Question 1

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

Accepted Answer

A) increases employment. 
B) leaves employment unchanged. 
C) decreases unemployment. 
D) decreases employment. 
E) decreases output. 
A) increases employment. 
B) leaves employment unchanged. 
C) decreases unemployment. 
D) decreases employment. 
E) decreases output.

Question 2

The basic real business cycle model has some difficulty explaining why

Accepted Answer

A) the real wage is procyclical. 
B) the money supply is procyclical. 
C) consumption is procyclical. 
D) investment is procyclical. 
E) the price level is countercyclical. 
A) the real wage is procyclical. 
B) the money supply is procyclical. 
C) consumption is procyclical. 
D) investment is procyclical. 
E) the price level is countercyclical.

Question 3

In the long run, most Keynesians believe

Accepted Answer

A) government policy is neutral. 
B) total factor productivity is neutral. 
C) the Bank of Canada is neutral. 
D) money is neutral. 
E) money is not neutral. 
A) government policy is neutral. 
B) total factor productivity is neutral. 
C) the Bank of Canada is neutral. 
D) money is neutral. 
E) money is not neutral.

Question 4

Using the New Keynesian model, determine the effects on output, the real interest rate, investment,
employment, the price level, and the real wage of an increase in total factor productivity.

Accepted Answer

An increase in current total factor prod

Question 5

A negative nominal interest rate may not be good policy because

Accepted Answer

A) could produce inefficiencies in the banking system. 
B) it makes investment go down. 
C) could produce inefficiencies at Federal Reserve Banks. 
D) it makes the output gap go up. 
E) it makes consumers too optimistic, and the economy overheats. 
A) could produce inefficiencies in the banking system. 
B) it makes investment go down. 
C) could produce inefficiencies at Federal Reserve Banks. 
D) it makes the output gap go up. 
E) it makes consumers too optimistic, and the economy overheats.

Question 6

The Yd(IS)curve in the New Keynesian model represents output demand at different levels of

Accepted Answer

A) the price level. 
B) the real interest rate. 
C) real wage rate. 
D) total factor productivity. 
E) the nominal wage rate. 
A) the price level. 
B) the real interest rate. 
C) real wage rate. 
D) total factor productivity. 
E) the nominal wage rate.

Question 7

According to the New Keynesian model, after a negative shock to output

Accepted Answer

A) the government increases expenditures and the central bank increases its target rate. 
B) the government decreases expenditures and the central bank decreases its target rate. 
C) the government decreases expenditures and the central bank increases its target rate. 
D) the government leaves expenditures unchanged and the central bank increases its target rate. 
E) the government increases expenditures and the central bank decreases its target rate. 
A) the government increases expenditures and the central bank increases its target rate. 
B) the government decreases expenditures and the central bank decreases its target rate. 
C) the government decreases expenditures and the central bank increases its target rate. 
D) the government leaves expenditures unchanged and the central bank increases its target rate. 
E) the government increases expenditures and the central bank decreases its target rate.

Question 8

The Yd(IS)curve is downward sloping to reflect the

Accepted Answer

A) positive relationship between aggregate output and employment. 
B) negative relationship between aggregate output and the real wage rate. 
C) positive relationship between aggregate output and the real wage rate. 
D) negative relationship between aggregate output and the real interest rate. 
E) positive relationship between aggregate output and total factor productivity. 
A) positive relationship between aggregate output and employment. 
B) negative relationship between aggregate output and the real wage rate. 
C) positive relationship between aggregate output and the real wage rate. 
D) negative relationship between aggregate output and the real interest rate. 
E) positive relationship between aggregate output and total factor productivity.

Question 9

New Keynesian economics refers to

Accepted Answer

A) the IS-LM model. 
B) models of real business cycles with sticky prices. 
C) models that do not support a role for fiscal or monetary policy. 
D) the monetarist approach. 
E) the work of Milton Friedman. 
A) the IS-LM model. 
B) models of real business cycles with sticky prices. 
C) models that do not support a role for fiscal or monetary policy. 
D) the monetarist approach. 
E) the work of Milton Friedman.

