers to

A)the ability of an economy to recover from a severe recession.
B)the ability of lower income countries to grow rapidly by emulating the practices and technology of higher income countries.
C)the likelihood of a sharp decline in asset and stock market prices following a prolonged period of economic growth.
D)the failure of low-income countries to catch up with high-income countries because no country can sustain economic growth over long periods of time.

Question 12

Which of the following best describes Japan's fiscal policy response to the recession in the 1990s?

A)Japan tried to stimulate the economy through a series of tax rate reductions as suggested by supply-side economics.
B)Japan reduced government spending as a share of the economy,and the central government balanced its budget annually.
C)Japan expanded government spending as a share of the economy and financed the spending with budget deficits and increased borrowing.
D)Japan maintained a balanced budget during the 1990s,just as the U.S.did during the Great Depression.

Question 13

The Japanese experience of the 1990s indicates that increases in government spending financed by borrowing will

A)stimulate aggregate demand and generate a strong recovery.
B)lead to inflation.
C)sometimes fail to stimulate aggregate demand and the growth of real output.
D)push real interest rates up quickly.

Question 14

Why are the 1990s sometimes referred to as Japan's "lost decade"?

A)Similar to the Great Depression in the U.S. ,Japan's unemployment remained at double-digit levels throughout the 1990s.
B)The Japanese were reluctant to use fiscal policy to stimulate aggregate demand,which would have prompted an economic recovery.
C)Following the stock market crash of 1990,GDP was persistently weak throughout the decade,only growing at a rate of about 1 percent.
D)Despite the strong economic growth during the decade,stock market prices have not recovered.

Question 15

The deflationary conditions in Japan from 1995 to 2002 were a result of

A)a rapid expansion in the money supply.
B)highly restrictive monetary policy.
C)a decline in government spending as a percent of GDP.
D)the persistently large budget surpluses of the central government.

Question 16

How did the fiscal policy response of Japan during the 1990s compare with that of the U.S.during the recession of 2008-2009?

A)Both countries responded with permanent tax cuts in an effort to stimulate supply-side effects.
B)Both countries responded with government spending programs financed by borrowing.
C)Japan's fiscal policy was restrictive,while U.S.fiscal policy was expansionary.
D)Japan continued to maintain budget surpluses,while the U.S.increased its budget deficits.

Question 17

Which of the following led to a strong demand for commercial real estate in Japan in the mid-1980s,resulting in soaring real estate prices?

A)low interest rates set by the Bank of Japan combined with optimism of continued strong economic growth
B)high interest rates of the period along with the adoption of higher credit and borrowing standards
C)stagnant stock market prices that induced investors to shift investments from stocks to real estate
D)a historically-sluggish economy that was showing signs of recovery and future economic growth

Question 18

The Japanese experience of the 1990s indicates that increases in government spending financed through borrowing will generate

A)an increase in aggregate demand and real output,just as the Keynesian model predicts.
B)secondary effects that retard private sector spending and thereby reduce the expansionary impact of fiscal policy.
C)a recovery of stock market and asset prices within 12 to 18 months.
D)a decrease in tax rates but an increase in tax revenues,just as the supply-side model predicts.

Question 19

Which of the following best describes Japan's monetary policy leading up to and during the recession of the 1990s?

A)Japan's monetary policy was expansionary during the 1980s,but it shifted toward restriction during the 1990s.
B)Japan's monetary policy was restrictive during the 1980s,but it was much more expansionary during the 1990s.
C)Japan's monetary policy was expansionary during the 1980s and remained expansionary in the 1990s.
D)Japan's monetary policy was restrictive during the 1980s and remained restrictive in the 1990s in order to combat inflation.

Question 20

Since Japan's stock market crash in 1990,its stock market has

A)reach the pre-crash levels several times,but it has been unable to maintain those high levels.
B)fluctuated,but stock prices have remained well below their peak level prior to the crash.
C)recovered most of its pre-crash value.
D)fluctuated for several years,but a strong upward trend has been present since 1995.

Question 21

Why will persistently restrictive monetary policy often lead to low interest rates?

