Question 1

The New Keynesian model predicts that

Accepted Answer

A) Keynesian transmission mechanism for monetary policy is initially through the private sector. 
B) monetary policy is unobservable and unpredictable. 
C) monetary policy is not as effective as fiscal policy. 
D) monetary policy causes business cycles. 
E) money is neutral. 
A) Keynesian transmission mechanism for monetary policy is initially through the private sector. 
B) monetary policy is unobservable and unpredictable. 
C) monetary policy is not as effective as fiscal policy. 
D) monetary policy causes business cycles. 
E) money is neutral. D

Question 2

In the New Keynesian model, an increase in current total factor productivity shifts the

Accepted Answer

A) output demand curve to the left. 
B) production function to the right. 
C) production function up. 
D) output demand curve to the right. 
E) output demand curve and production function to the left. 
A) output demand curve to the left. 
B) production function to the right. 
C) production function up. 
D) output demand curve to the right. 
E) output demand curve and production function to the left. C

Question 3

In the New Keynesian model, an increase in current total factor productivity

Accepted Answer

A) increases output and increases employment. 
B) increases output and increases the real interest rate. 
C) decreases output and increases the real interest rate. 
D) decreases output and decreases employment. 
E) does not affect output and decreases employment. 
A) increases output and increases employment. 
B) increases output and increases the real interest rate. 
C) decreases output and increases the real interest rate. 
D) decreases output and decreases employment. 
E) does not affect output and decreases employment. E

Question 4

In the New Keynesian model, suppose that the output gap is initially zero, there is an increase in money demand, and the central bank wants to keep the output gap at zero. What happens?

Accepted Answer

A) Investment goes down. 
B) Output goes up. 
C) Money supply goes up. 
D) Consumption goes up. 
E) Employment goes down. 
A) Investment goes down. 
B) Output goes up. 
C) Money supply goes up. 
D) Consumption goes up. 
E) Employment goes down.

Question 5

Compared to monetary policy, fiscal policy leads to

Accepted Answer

A) more efficient outcomes. 
B) larger changes in output. 
C) more private spending relative to public. 
D) more stable prices. 
E) the price level fluctuates more in the short run. 
A) more efficient outcomes. 
B) larger changes in output. 
C) more private spending relative to public. 
D) more stable prices. 
E) the price level fluctuates more in the short run.

Question 6

The Yd(IS)curve in the New Keynesian model is identical to which of the following in the intertemporal monetary model?

Accepted Answer

A) the labour supply curve 
B) the output supply curve 
C) the labour demand curve 
D) the output demand curve 
E) the total factor productivity curve 
A) the labour supply curve 
B) the output supply curve 
C) the labour demand curve 
D) the output demand curve 
E) the total factor productivity curve

Question 7

In analyzing the fit of the New Keynesian model to the data, it is important to

Accepted Answer

A) recognize the important contribution of the real business cycle theorists. 
B) understand that consumption is countercyclical. 
C) assume that monetary policy is irrelevant. 
D) understand the role of international trade. 
E) recognize that policy is responding to events in the economy. 
A) recognize the important contribution of the real business cycle theorists. 
B) understand that consumption is countercyclical. 
C) assume that monetary policy is irrelevant. 
D) understand the role of international trade. 
E) recognize that policy is responding to events in the economy.

Question 8

The output gap is the difference between

Accepted Answer

A) output demand and output supply. 
B) the market-clearing level of output and the actual level of output, Ym - Y*. 
C) the Bank of Canada's output target and the market-clearing level of output. 
D) nominal output and real output. 
E) current and future total factor productivity. 
A) output demand and output supply. 
B) the market-clearing level of output and the actual level of output, Ym - Y*. 
C) the Bank of Canada's output target and the market-clearing level of output. 
D) nominal output and real output. 
E) current and future total factor productivity.

Question 9

Keynesian sticky price models are typically called

Accepted Answer

A) menu cost models. 
B) administered cost models. 
C) faulty pricing models. 
D) inflation forecasting models. 
E) classical models. 
A) menu cost models. 
B) administered cost models. 
C) faulty pricing models. 
D) inflation forecasting models. 
E) classical models.

