Chapter 15
Japan’s Lost Decade – Could It Happen in the the United States?
Multiple Choice
1. The economy of Japan grew most rapidly during the
A) 1940s.
B) 1960s through the 1980s.
C) 1990s.
D) 2000s.
2. The primary stock index of Japan is the
A) Nikkei
B) Hang Sang
C) NASDAQ
D) Wilshire
3. During the early to mid 1980s the Nikkei
A) was taken over by Dow Jones.
B) grew rapidly.
C) fell steeply.
D) was stagnant.
4. The Nikkei peaked in
A) 1982.
B) 1989.
C) 1999.
D) 2000.
5. After the decline in the Nikkei from its peak, it
A) never fully recovered in inflation adjusted terms.
B) never fully recovered even without accounting for inflation.
C) quickly recovered.
D) slowly grew during the 1990s.
6. The drop in the Nikkei was
A) mirrored by a similar drop in real estate values.
B) counteracted by an even larger increase in real estate values.
C) counteracted by an equally sized increase in real estate values.
D) partially counteracted by an increase in real estate values.
7. During the 1960s Japan grew at
A) roughly the same rate as the United States grew.
B) a slightly faster rate than the United States grew.
C) a slightly slower rate than the United States grew.
D) a much faster rate (more than twice) than the United States grew.
8. During the 1970s Japan grew at
A) roughly the same rate as the United States grew.
B) a somewhat faster rate (4.8% vs 4.2%) than the United States grew.
C) a slightly slower rate than the United States grew.
D) a much faster rate than the United States grew.
9. During the 1980s Japan grew at
A) roughly the same rate as the United States grew.
B) a somewhat faster rate (4.5% vs 3%) than the United States grew.
C) a slightly slower rate than the United States grew.
D) a much faster rate than the United States grew.
10. During the 1990s Japan grew at
A) roughly the same rate as the United States grew.
B) a slightly faster rate than the United States grew.
C) a slower rate than the United States grew.
D) a much faster rate than the United States grew.
11. During the 2000s Japan grew at
A) roughly the same rate as the United States grew.
B) a slightly faster rate than the United States grew.
C) a slower rate than the United States grew.
D) a much faster rate than the United States grew.
12. During the 1980s Japan grew at
A) roughly the same rate as the Germany grew.
B) a somewhat faster rate (4.5% vs 1.8%) than the Germany grew.
C) a slightly slower rate than the Germany grew.
D) a much faster rate than the Germany grew.
13. During the 1990s Japan grew at
A) roughly the same rate as the Germany grew.
B) a slightly faster rate than the Germany grew.
C) a slower rate than the Germany grew.
D) a much faster rate than the Germany grew.
14. During the 2000s Japan grew at
A) roughly the same rate as the Germany grew.
B) a slightly faster rate than the Germany grew.
C) a slower rate than the Germany grew.
D) a much faster rate than the Germany grew.
15. If you compare U.S. and Japanese rates of growth can be complicated by
A) the fact that the U.S. publishes economic activity in GNP and Japan does it in
GDP.
B) the fact that the Dollar’s value against the Yen fluctuates.
C) inflation in the United States.
D) inflation in Japan.
16. Between 1955 and 1990 Japan’s recessions were
A) worse than those in the United States
B) shorter, more shallow, and less frequent than those in the United States
C) the worst in world history
D) non-existent
17. Between 1990 and 2010 real GDP in Japan
A) rose rapidly.
B) rose, albeit very slowly relative to the rate at which it grew between 1990 and 2010.
C) remained flat as real GDP in Japan was the same in 2010 as it was in 1990.
D) fell.
18. In 1980, Japan was the world’s
A) largest economy
B) second largest economy
C) third largest economy
D) fourth largest economy
19. In 1990, Japan was the world’s
A) largest economy
B) second largest economy
C) third largest economy
D) fourth largest economy
20. In 2000, Japan was the world’s
A) largest economy
B) second largest economy
C) third largest economy
D) fourth largest economy
21. In 2010, Japan was the world’s
A) largest economy
B) second largest economy
C) third largest economy
D) fourth largest economy
22. Real government spending in Japan on public investment (infrastructure)
A) grew from 1990 through 2010.
B) grew from 1990 through 1996 but fell from 1996 through 2010.