A)Decision-makers expect the inflation rate to rise,and this will reduce nominal interest rates.
B)Decision-makers expect deflation,and this will keep nominal interest rates low.
C)Decision-makers expect low rates of unemployment in the future and this will reduce nominal interest rates.
D)Decision-makers expect higher stock prices in the future and this will reduce nominal interest rates.

Question 22

As the U.S.recovers from the 2008-2009 recession,asset prices are not likely to rebound quickly

A)even though asset prices did rebound quickly in Japan during the 1990s.
B)because it will take time to correct the mal-investment in the housing market.
C)because there are not enough loanable funds in the banking system due to restrictive monetary policy.
D)because the supply of housing will be unable to keep up with demand,as was the case in Japan during the 1990s.

Question 23

In the mid-1990s,Canada was experiencing large budget deficits,high levels of government expenditures as a share of the economy,and double-digit unemployment rates.Canadian policy-makers responded to this situation by

A)cutting taxes to stimulate aggregate demand and reduce unemployment.
B)increasing government spending to stimulate aggregate demand and reduce unemployment.
C)cutting government spending.
D)shifting the budget toward a larger deficit.

Question 24

Which of the following most accurately describes the correlation between the aging populations of the U.S.and Japan?

A)Japan's aging population follows a similar growth curve to that of the U.S. ,though there is about a 20-year lag behind the U.S.
B)Japan and the U.S.have followed a similar growth curve of the elderly population since 1990.
C)The U.S.is currently experiencing similar growth of the elderly population as a share of the total,such as Japan experienced during 1990-2010,though at a slower rate.
D)The elderly population in the U.S.is projected to surpass that of Japan by the year 2020.

Question 25

Which of the following is true with regard to the use of monetary policy to combat a recession?

A)The Fed's monetary policy has been expansionary in response to the 2008-2009 recession,despite the poor results from Japan's expansionary monetary policy during the 1990s.
B)Monetary policy lags are relatively short and predictable,so the results of expansionary monetary policy should be quickly evident.
C)Frequent monetary policy changes will promote economic stability,so the Fed must constantly alter its policy to correspond with changing economic conditions.
D)If monetary policy makers turn toward restriction too quickly or stay with the expansionary policy too long,it can throw the economy back into recession or generate future inflation.

Question 26

Based on Japan's experience during the 1990s,which of the following is most likely to slow the long-term growth of the U.S.?

A)the restrictive monetary policy of the Fed in 2008 and 2009
B)the aging of the U.S.population
C)the lack of stimulus packages designed to increase aggregate demand
D)the government's policy of maintaining a balanced budget

Question 27

In response to high rates of unemployment and a large and growing debt as a share of the economy,in the latter half of the 1990s,Canada

A)increased government spending and shifted the federal budget toward a deficit.
B)reduced government spending and shifted the federal budget toward a surplus.
C)cut taxes and increased government spending.
D)held government spending constant as a share of the economy and increased taxes in order to balance the budget.

Question 28

Which of the following is a major difference between the Japanese experience of the 1990s and the U.S.in 2008-2009?

A)The U.S.saving rate is much lower than that of Japan during the 1990s.
B)The labor force of the U.S.is getting younger,while the labor force of Japan was aging.
C)The U.S.responded to its downturn with considerable stimulus spending,while Japan failed to significantly increase government spending.
D)In the U.S.the recession was the result of a severe downturn in real estate prices,while in Japan,a lengthy recession eventually led to a downturn in real estate prices.

Question 29

Which of the following is a similarity between the Japanese experience of the 1990s and the U.S.in 2008-2009?

A)Both responded to an economic downturn with higher taxes designed to balance the budget.
B)Both responded to an economic downturn with reductions in government spending designed to balance the budget.
C)Both responded to an economic downturn with expansionary fiscal policy.
D)Both responded to an economic downturn with expansionary monetary policy.

Question 30

Which of the following responded to an economic downturn with a shift to a more expansionary monetary policy?

A)Japan in the 1990s
B)the U.S.during the Great Depression
C)the U.S.in response to the recession of 2008-2009
D)none of the above

Question 31

Based on Japan's experience during the 1990s,are fiscal stimulus packages effective in promoting a quick and sustainable recovery?

