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

Who was the economist who laid the foundations for classical economics?

New classical economists argue that unless people are taken by surprise, a decrease in aggregate demand will cause

Monetarists argue that impact lags associated with changes in the money supply are long and variable.

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

The theory that argues most strongly for countercyclical policy activism is

The theory that dominated macroeconomic thinking in the 1960s was

The close relationship between M2 and nominal GDP in the 1960s and 1970s vanished from the 1980s through 2007.Which of the following contributed to this breakdown? I.deregulation of the banking industry II.introduction of new financial products (not included in M2)which allowed people to transfer funds into their checking accounts as and when needed III.monetary policy lags

In the 1970s, the U.S.economy experienced both inflation and unemployment.This led economists to recognize that I.stabilization was a much more difficult task than many economists anticipated. II.the Keynesian doctrine correctly asserts that reducing inflation and unemployment can be addressed by fiscal policies. III.shifts in aggregate could frustrate policymaking efforts whereas shifts in the short-run Aggregate were more easily addressed.

If prices and wages are sticky, a decrease in aggregate demand will cause

Which of the following groups of economists perceive the economy as essentially stable and self-correcting?

New Keynesian economics is built on I.the Keynesian approach II.the monetarist approach III.the new classical approach

Classical economists believed I.there could be temporary periods of unemployment. II.emphasis should be placed on the long run, and in the long run all would be set right Because of the smooth functioning of the price system. III.the Great Depression would be a short-run aberration.

The classical school focused on the long-run forces that determined an economy's potential level of output.

According to Milton Friedman, any divergence in unemployment from its natural rate is Temporary because

Figure 17-1 -Refer to Figure 17-1.During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap.Nominal wages plunged roughly 20% between 1929 and 1933.How did the economy respond to the falling wages?

The recession in real GDP in 1970 during the Nixon administration

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

Figure 17-1 -Refer to Figure 17-1.The Great Depression began with a shift

The rational expectations hypothesis assumes that individuals form expectations about the future based on the information available to them and that they act on those expectations.

Figure 17-1 -Refer to Figure 17-1.Which price level and output level best illustrates where the U.S.economy was before the Great Depression began?