C) fell from 1990 through 1996 but grew from 1996 through 2010.
D) fell from 1990 through 2010.
23. Real government spending in Japan on consumption activities (such as government
salaries)
A) grew from 1990 through 2010.
B) was stagnant from 1993 through 2003, grew from 2004 through 2008 and fell
afterwards.
C) fell from 1990 through 1996 but grew from 1996 through 2010.
D) fell from 1990 through 2010.
24. Between 1990 and 2010 Japan has experienced
A) normal levels of inflation (between 1% and 5%).
B) rapid inflation (between 10% and 20%).
C) deflation.
D) a hyperinflation.
25. Between 1990 and 2010 Japan
A) saw some years with normal levels of inflation but more years of deflation.
B) rapid inflation in most years.
C) deflation in each and every year.
D) a hyperinflation.
26. Using an aggregate supply-aggregate demand model, the shock associated with the
bursting of the stock and real-estate bubbles in Japan in 1990 can be depicted by a
movement to the
A) right in the aggregate demand curve.
B) left in the aggregate demand curve.
C) right of the aggregate supply curve.
D) left of the aggregate supply curve.
27. Using an aggregate supply-aggregate demand model, the nondiscretionary fiscal
policy can be depicted by a movement to the
A) right in the aggregate demand curve.
B) left in the aggregate demand curve.
C) right of the aggregate supply curve.
D) left of the aggregate supply curve.
28. Using an aggregate supply-aggregate demand model, discretionary fiscal policy can
be depicted by a movement to the
A) right in the aggregate demand curve.
B) left in the aggregate demand curve.
C) right of the aggregate supply curve.
D) left of the aggregate supply curve.
29. Using an aggregate supply-aggregate demand model, deflationary expectations can be
depicted by a movement to the
A) right in the aggregate demand curve.
B) left in the aggregate demand curve.
C) right of the aggregate supply curve.
D) left of the aggregate supply curve.
30. If you were to use an Aggregate Supply Aggregate Demand diagram to model
nondiscretionary and discretionary fiscal policy in reaction to a negative aggregate
demand shock, you would see the aggregate demand curve
A) move to the right as a result of the shock.
B) move to the left as a result of the shock.
C) move back toward its pre-shock position as a result of these policies.
D) move to the left back toward its pre-shock position as a result of these policies.
31. If you were to use an Aggregate Supply Aggregate Demand diagram to model
nondiscretionary and discretionary fiscal policy in reaction to a positive aggregate
demand shock, you would see the aggregate demand curve
A) move to the right as a result of the shock.
B) move to the left as a result of the shock.
C) move back toward its pre-shock position as a result of these policies.
D) move to the left back toward its pre-shock position as a result of these policies.
32. Federal Reserve policies designed to counteract deflationary expectations in 2008 and
2010 included
A) the purchase of AIG
B) deficit cutting
C) increases in interest rates
D) sale of U.S. Treasuries
33. To counteract deflationary expectations, the Federal Reserve policies in 2008 and
2010 were
A) less bold than is typical in a recession.
B) more bold than in typical in a recession.
C) counterintuitive in that they sought to increase interest rates.
D) counterintuitive in that they sought to restrict bank lending.
34. Federal Reserve policies designed to counteract deflationary expectations in 2008 and
2010 included
A) the purchase of longer term U.S. Treasuries.
B) deficit cutting.
C) increases in interest rates.
D) sale of U.S. Treasuries.
35. Federal Reserve policies designed to counteract deflationary expectations in 2008 and
2010 included
A) the purchase of mortgage backed securities.
B) deficit cutting.
C) increases in interest rates.
D) sale of U.S. Treasuries.
36. Federal Reserve policies designed to counteract deflationary expectations in 2008 and
2010 included
A) keeping the Federal Funds Rate near zero.
B) deficit cutting.
C) increases in interest rates.
D) sale of U.S. Treasuries.
37. The Federal Reserve’s holding of financial assets
A) shrank between 2008 and 2010.
B) rose rapidly in late 2008 and then rose steadily from there.
C) was relatively stable during the period from 2008 to 2010.
D) shrank in 2008 but rebounded in 2009.