A)No,Japan's fiscal stimulus did not result in strong aggregate demand and output,and the secondary effects may well have retarded recovery.
B)No,Japan's fiscal stimulus was not large enough to exert an impact on aggregate demand or real output.
C)Yes,Japan's fiscal stimulus resulted in increases in aggregate demand and real output,but higher inflation rates slowed the recovery.
D)Yes,Japan's increases in government spending resulted in corresponding increases in GDP,but high interest rates offset much of the stimulus.

Question 32

During the Japanese downturn of the early 1990s and the U.S.recession of 2008-2009,both countries

A)followed a highly expansionary monetary policy.
B)raised taxes in order to balance the budget of the central government.
C)followed a highly restrictive monetary policy.
D)increased government spending and ran large budget deficits as a share of the economy.

Question 33

Workers in a labor force of a highly skilled country,like Japan or the United States,usually reach their productive peak

A)during their teen-age years,when they are young and being educated.
B)during their 20s,when they are still young and strong.
C)in their 40s and 50s,when they have a balance between education and experience.
D)in their 60s,just before retirement.

Question 34

Which of the following was true of Japan during the 1990s?

A)Japan followed an expansionary fiscal policy but it did not lead to a quick recovery.
B)Japan followed an expansionary monetary policy,but it did not lead to a quick recovery.
C)The monetary policy of Japan during the 1990s was highly expansionary.
D)The fiscal policy of Japan during the 1990s was highly restrictive.

Question 35

Between 1990 and 2010,the population age 65 years and older in Japan,

A)almost doubled,expanding from 12 percent to approximately 23 percent.
B)rose slightly from 13 percent to almost 16 percent.
C)remained relatively constant at around 20 percent.
D)declined from 20 percent to less than 15 percent.

Question 36

Which of the following most accurately describes Japan's fiscal and monetary policies during the 1990s?

A)Both fiscal and monetary policy were expansionary.
B)Both fiscal and monetary policy were restrictive.
C)Fiscal policy was restrictive,but monetary policy was expansionary.
D)Fiscal policy was expansionary,but monetary policy was restrictive.

Question 37

As the share of a nation's population age 65 and older expands,

A)the productivity growth of the population will tend to increase.
B)the productivity growth of the population will tend to slow.
C)the nation will become more productive as more jobs become available for younger workers.
D)government expenditures on the elderly will decrease.

Question 38

As the elderly population of a nation expands as a share of the total,

A)government expenditures on health care and retirement programs will generally decline.
B)economic growth is likely to slow because of a slowdown in the growth of productivity and higher taxes on current workers.
C)economic growth is likely to increase because the retirement of older workers will create high-paying jobs for younger workers.
D)government spending as a share of the economy in high-income countries like the United States will tend to fall.

Question 39

One advantage that Japan held during the recession of the 1990s over the U.S.recession in 2008-2009,was in its

A)fiscal policy response.
B)rate of saving.
C)aging of the labor force.
D)flexibility of the labor market.

Question 40

During the mid-1990s,the Canadian economy was characterized by

A)large budget deficits as a share of the economy.
B)government expenditures in excess of 50 percent of GDP.
C)a down-grading of Canadian bonds by the bond rating agencies.
D)all of the above.

Question 41

During and following the severe recession of 2008-2009,the fiscal policy of the United States was

A)similar to the response of Japan to a severe recession during the early 1990s.
B)similar to the response of Canada to an economic crisis during the latter half of the 1990s.
C)dramatically different than the response of Japan to a severe recession during the early 1990s.
D)similar to the highly successful fiscal policy of the United states during the 1990s: government expenditures were reduced as a share of GDP and the budget was shifted toward a surplus.

Question 42

Which of the following is a similarity between Japan's response to the recession of the 1990s and the U.S.response to the Great Depression?

A)Both countries reduced government spending as a percentage of GDP significantly in response to the recessions.
B)Both countries were able to utilize fiscal policy to significantly reduce unemployment during the recessions.
C)Both countries followed a restrictive monetary policy during the recessions.
D)Both countries tried to stimulate real output and aggregate demand by shifting to a more expansionary monetary policy.

