Exam 39: Current Issues in Macro Theory and Policy

An idea from monetarism that has been absorbed into mainstream macroeconomics would be the

In the equation of exchange, V indicates the

Which of the following contributes to the downward inflexibility of wages, according to mainstream economists?

According to real-business-cycle theory, recessions are caused by

Within the aggregate demand-aggregate supply framework, monetarists argue that a change in aggregate

In the rational expectations view,

New classical economics suggests that in the long-run, changes in aggregate demand will cause

Under its recent policy of inflation targeting, the Fed has committed to adjusting monetary policy as necessary to achieve a target inflation rate of

Most economists today would agree with the view that "money doesn't matter" in macroeconomic theory.

The theory of rational expectations concludes that

The real-business-cycle theory holds that business fluctuations are caused by

Which of the following ideas of the rational expectations theory has been absorbed into mainstream macroeconomics?

The policy position that the supply of money should be increased at a constant rate each year is most closely associated with the views of

If the amount of money in circulation is $180 billion and the value of the economy's total output is $540 billion, then the

Real-business-cycle theory views changes in resource availability and technology as shifting aggregate demand and thus causing macroeconomic instability.

In the mainstream view, one major source of instability in the macroeconomy is the volatility of

The idea of coordination failures suggests the possibility of less than desirable price-level and real-output equilibriums in the economy.

In the view of rational expectations theory,

The rational expectations view that expectations regarding policy and its effects are important to consider

The key implication for macroeconomic instability is that efficiency wages