Exam 26: Rational Expectations Redux: Monetary Policy Implications
Exam 2: The Financial System80 Questions
Exam 3: Money81 Questions
Exam 4: Interest Rates73 Questions
Exam 5: The Economics of Interest-Rate Fluctuations73 Questions
Exam 6: The Economics of Interest-Rate Spreads and Yield Curves70 Questions
Exam 7: Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities80 Questions
Exam 8: Financial Structure, Transaction Costs, and Asymmetric Information75 Questions
Exam 9: Bank Management82 Questions
Exam 10: Innovation and Structure in Banking and Finance75 Questions
Exam 11: The Economics of Financial Regulation77 Questions
Exam 12: Financial Derivatives53 Questions
Exam 13: Financial Crises: Causes and Consequences79 Questions
Exam 14: Central Bank Form and Function73 Questions
Exam 15: The Money Supply Process and the Money Multipliers135 Questions
Exam 16: Monetary Policy Tools78 Questions
Exam 17: Monetary Policy Targets and Goals77 Questions
Exam 18: Foreign Exchange75 Questions
Exam 19: International Monetary Regimes73 Questions
Exam 20: Money Demand75 Questions
Exam 21: Is-Lm75 Questions
Exam 22: Is-Lm in Action73 Questions
Exam 23: Aggregate Supply and Demand and the Growth Diamond59 Questions
Exam 24: Monetary Policy Transmission Mechanisms75 Questions
Exam 25: Inflation and Money75 Questions
Exam 26: Rational Expectations Redux: Monetary Policy Implications69 Questions
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If expectations are rational, the credibility of an anti-inflation announcement reduces the resulting fall in employment.
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(True/False)
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Correct Answer:
True
At the beginning of the Reagan administration, AS shifted in spite of the Fed's commitment to lower inflation. What does this imply about the labor market and the validity of the new classical assumptions?
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(Essay)
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Correct Answer:
The shift indicated the wages must have continued to rise, as inflation was expected to continue. Either the announcement was completely credible or wages were sticky, in contrast to the new classical assumptions.
When a central bank announces that it will lower inflation, it is attempting to influence
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(Multiple Choice)
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Correct Answer:
C
Unanticipated monetary policy designed to reduce inflation would lead to a reduction in employment under which model?
(Multiple Choice)
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Starting from the natural rate, if prices are sticky, anticipated EMP will raise equilibrium output and inflation.
(True/False)
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New Keynesians believe that anticipated policies have some short-term effects due to wage and price stickiness.
(True/False)
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Why do new classical economists say that activist policy might be not just ineffective but mistaken?
(Essay)
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U.S. economy in the early 1980s gave support for the key assumptions of the new Keynesian model.
(True/False)
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According to the new Keynesian model, expansionary monetary policy can be effective if it is
(Multiple Choice)
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Credibility of the monetary policymaker is important according to the new Keynesian model.
(True/False)
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A large change in expectations can cause EMP to lead to a reduction in output if the shift in _____ is not sufficiently large.
(Multiple Choice)
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If an increase in the money supply is less than what was expected, output will rise.
(True/False)
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What is the major element introduced to macroeconomics models by new classical economists?
(Short Answer)
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In the new Keynesian model, a credible commitment to lower inflation will cause output to rise.
(True/False)
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Credibility of an inflation reduction policy does NOT matter in which of the following models?
(Multiple Choice)
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Assuming flexible prices, if the federal funds rate rises more than expected, then the shift to the _____ by AD will be _____ than the shift to the _____ by AS in the short run.
(Multiple Choice)
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If autonomous consumption rises more than expected, then output rises under the
(Multiple Choice)
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New Keynesian economists believe that EMP cannot increase output above the natural rate in the short run.
(True/False)
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