Question 43

Which of the following occurred in Canada during the latter part of the 1990s?

A)Increases in government spending and larger budget deficits as a share of the economy.
B)Reductions in government spending that led to the loss of political control by the Liberal Party.
C)A tax increase that balanced the budget without reductions in government spending as a share of the economy.
D)Reductions in government spending as a share of the economy and shift of the government budget to a surplus.

Question 44

When the Bank of Japan reduced the discount rate from 5 percent to 2.5 percent in 1987,

A)both the demand for real estate and asset prices decreased dramatically.
B)the demand for real estate increased,but asset prices decreased.
C)the demand for real estate decreased,but asset prices increased.
D)both the demand for real estate and asset prices increased dramatically.

Question 45

Both Japan and Canada experienced a severe economic slowdown during the 1990s.The fiscal policy responses of the two countries were

A)virtually the same: both substantially increased government spending and ran large budget deficits.
B)virtually the same: both reduced government spending as a share of the economy and shifted the budget toward a surplus.
C)dramatically different: Japan sharply increased government spending and ran large budget deficits,while Canada reduced government spending as a share of the economy and shifted the budget toward a surplus.
D)dramatically different: Japan reduced government spending as a share of the economy and shifted the budget toward a surplus,while Canada increased government spending and ran large budget deficits.

Question 46

Both Japan and Canada experienced severe economic slowdowns during the 1990s.Which of the following is true of their fiscal policy responses and the results achieved?

A)Japan applied the Keynesian prescription of spending increases financed by borrowing and the Japanese economy grew rapidly during the 1990s.
B)Canada reduced government spending as a share of the economy and shifted the budget toward a surplus;the Canadian economy grew rapidly during the decade that followed.
C)Both Japan and Canada applied the Keynesian prescription of spending increases financed by borrowing and both achieved rapid growth during the decade that followed .
D)Both Japan and Canada reduced government spending and shifted the budget toward a surplus and the result was a decade of stagnation and high unemployment.

Question 47

A lesson the U.S.might learn from the Canadian experience of the late 1990s is that

A)it is possible to reduce government spending and the results can be positive.
B)reductions in government spending when an economy is sluggish will lead to a disastrous outcome.
C)budget deficits stimulate aggregate demand and reduce unemployment just as the Keynesian model implies.
D)a country can continue to expand its debt as a share of the economy without experiencing higher interest rates.

Question 48

Which of the following describes the relationship between the decline in asset prices and the recession for both Japan in the 1990s and the United States in 2008-2009?

A)A recession was responsible for the decline in stock market and real estate prices.
B)The decline in stock market and real estate prices preceded the recession and was a major cause of an economic downturn.
C)Both the decrease in real estate prices and an economic recession were the result of a stock market crash.
D)The decline in stock market and real estate prices,and the economic recession were separate events and there was no relationship between the two.

Question 49

When confronting declining economic growth and recession during the 1990s,how did the Canadian response differ from that of Japan?

A)Canada reduced government spending and shifted the government budget toward a surplus;Japan did the opposite.
B)Canada increased government spending and shifted the government budget toward a deficit;Japan did the opposite.
C)Canada shifted to a highly restrictive monetary policy,while the monetary policy of Japan was highly expansionary.
D)Canada increased tariffs and imposed trade restrictions;Japan did the opposite.

Question 50

Which of the following combinations would have been most appropriate if Japanese policy-makers thought that both fiscal and monetary policy would provide demand stimulus and help promote recovery during the 1990s?

A)a decrease in government spending,combined with expansionary monetary policy
B)an increase in government spending,combined with restrictive monetary policy
C)both an increase in government spending and expansionary monetary policy
D)both a decrease in government spending and restrictive monetary policy

Question 51

As the share of population age 65 and older expands in high-income countries like Japan and the United States,

A)the tax burden on current workers will tend to decrease.
B)the tax burden on current workers will tend to increase.
C)the productivity of the population will tend to increase,leading to higher rates of economic growth.
D)government expenditures on health care and retirement benefits for the elderly will tend to decrease.

Question 52

Which of the following is indicative of Japan's expansionary fiscal policy during the 1990s?

