Question 1

Between 1992 and the early 2000s, Poland experienced

Accepted Answer

A) strong economic growth, but increasing inflation. 
B) weak economic growth, but falling inflation. 
C) strong economic growth and falling inflation. 
D) weak economic growth and increasing inflation. 
A) strong economic growth, but increasing inflation. 
B) weak economic growth, but falling inflation. 
C) strong economic growth and falling inflation. 
D) weak economic growth and increasing inflation.

Question 2

New Keynesians believe that an increase in the nominal money supply will result in

Accepted Answer

A) no change in the price level. 
B) a proportional increase in the price level. 
C) a less than proportional increase in the price level. 
D) a fall in the price level. 
A) no change in the price level. 
B) a proportional increase in the price level. 
C) a less than proportional increase in the price level. 
D) a fall in the price level.

Question 3

The hypothesis that large negative shifts in aggregate demand reduce the full-employment level of output is known as

Accepted Answer

A) the real balance effect. 
B) the perverse employment syndrome. 
C) the real business cycle effect. 
D) hysteresis. 
A) the real balance effect. 
B) the perverse employment syndrome. 
C) the real business cycle effect. 
D) hysteresis.

Question 4

Which of the following is the correct new Keynesian expression for the price level?

Accepted Answer

A) P = Pe + b[(1 - c)/c]ΔY 
B) Pe = P + b[(1 - c)/c]ΔY 
C) P = Pe + b[(1 + c)/c]ΔY 
D) Pe = P + b[(1 + c)/c]ΔY 
A) P = Pe + b[(1 - c)/c]ΔY 
B) Pe = P + b[(1 - c)/c]ΔY 
C) P = Pe + b[(1 + c)/c]ΔY 
D) Pe = P + b[(1 + c)/c]ΔY

Question 5

In the new Keynesian expression for the price level, c represents

Accepted Answer

A) the fraction of firms in the economy with sticky prices. 
B) the marginal propensity to consume. 
C) the responsiveness of the price level to differences between actual aggregate output and full-employment aggregate output. 
D) the responsiveness of aggregate output to the difference between the actual price level and the expected price level. 
A) the fraction of firms in the economy with sticky prices. 
B) the marginal propensity to consume. 
C) the responsiveness of the price level to differences between actual aggregate output and full-employment aggregate output. 
D) the responsiveness of aggregate output to the difference between the actual price level and the expected price level.

Question 6

Suppose that initially U.S. households are saving only a small fraction of their incomes because they are relying on rapid increase in stock prices to increase their wealth. If stock prices decline and households decide to increase their saving rate, what will be impact on output in the new Keynesian view? Be sure to distinguish the short run from the long run.

Accepted Answer

The increase in the saving rate will shi

Question 7

The Ricardian equivalence proposition will not hold if

Accepted Answer

A) the government finances its expenditures by borrowing rather than by taxing. 
B) the government finances its expenditures by taxing rather than by borrowing. 
C) consumers face restrictions on the amount they can borrow. 
D) consumers finance their tax payments by borrowing. 
A) the government finances its expenditures by borrowing rather than by taxing. 
B) the government finances its expenditures by taxing rather than by borrowing. 
C) consumers face restrictions on the amount they can borrow. 
D) consumers finance their tax payments by borrowing.

Question 8

Economists generally agree that in the long run changes in aggregate demand affect

Accepted Answer

A) aggregate output but not the price level. 
B) the price level but not aggregate output. 
C) both the price level and aggregate output. 
D) neither the price level nor aggregate output. 
A) aggregate output but not the price level. 
B) the price level but not aggregate output. 
C) both the price level and aggregate output. 
D) neither the price level nor aggregate output.

Question 9

An increase in the price level

Accepted Answer

A) shifts the short-run aggregate supply curve up and to the left. 
B) shifts the short-run aggregate supply curve down and to the right. 
C) shifts the long-run aggregate supply curve to the left. 
D) results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve. 
A) shifts the short-run aggregate supply curve up and to the left. 
B) shifts the short-run aggregate supply curve down and to the right. 
C) shifts the long-run aggregate supply curve to the left. 
D) results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve.

Question 10

Which of the following best describes a price taker?

Accepted Answer

A) A firm taking the market price as given 
B) Price strategies found in monopolistically competitive markets 
C) Prices being set by long-term contracts 
D) Firms taking the aggregate price level as given 
A) A firm taking the market price as given 
B) Price strategies found in monopolistically competitive markets 
C) Prices being set by long-term contracts 
D) Firms taking the aggregate price level as given

Question 11

If labor costs rise at the same time that the federal government decreases its spending, in the short run

Accepted Answer

A) aggregate output and the price level will both increase. 
B) aggregate output will increase, but the price level will fall. 
C) aggregate output and the price level will both fall. 
D) aggregate output will fall, but the price level may either increase or decrease. 
A) aggregate output and the price level will both increase. 
B) aggregate output will increase, but the price level will fall. 
C) aggregate output and the price level will both fall. 
D) aggregate output will fall, but the price level may either increase or decrease.

Question 12

Which of the following is NOT an example of a supply shock?

Accepted Answer

A) A drought in the Midwest 
B) A decline in natural gas prices following discovery of new fields 
C) The introduction of a new line of computer-controlled machine tools in manufacturing 
D) A substantial increase in federal government spending on medicare 
A) A drought in the Midwest 
B) A decline in natural gas prices following discovery of new fields 
C) The introduction of a new line of computer-controlled machine tools in manufacturing 
D) A substantial increase in federal government spending on medicare

Between 1992 and the early 2000s, Poland experienced

New Keynesians believe that an increase in the nominal money supply will result in

The hypothesis that large negative shifts in aggregate demand reduce the full-employment level of output is known as

Which of the following is the correct new Keynesian expression for the price level?

In the new Keynesian expression for the price level, c represents

The Ricardian equivalence proposition will not hold if

Economists generally agree that in the long run changes in aggregate demand affect

An increase in the price level

Which of the following best describes a price taker?

If labor costs rise at the same time that the federal government decreases its spending, in the short run

Which of the following is NOT an example of a supply shock?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters

Exam 25: Aggregate Demand and Aggregate Supply

Between 1992 and the early 2000s, Poland experienced

New Keynesians believe that an increase in the nominal money supply will result in

The hypothesis that large negative shifts in aggregate demand reduce the full-employment level of output is known as

Which of the following is the correct new Keynesian expression for the price level?

In the new Keynesian expression for the price level, c represents

The Ricardian equivalence proposition will not hold if

Economists generally agree that in the long run changes in aggregate demand affect

An increase in the price level

Which of the following best describes a price taker?

If labor costs rise at the same time that the federal government decreases its spending, in the short run

Which of the following is NOT an example of a supply shock?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters