Exam 22: The Classical Foundations

According to Classical interest rate theory, which of the following will increase the equilibrium interest rate?

Rational expectations theory is based on the assumption that when individuals in the economy are forming expectations, they

The function of the interest rate in the Classical model was to keep the economy at full employment equilibrium by assuring that

Which of the following statements is inconsistent with Say's Law?

According to Say's law

In the Classical model, an increase in saving will result in saving being __________ than investment which will cause the interest rate to __________.

Under the Cambridge cash balance approach, money demand is determined by

Using the Cambridge equation, by how much does the demand for money rise at a constant real GDP of $2,000 billion when the price level rises by 10 percent from 1.00, given k = 0.25?

According to Classical interest rate theory, which of the following will decrease the equilibrium real interest rate?

Using the cash balance version of the quantity theory with k = .2, an increase in the money supply of $100 billion leads to an increase in GDP of

The velocity of money is assumed to be constant in the Classical model because

According to Classical interest rate theory, which of the following will increase the equilibrium interest rate?

Monetarists differ from Classical economists in that they argue that

If the fraction of the economy's nominal GDP held by the public in the form of money is 20 percent, income velocity in the economy is

Which of the following is assumed constant in the short-run Classical model?

In the Classical view, inflation is the result of

A decrease in aggregate demand in the Classical model leads to

The Cambridge k is all of the following except

Roughly speaking, the nominal interest rate is __________ than the real interest rate by the amount of the expected __________.

The origins of modern monetarism lie in the work of the