38. The fiscal policy of the Japanese government was largely
A) ineffective because it was inconsistent and never sufficient to overcome
deflationary pressures.
B) ineffective though it was consistent in the attempt it was never sufficient to
overcome deflationary pressures.
C) aided by deflationary pressures.
D) stifled by the inflation it fostered.
39. The Japanese 1990–1996 recession and the U.S.2007–2009 recession
A) had very different causes.
B) had very similar causes with precisely the same policy responses.
C) had similar causes, similar (but not identical) policy responses with outcomes that
may or may not be similar.
D) were exactly the same in every respect.
40. One similarity between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was both crises
A) were coincident to the countries being heavily involved in protracted military
struggles.
B) were short lived
C) resulted from real estate bubbles bursting
D) resulted in their government deficits falling.
41. One similarity between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was both crises
A) were coincident to the countries being heavily involved in protracted military
struggles.
B) were short lived
C) resulted in large initial increases in government spending
D) resulted in their government deficits falling.
42. One similarity between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was both crises
A) were coincident to the countries being heavily involved in protracted military
struggles.
B) were short lived
C) resulted in failures of major financial firms
D) resulted in their government deficits falling.
43. One difference between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was
A) the United States Federal Reserve made sure that deflation did not set it while the
Japanese central bank did not.
B) there was no stock market plunge in Japan at the time
C) there were no major financial institutions affected in Japan at the time
D) the Japanese engaged in no major stimulus package
44. One difference between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was
A) the United States federal government continued to spend money on its stimulus
package whereas the Japanese government cut its budget quickly
B) there was no stock market plunge in Japan at the time
C) there were no major financial institutions affected in Japan at the time
D) the Japanese engaged in no major stimulus package
45. One difference between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was
A) the United States Federal Reserve bought up the mortgages in the struggling real
estate sector and the Japanese central bank did not.
B) there was no stock market plunge in Japan at the time
C) there were no major financial institutions affected in Japan at the time
D) the Japanese engaged in no major stimulus package
46. One difference between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was
A) the United States Federal Reserve was consistently expansionary and the Japanese
central bank was not.
B) there was no stock market plunge in Japan at the time
C) there were no major financial institutions affected in Japan at the time
D) the Japanese engaged in no major stimulus package
47. One difference between the Japanese situation of the 1990s and the United States
situation in 2007-2010 was
A) the United States federal government was consistently expansionary in the first
four years of its contraction whereas the Japanese government was not
B) there was no stock market plunge in Japan at the time
C) there were no major financial institutions affected in Japan at the time
D) the Japanese engaged in no major stimulus package
48. Economists, in discussing what is required to get an economy out of a recession are
A) united in their support for policies like QE2 (the buying of long term Treasuries
and mortgage backed securities.
B) united in their support for fiscal policies designed to increase government
spending on infrastructure
C) united in their support for fiscal policies designed to increase government
spending on unemployment benefits
D) in considerable disagreement
49. Economists, in discussing the size of fiscal stimulus, were
A) united in their support for the Obama stimulus plan.
B) united in their opposition the Obama stimulus plan.
C) in considerable disagreement
D) united in their view that it should have been much larger
50. Liberal critics of the Obama stimulus plan focused their concern on
A) their believe that the package was too large and created a threat of inflation
B) their believe that the package was too small and therefore insufficient to the task.
C) the plan’s requirement that plans be shovel ready
D) the fact that there were too few tax cuts in the plan.
51. Expansionary monetary policy would shift the
A) aggregate demand curve to the right.
B) aggregate demand curve to the left.
C) aggregate supply curve up and to the left.
D) aggregate supply curve down and to the right.
52. A purchase of government debt as part of open market operations would be an
example of
A) expansionary fiscal policy.
B) expansionary monetary policy.
C) contractionary fiscal policy.
D) contractionary monetary policy.
53. New tools of monetary policy created in 2008 included
A) restoration of individual income tax rates to their pre-2001 levels.
B) elimination of the requirement that banks hold reserves against deposits.
C) open market purchases and sales of short-term U.S. government securities.
D) the Fed purchase of corporate paper and a new discount window for investment
banks.
54. If interest rates near zero fail to stimulate borrowing, the economy is in a
A) money pit
B) liquidity trap
C) hyperinflation
D) housing bubble