Exam 32: Macro a Brief History of Macroeconomic Thought and Policy

The body of economic thought associated with 19th century economist _______ is called ________ economics.

Figure 17-1 -Refer to Figure 17-1.During the Great Depression, aggregate demand declined sharply.Suppose the economy moved to a short-run equilibrium at point k.Over time, the economy moved to point j.What could have caused the economy to move to point j?

Figure 17-2 -Refer to Figure 17-2.The economy is initially in equilibrium at point (1).Now suppose a reduction in the money supply causes aggregate demand to fall to AD₂.The below potential output level of Y₂ will exist as long as

The rational expectations hypothesis suggests that monetary policy, even though it will affect the aggregate demand curve, might have no effect on real GDP.

David Ricardo's work is associated with _______ economics.

If the economy's short-run aggregate supply curve is upward sloping, a decrease in aggregate demand will cause

In the 1960s, despite the successful application of expansionary fiscal policy in the United States, Milton Friedman argued that

The Monetarists school of economics believes that changes in _______ are the primary Causes of changes in ______.

In the early 1990s, although the U.S.economy was in a recession, Congress rejected the idea of using an expansionary fiscal policy to close the recessionary gap on grounds that it would increase the budget deficit.This view accords with

Figure 17-1 -Refer to Figure 17-1.During the Great Depression, aggregate demand declined sharply.As a result, the economy moved to

Prior to the Great Depression of the 1930s, macroeconomics was dominated by

During the Johnson administration, the U.S.economy was headed toward an inflationary gap.In 1967 President Johnson proposed a temporary 10% increase in personal income taxes.If the Fed wanted to mitigate the effects of this contractionary policy, what could it do?

Early classical macroeconomics was based largely on the foundation of

Milton Friedman is a leader and major proponent of

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

Suppose the economy is initially in long-run equilibrium.Now suppose oil prices rise sharply and at the same time, policymakers pursue expansionary monetary and fiscal policies.Which of the following will occur as a result of these two events, given that supply-side effects dominate demand-side effects?

One distinguishing feature of new Keynesian economics (from earlier schools of thought) is the greater use of microeconomic analysis in macroeconomic analysis.

Prior to the Great Depression, the dominant economic view held that

According to new classical economics, individuals will respond to expansionary monetary Policy by

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