Exam 17: A Brief History of Macroeconomic Thought and Policy

Which of the following was not an explanation for the lower volatility of the U.S.economy during the 25-year period that preceded the Great Recession?

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 point best illustrates where the U.S.economy was just prior to the Great Depression?

Classical economists believed I.there could be temporary periods of unemployment. II.emphasis should be placed on the long run, and in the long run all would be set right Because of the smooth functioning of the price system. III.the Great Depression would be a short-run aberration.

The theory that argues most strongly for countercyclical policy activism is

In the early 1990s, although the U.S.economy was in a recession, Congress rejected the idea of using an expansionary fiscal policy to close the recessionary gap.What was the reason?

The General Theory of Employment, Interest, and Money was written by

Suppose the U.S.economy experiences stagflation.An expansionary fiscal policy

During the Johnson administration, the U.S.economy was headed toward an inflationary gap.In 1967 President Johnson proposed a temporary 10% increase in personal income taxes.If the Fed wanted to mitigate the effects of this contractionary policy, what could it do?

According to Keynesian theory,

Who was the economist who laid the foundations for classical economics?

Which of the following is true about the Great Depression?

New classical economics

Which component of aggregate demand plunged sharply at the start of the Great Depression?

If the economy's short-run aggregate supply curve is upward sloping, a decrease in aggregate demand will cause

Monetarists argue that impact lags associated with changes in the money supply are long and variable.

Keynes believed that wages and prices were sticky.Therefore, a rightward shift of the Aggregate demand curve would cause

In the 1970s, the U.S.economy saw sharp changes in real GDP and in the price level.This presented a challenge to policymakers and to economists because these outcomes could not be explained by a Keynesian analysis.

Use the following to answer questions Exhibit: Responses to a Decrease in Aggregate Demand -(Exhibit: Responses to a Decrease in Aggregate Demand) The economy is initially in equilibrium at point (1) .Now suppose a reduction in the money supply causes aggregate demand to fall to AD₂.Which of the following explains the new classical view regarding economic agents' response to the decrease in money supply?

If the economy's short-run aggregate supply curve is upward sloping, an increase in Aggregate demand will cause

During the 1970s when the U.S.experienced rising inflation and unemployment, economists began to reconsider the significance of aggregate supply as well.