A)a shift from budget deficits to budget surpluses during the 1990s
B)a decrease in government spending as a share of GDP during the 1990s
C)an increase in tax rates during the 1990s
D)a shift from budget surpluses to budget deficits during the 1990s

Question 53

Canada had a high rate of unemployment and sluggish economy during the first half of the 1990s.During the latter half of the 1990s,Canada

A)reduced government spending as a share of the economy,shifted the budget toward a surplus,and the economy achieved solid economic growth in the years that followed.
B)increased government spending as a share of the economy,shifted the budget toward a deficit,and the economy achieved solid economic growth in the years that followed.
C)reduced government spending as a share of the economy,shifted the budget toward a surplus,and the economy quickly fell into a severe recession.
D)increased government spending as a share of the economy,shifted the budget toward a deficit,and the inflation rate soared to double-digit levels.

Question 54

Which of the following was a similarity between the Japanese recession of the early 1990s and the U.S.recession of 2008-2009?

A)Following the recession,there was a sizeable increase in the population over 65 in both countries.
B)Balancing the budget was the focus of fiscal policy during the recessions in both countries.
C)Both countries followed a restrictive monetary policy in response to the recessions.
D)Neither country increased government expenditures in response to the recessions.

Question 55

Which one of the following is true of the Canadian fiscal policy of the late 1990s?

A)Canada shifted its budget toward a deficit in the late 1990s and experienced strong growth in the years that followed.
B)Canada shifted its budget toward a surplus in the late 1990s and experienced strong growth in the years that followed.
C)Canada's fiscal policy was highly expansionary during the latter half of the 1990s and the inflation rate rose sharply in the years that followed.
D)Canada reduced government spending as a share of the economy,but the policy was soon reversed as the rate of unemployment rose to higher and higher levels.

Question 56

Japan's increase in government spending financed by borrowing in response to the economic downturn and sluggish growth of the 1990s is most consistent with

A)the Keynesian view of appropriate fiscal policy.
B)the supply-side view of appropriate fiscal policy.
C)the crowding-out theory of fiscal policy.
D)the view that the government should maintain a balanced budget.

Question 57

Following World War II,Japan's GDP grew at an annual rate of about _________,but in the decade following the stock market crash in 1990,Japan's GDP grew at an annual rate of about _________.(Fill in the blanks)

A)1 percent;6 percent
B)6 percent;1 percent
C)5 percent;-5 percent
D)3 percent;10 percent

Question 58

After two decades of increasing government spending financed by borrowing,Canada reversed the direction of fiscal policy in the latter half of the 1990s.This reversal was followed by

A)an increase in the unemployment rate to historically high levels.
B)sluggish growth of real GDP compared to the earlier era.
C)solid growth of real GDP and a declining rate of unemployment.
D)a massive political defeat of the Liberal Party in the next election and reversal of the policy.

Question 59

What is the relationship between monetary policy and interest rates?

A)Expansionary monetary policy will always result in an increase in interest rates.
B)Restrictive monetary policy will tend to push interest rates up,unless people expect deflation to occur,in which case interest rates will decline to low levels.
C)Expansionary monetary policy will tend to push interest rates up,unless people expect inflation to occur,in which case interest rates will remain low.
D)Restrictive monetary policy will always result in a decrease in interest rates.

Question 60

In the latter part of the 1990s,Canada reduced government spending as a share of the economy and shifted the budget to a surplus.In the years that followed,the Canadian economy

A)experienced sharply higher rates of unemployment.
B)grew more rapidly than any of the world's large high-income economies.
C)experienced an economic slowdown that forced policy-makers to reverse the direction of fiscal policy.
D)continued to experience slow economic growth,which explains why this period is now referred to as Canada's "lost decade."

Question 61

Both Japan in the 1990s and the U.S.during the Great Depression followed a restrictive monetary policy,because

A)all the leading indicators,such as the money supply and price levels,suggested that this policy was effective.
B)most economists believed the restrictive monetary policy was the correct response to a recession.
C)when an expansionary monetary policy was briefly followed,both employment and GDP declined.
D)key policy-makers thought low interest rates indicated that monetary policy was highly expansionary.

