Exam 17: A Brief History of Macroeconomic Thought and Policy

Figure 17-1 -Refer to Figure 17-1. Suppose the U.S. economy is at point j. With the onset of World War II, expansionary fiscal policies forced by the war pushed into an inflationary gap. Which of the following best illustrates this event?

When did policy makers in the U.S. first use fiscal policy with the intent of manipulating Jaggregate demand to move the economy to its potential level of real GDP?

A 2010 survey of economists suggested that the _______ approach is the preferred approach to macroeconomic analysis.

Economists who subscribe to the rational expectations hypothesis

Consider the following statement: "A consistent countercyclical policy has no effect on employment and output, since individuals will recognize those policies as systematic and will anticipate them correctly." This statement is most closely associated with

Milton Friedman was a leader and major proponent of

During the 1970s when the U.S. experienced rising inflation and unemployment, economists began to reconsider the significance of aggregate supply as well.

According to the Keynesian theory of income and employment,

If the economy's short-run aggregate supply curve is upward sloping, an increase in Jaggregate demand will cause

New classical economics contends that policy activism is

Which of the following are reasons why monetarists oppose activist stabilization policies? I. Monetary policy lags are so long and variable that trying to stabilize the economy using Jmonetary policy can be destabilizing. II. Monetary policy affects a nation's currency exchange rate and affects the nation's competitiveness in the global market. III. Because of crowding-out effects, fiscal policy has no effect on GDP. IV. Fiscal policies must be financed by government borrowing or tax increases, both of which affect aggregate demand negatively.

In 1963, President Kennedy proposed a tax cut to stimulate the economy. In 1963, Congress approved the tax cut. The one-year period between these two events is attributed to

Keynes argued that the surest way to bring the economy out of the Great Depression was to

According to early classical macroeconomics, unemployment

David Ricardo's work is associated with _______ economics.

John Maynard Keynes argued that _______

The body of economic thought associated with David Ricardo is called new classical Jeconomics.

Figure 17-3 -Refer to Figure 17-3. Suppose the economy is at point c. A Keynesian economist would advocate

New Keynesian economics

In 2009, the Obama administration advocated and Congress passed a massive spending and tax relief package of about $800 billion to stimulate aggregate demand. This policy would be favored by