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

Which of the following factors contributed to the sharp reduction in aggregate demand during the Great Depression? I.reduction in wealth II.reduction in net exports III.a financial crisis that reduced money supply IV.tax increases

The experience of the Great Depression led to the widespread acceptance of classical economics.

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 Monetary 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.

According to early classical macroeconomics, unemployment

Which of the following statements is true about classical economists?

Which of the following policies would supply-side economists favor?

A policy implication of Keynesian economics is that

Figure 17-3 -Refer to Figure 17-3.Suppose the economy is at point a.The rational expectations hypothesis suggests that an increase in aggregate demand will result in the economy moving from ________ whereas new Keynesian economics suggests that it will move from _______.

An important distinction between the classical and Keynes's view of the economy is that

The Case in Point titled "Tough Medicine" stated that the Keynesian prescription for an inflationary gap was to

In the late 1970s, oil prices rose sharply and at the same time, U.S.policymakers pursued expansionary fiscal and monetary policies.As a result, real GDP stayed at potential output, while the implicit price deflator jumped 8.1%.If the Fed's goal was to reduce inflation, which of the following would also occur?

New classical economics contends that policy activism is

Keynes's theory of macroeconomics rejects classical macroeconomists' assumptions that

According to Keynesian theory,

While Keynes argued that the Great Depression was caused by government interference in the economy, monetarists contended that it was the result of a decline in investment expenditures.

In 1965 during the Johnson administration, the U.S.economy was headed toward an inflationary gap.Which of the following policies would an economist recommend?

The Smoot-Hawley Tariff Act of 1930 contributed to the collapse of global trade

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?

In 1979, the CPI rose 13.5%, the highest inflation rate recorded in the twentieth century.Public opinion polls in 1979 consistently showed that most people regarded inflation as the leading problem facing the U.S.How did the Fed respond to this situation?

When consumers and producers operate under rational expectations,