Exam 39: Current Issues in Macro Theory and Policy

Suppose laid-off workers and other qualified unemployed workers offer to work for less than the wages being paid existing employed workers, but employers do not hire these workers for fear that existing workers will refuse to cooperate with them.This situation best describes the

Mainstream economists question the new classical assumption that

New classical economists

Which of the following is the basic equation underlying aggregate expenditures?

According to monetarists, a change in the money supply changes

Assume there is an increase in government spending and a reduction in net taxes.With a specific money supply, the consequent

One of the basic assumptions of rational expectations theory is that

If firms are paying efficiency wages, they

The equation of exchange suggests that if the velocity of money and the quantity of goods and services are held constant, a(n)

In the monetarist view,

The equation underlying the mainstream view of macroeconomics is

According to monetarists, a fiscal deficit will be associated with an increase in real output

If households and firms cut back on spending because they expect other households and firms to do so, and this self-fulfilling prophecy causes a recession, then this would be an example of

If the nominal GDP is $477 billion and the velocity of money is 4.5, then the money supply is

The mainstream view of the economy since 1946 is that it has become more stable because of the use of discretionary fiscal and monetary policies.

The velocity of money is the

With inflation targeting, the Federal Reserve would be required to announce its targeted band for

In new classical economics, the change in output caused by a "price-level surprise"

In new classical economics, a "price-level surprise"

Economist Milton Friedman compared the economy to a car needing