Question 10

Different business cycle models

Accepted Answer

A) support monetary policy but not fiscal policy. 
B) have contradictory implications for monetary and fiscal policy. 
C) have similar implications for monetary and fiscal policy. 
D) all imply that active government intervention is detrimental. 
E) all justify active government stabilization policy. 
A) support monetary policy but not fiscal policy. 
B) have contradictory implications for monetary and fiscal policy. 
C) have similar implications for monetary and fiscal policy. 
D) all imply that active government intervention is detrimental. 
E) all justify active government stabilization policy.

Question 11

Stabilization policy refers to using government policy

Accepted Answer

A) to promote competition among firms and industries. 
B) to promote technology development. 
C) to smooth out business cycles. 
D) to set up a legal system. 
E) to alter commodity prices. 
A) to promote competition among firms and industries. 
B) to promote technology development. 
C) to smooth out business cycles. 
D) to set up a legal system. 
E) to alter commodity prices.

Question 12

Real business cycle theory was introduced by

Accepted Answer

A) Thomas Cooley and Gary Hansen. 
B) Finn Kydland and Edward Prescott. 
C) Robert Lucas. 
D) Milton Friedman and Anna Schwartz. 
E) Milton Friedman and Robert Lucas. 
A) Thomas Cooley and Gary Hansen. 
B) Finn Kydland and Edward Prescott. 
C) Robert Lucas. 
D) Milton Friedman and Anna Schwartz. 
E) Milton Friedman and Robert Lucas.

Question 13

In the New Keynesian model, an increase in future total factor productivity

Accepted Answer

A) shifts the output supply curve to the right. 
B) does not impact current output. 
C) shifts the output supply curve to the left. 
D) shifts the output demand curve to the right. 
E) shifts the output demand curve to the left. 
A) shifts the output supply curve to the right. 
B) does not impact current output. 
C) shifts the output supply curve to the left. 
D) shifts the output demand curve to the right. 
E) shifts the output demand curve to the left.

Question 14

Crowding out of private expenditure occurs when

Accepted Answer

A) increases in the price level lowers the real wage. 
B) the money supply is decreased. 
C) the money supply is increased. 
D) government spending decreases. 
E) government spending increases. 
A) increases in the price level lowers the real wage. 
B) the money supply is decreased. 
C) the money supply is increased. 
D) government spending decreases. 
E) government spending increases.

Question 15

If there is a liquidity trap in the New Keynesian model then

Accepted Answer

A) fiscal policy is irrelevant. 
B) conventional monetary easing works well. 
C) government spending is trapped. 
D) the nominal interest rate is at its lower bound. 
E) prices cease to be sticky. 
A) fiscal policy is irrelevant. 
B) conventional monetary easing works well. 
C) government spending is trapped. 
D) the nominal interest rate is at its lower bound. 
E) prices cease to be sticky.

Question 16

The New Keynesian model and the monetary intertemporal model are essentially identical EXCEPT that

Accepted Answer

A) nominal and real interest rates are permitted to fluctuate. 
B) Bank of Canada policy is restricted. 
C) total factor productivity is neutral. 
D) the price level is not sufficiently flexible for the goods market to clear in the short run. 
E) money is neutral. 
A) nominal and real interest rates are permitted to fluctuate. 
B) Bank of Canada policy is restricted. 
C) total factor productivity is neutral. 
D) the price level is not sufficiently flexible for the goods market to clear in the short run. 
E) money is neutral.

Question 17

The real business cycle model best explains the procyclicality of the nominal money by

Accepted Answer

A) uncorrelated money. 
B) an unpredictable Bank of Canada. 
C) endogenous money. 
D) exogenous money. 
E) monetary neutrality. 
A) uncorrelated money. 
B) an unpredictable Bank of Canada. 
C) endogenous money. 
D) exogenous money. 
E) monetary neutrality.

