Exam 17: A Brief History of Macroeconomic Thought and Policy

Use the following to answer questions Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression -(Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression) During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap.Nominal wages plunged roughly 20% between 1929 and 1933.How did the economy respond to the falling wages?

The recession in real GDP in 1970 during the Nixon administration

Monetarists conclude that the primary determinant of changes in nominal GDP is

The classical school focused on the long-run forces that determined an economy's potential level of output.

If prices and wages are sticky, a decrease in aggregate demand will cause

Keynes's theory of macroeconomics rejects classical macroeconomists' assumptions that

Which of the following is true about Keynesians and monetarists with regards to policy intervention?

David Ricardo's work is associated with _______ economics.

Supply-side economics is the belief that fiscal policy can be used to stimulate long-run economic growth.

Which of the following is true about the classical theory and the monetarist theory with Regards to the impact of changes in the money supply on the economy?

In 1963, President Kennedy proposed a tax cut to stimulate the economy.In 1963, Congress approved the tax cut.The one-year period between these two events is attributed to

Use the following to answer questions Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression -(Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression) Which price level and output level best illustrates where the U.S.economy was before the Great Depression began?

Which of the following are reasons why monetarists oppose activist stabilization policies? I.Monetary policy lags are so long and variable that trying to stabilize the economy using Monetary policy can be destabilizing. II.Monetary policy affects a nation's currency exchange rate and affects the nation's competitiveness in the global market. III.Because of crowding-out effects, fiscal policy has no effect on GDP. IV.Fiscal policies must be financed by government borrowing or tax increases, both of which affect aggregate demand negatively.

During the Great Depression, investment plummeted because

A recent survey of economists suggested that the _______ approach is the preferred approach to macroeconomic analysis.

New classical theory asserts that, because people have rational expectations, if a policy of reducing the money supply is used

Which of the following factors contributed to the sharp reduction in aggregate demand during the Great Depression? I.reduction in wealth II.reduction in net exports III.a financial crisis that reduced money supply IV.tax increases

In the 1970s the U.S.economy experienced a novel set of macroeconomic outcomes: rising Price level and falling output.This experience led policymakers to

Early classical macroeconomics was based largely on the foundation of

Use the following to answer questions Exhibit: Economic Adjustments -The worst economic downturn in the United States in the twentieth century occurred during the 1930s.