Exam 39: Current Issues in Macro Theory and Policy

From a rational expectations perspective, an easy money policy is likely to be completely

The "real" factors in the real-business-cycle theory include resource availability and technology.

New classical economists see the economy as incapable of self-correction when disturbed and pushed away from its full-employment level of real output.

The equation of exchange suggests that, if the supply and velocity of money remain unchanged, an increase in the physical volume of goods and services produced will cause

If the economy's real output is growing by 2.5 percent a year, then, in order to maintain price stability, a monetarist would most likely recommend that money supply should be

The key implication for macroeconomic instability is that insider-outsider relationships in the labor market

In the equation of exchange, the nominal GDP is designated by

Economist Milton Friedman is most closely associated with

The average number of times per year that a dollar bill is used to pay for final goods and services is the

Answer the question on the basis of the following information for a hypothetical economy.All values are in nominal terms. M = $100 V = 2 Ca = $160 Xn = $10 G = $10 If the price level P is 4, Q is

The idea that an economy can get stuck in either an unemployment equilibrium or an inflation equilibrium is most closely associated with

Which of the following is a likely result of firms paying efficiency wages?

Monetarists and rational expectations theorists believe that cost-push inflation is impossible in the long run in the absence of excessive money supply growth.

New classical economists say that a fully anticipated decrease in aggregate demand

Mainstream macroeconomists see two main sources of macroeconomic instability: changes in investment spending and, occasionally, adverse aggregate supply shocks.

The "efficiency wage" is one possible explanation for rigidities in the economy that lead to economic instability.

The idea that business fluctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

As monetarists view the equation of exchange,

In the new classical theory, a fully anticipated change in aggregate demand and the price level will temporarily change real output, but an unanticipated change will not.

Monetarists argue that V in the equation of exchange is stable and, thus, a change in M will bring about a direct and proportional change in nominal GDP.