Question 62

Why is Japan's unemployment rate consistently well below the figures of most other high-income market economies,even during a recession?

A)The Japanese labor market is characterized by lifetime employment contracts,thus employees change jobs less frequently.
B)Because of a more dynamic business environment and higher labor mobility,employees are able to switch and obtain jobs more frequently.
C)The Japanese government regularly shifts resources to areas of high productivity by eliminating unprofitable enterprises.
D)Japan follows a highly expansionary monetary policy,which keeps the unemployment rate low.

Question 63

Based on the Japanese experience of the 1990s,in the aftermath of the 2008-2009 recession,Americans can expect that

A)asset prices will quickly return to their pre-recession levels.
B)fiscal stimulus will promote a quick,sustainable recovery.
C)housing and stock market prices are unlikely to rebound quickly.
D)expansionary monetary policy will result in a period of deflation.

Question 64

The major difference between Japan's response to the recession of the 1990s and the U.S.'s response to the recession of 2008-2009 was

A)the failure of Japan to adopt fiscal stimulus packages.
B)Japan's more expansionary monetary policy.
C)the balanced-budget policy followed by the United States.
D)the more expansionary monetary policy followed by the United States.

Question 65

Which of the following is a similarity between the Japanese experience of the 1990s and the U.S.economic downturn in 2008-2009?

A)A rapid increase in real estate prices preceded the economic troubles.
B)An economic bust of real estate prices and a drop in stock market prices contributed to both downturns.
C)A flood of loan defaults that created huge problems for the banking and financial sectors were present during both downturns.
D)All of the above.

Question 66

Japan's expansionary fiscal policy during the 1990s resulted in

A)an increase in the national debt,but economic growth was weak.
B)strong growth of real output,but the national debt was relatively constant as a share of GDP.
C)a quick recovery,but no increases in stock market and real estate prices.
D)a large increase in stock market and real estate prices,but slow growth of real GDP.

Question 67

Which of the following is evidence of Japan's expansionary fiscal policy during the 1990s?

A)persistent budget surpluses throughout the decade
B)persistently large budget deficits throughout the decade
C)a gradual decrease in Japan's national debt during the 1990s
D)a gradual decrease in Japan's government expenditures as a share of GDP during the 1990s

Question 68

Which of the following is a potentially important difference between the U.S.economy today and the Japanese economy of the 1990s?

A)The fiscal policy response of the United States has been less expansionary.
B)The rate of saving is higher in the United States.
C)The elderly will not increase as a share of the population in the United States.
D)The U.S.labor market is more flexible.

Question 69

Even if the expansionary monetary policy of the Fed leads to a strong recovery from the recession of 2008-2009,

A)the general level of prices will fall in the decade immediately ahead.
B)the Japanese experience indicates that expansionary monetary policy will not lead to long-term recovery.
C)time lags between changes in monetary policy and when the changes exert an impact will make it difficult to promote long-term economic stability.
D)asset prices will quickly return to their pre-recession levels,but this will cause another crash in housing and stock prices.

Question 70

Why are U.S.housing and stock prices unlikely to rebound quickly from the recession of 2008-2009?

A)Restrictive monetary policy will place downward pressure on asset prices.
B)Lack of sufficient stimulus will decrease demand for housing and other assets.
C)It will take time to correct the mal-investment generated by the run-up in housing prices.
D)Based on Japan's experience of the 1990s,asset prices are likely to rebound quickly.

Question 71

If interest rates fall to near zero and consumers expect a decline in the price levels in the coming year,what would this indicate?

A)highly expansionary monetary policy
B)restrictive monetary policy,but an anticipation of future inflationary conditions
C)highly restrictive monetary policy and an anticipation of deflation in the future
D)an unanticipated decrease in the money supply

Question 72

Which of the following is a reason why the economic growth of a nation will slow as the population age 65 and older expands?

A)Older workers are better educated than younger workers.
B)When the elderly increase as a share of the total population,this will increase government spending on health care and retirement benefits and lead to higher taxes on current workers.
C)As people retire,high paying jobs are removed from the labor force and are replaced by low paying jobs.
D)Even though their incomes are low,the elderly population will have to pay higher taxes in order to support younger workers.