Question 18

An important critique of real business cycle theory is the belief that cyclical movements in total factor productivity

Accepted Answer

A) are too small to account for the size of fluctuations in real GDP. 
B) does not explain the overall fluctuations in the business cycle. 
C) may, in part, be an artifact of measurement error. 
D) rarely occur. 
E) lead to imperceptible changes in labour demand. 
A) are too small to account for the size of fluctuations in real GDP. 
B) does not explain the overall fluctuations in the business cycle. 
C) may, in part, be an artifact of measurement error. 
D) rarely occur. 
E) lead to imperceptible changes in labour demand.

Question 19

Endogenous money is where the money supply is NOT determined by the monetary authority, but

Accepted Answer

A) by the federal government. 
B) by the private sector. 
C) responds to conditions in the economy. 
D) the consumer. 
E) by total money demand in the economy. 
A) by the federal government. 
B) by the private sector. 
C) responds to conditions in the economy. 
D) the consumer. 
E) by total money demand in the economy.

Question 20

If the central bank in a New Keynesian model can always reduce the output gap to zero

Accepted Answer

A) the price level will be procyclical. 
B) investment will be procyclical if there are total factor productivity shocks. 
C) consumption will be countercyclical if there are total factor productivity shocks. 
D) the price level will be countercyclical. 
E) this would be inefficient. 
A) the price level will be procyclical. 
B) investment will be procyclical if there are total factor productivity shocks. 
C) consumption will be countercyclical if there are total factor productivity shocks. 
D) the price level will be countercyclical. 
E) this would be inefficient.

The New Keynesian model predicts that

In the New Keynesian model, an increase in current total factor productivity shifts the

In the New Keynesian model, an increase in current total factor productivity

In the New Keynesian model, suppose that the output gap is initially zero, there is an increase in money demand, and the central bank wants to keep the output gap at zero. What happens?

Compared to monetary policy, fiscal policy leads to

The Yd(IS)curve in the New Keynesian model is identical to which of the following in the intertemporal monetary model?

In analyzing the fit of the New Keynesian model to the data, it is important to

The output gap is the difference between

Keynesian sticky price models are typically called

Different business cycle models

Stabilization policy refers to using government policy

Real business cycle theory was introduced by

In the New Keynesian model, an increase in future total factor productivity

Crowding out of private expenditure occurs when

If there is a liquidity trap in the New Keynesian model then

The New Keynesian model and the monetary intertemporal model are essentially identical EXCEPT that

The real business cycle model best explains the procyclicality of the nominal money by

An important critique of real business cycle theory is the belief that cyclical movements in total factor productivity

Endogenous money is where the money supply is NOT determined by the monetary authority, but

If the central bank in a New Keynesian model can always reduce the output gap to zero

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters

Exam 13: Business Cycle Models With Flexible Prices and Wages

The New Keynesian model predicts that

In the New Keynesian model, an increase in current total factor productivity shifts the

In the New Keynesian model, an increase in current total factor productivity

In the New Keynesian model, suppose that the output gap is initially zero, there is an increase in money demand, and the central bank wants to keep the output gap at zero. What happens?

Compared to monetary policy, fiscal policy leads to

The Yd(IS)curve in the New Keynesian model is identical to which of the following in the intertemporal monetary model?

In analyzing the fit of the New Keynesian model to the data, it is important to

The output gap is the difference between

Keynesian sticky price models are typically called

Different business cycle models

Stabilization policy refers to using government policy

Real business cycle theory was introduced by

In the New Keynesian model, an increase in future total factor productivity

Crowding out of private expenditure occurs when

If there is a liquidity trap in the New Keynesian model then

The New Keynesian model and the monetary intertemporal model are essentially identical EXCEPT that

The real business cycle model best explains the procyclicality of the nominal money by

An important critique of real business cycle theory is the belief that cyclical movements in total factor productivity

Endogenous money is where the money supply is NOT determined by the monetary authority, but

If the central bank in a New Keynesian model can always reduce the output gap to zero

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters