Exam 39: Current Issues in Macro Theory and Policy

The view that changes in the money supply are the primary cause of change in real output and the price level is most closely associated with

The idea that the economy will self-correct when confronted with changes in aggregate demand is associated with new classical economics.

Monetarists say that the relationship between the amount of money that households and businesses want to hold and the level of national output and income

Mainstream economists think that

The crowding-out effect refers to the possibility that

In the mainstream view, the economic instability brought about by "oil shocks" works through changes in

An efficiency wage is one that

Monetarists believe that

According to economist Milton Friedman, a major reason for macroeconomic instability is

In the rational expectations theory, a temporary change in real output could result from

The view that anticipated changes in the money supply will have no effect on the economy's output would most likely be a proposition of

(Consider This) Monetarists claim that the financial crisis and resulting 2007-2009 recession were caused largely by

In the monetarist view, the economy is inherently stable, but the mismanagement of monetary policy creates instability.

Which economic perspective would be most closely associated with the view that discretionary monetary policy is an effective force for stabilizing the economy?

If nominal GDP is $848 billion and the velocity of money is 4, then the

According to the equation of exchange, changes in the money supply can affect

To stabilize the economy, monetarists and rational expectations economists

Which view of the macroeconomy suggests that the speed of adjustment for self-correction would be very quick?

A mainstream criticism of rational expectations theory is that

In the insider-outsider theory, insiders are agents and outsiders are principals.