Question 10

Changes in the money supply in the New Keynesian model are NOT a likely explanation of the typical business cycle, because the model counterfactually predicts that

Accepted Answer

A) the real wage is procyclical. 
B) investment is procyclical. 
C) the real wage is countercyclical. 
D) employment is procyclical. 
E) consumption is procyclical. 
A) the real wage is procyclical. 
B) investment is procyclical. 
C) the real wage is countercyclical. 
D) employment is procyclical. 
E) consumption is procyclical.

Question 11

When there is Keynesian unemployment in the New Keynesian model, a Pareto optimum can be reached by

Accepted Answer

A) decreasing the money supply or by increasing current government spending. 
B) increasing the money supply or by decreasing current government spending. 
C) increasing nominal wages and increasing the money supply. 
D) decreasing the money supply or by decreasing current government spending. 
E) increasing the money supply or by increasing current government spending. 
A) decreasing the money supply or by increasing current government spending. 
B) increasing the money supply or by decreasing current government spending. 
C) increasing nominal wages and increasing the money supply. 
D) decreasing the money supply or by decreasing current government spending. 
E) increasing the money supply or by increasing current government spending.

Question 12

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

Accepted Answer

A) shifts output supply right and opens a positive output gap. 
B) shifts output demand left and opens a negative output gap. 
C) shifts output demand right and opens a positive output gap. 
D) shifts output supply right and opens a negative output gap. 
E) shifts output supply left and opens a negative output gap. 
A) shifts output supply right and opens a positive output gap. 
B) shifts output demand left and opens a negative output gap. 
C) shifts output demand right and opens a positive output gap. 
D) shifts output supply right and opens a negative output gap. 
E) shifts output supply left and opens a negative output gap.

Question 13

An increase in future total factor productivity shifts the

Accepted Answer

A) M curve to the right. 
B) Yd curve to the left. 
C) Yd curve to the right. 
D) Ys curve to the left. 
E) Ns curve to the right. 
A) M curve to the right. 
B) Yd curve to the left. 
C) Yd curve to the right. 
D) Ys curve to the left. 
E) Ns curve to the right.

Question 14

If a shock results in a positive output gap and the government's policy choice is to do nothing

Accepted Answer

A) the government will immediately implement expansionary fiscal policy. 
B) the central bank will immediately increase the money supply and close the output gap. 
C) it will be detrimental to the economy. 
D) the economy will be prevented from returning to equilibrium. 
E) the price level will fall, the interest rate will fall, and output will rise, closing the gap. 
A) the government will immediately implement expansionary fiscal policy. 
B) the central bank will immediately increase the money supply and close the output gap. 
C) it will be detrimental to the economy. 
D) the economy will be prevented from returning to equilibrium. 
E) the price level will fall, the interest rate will fall, and output will rise, closing the gap.

Question 15

The natural rate of interest is

Accepted Answer

A) the real interest rate when wages and prices are fixed. 
B) the nominal rate of interest. 
C) the market-clearing interest rate. 
D) the Bank of Canada's target interest rate. 
E) the real interest rate minus the expected inflation rate. 
A) the real interest rate when wages and prices are fixed. 
B) the nominal rate of interest. 
C) the market-clearing interest rate. 
D) the Bank of Canada's target interest rate. 
E) the real interest rate minus the expected inflation rate.

Question 16

According to real business cycle theorists, the tendency of money to lead output may be due to

Accepted Answer

A) the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Bank of Canada's use of all available information in trying to stabilize the price
Level. 
B) the Bank of Canada's use of all available information in trying to stabilize the price level and the Bank of Canada's use of all available information in trying to stabilize the level of
Economic activity. 
C) the Bank of Canada's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in
Economic activity. 
D) government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date. 
E) the Bank of Canada's use of all available information in trying to stabilize business cycle fluctuations and the price level. 
A) the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Bank of Canada's use of all available information in trying to stabilize the price
Level. 
B) the Bank of Canada's use of all available information in trying to stabilize the price level and the Bank of Canada's use of all available information in trying to stabilize the level of
Economic activity. 
C) the Bank of Canada's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in
Economic activity. 
D) government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date. 
E) the Bank of Canada's use of all available information in trying to stabilize business cycle fluctuations and the price level.

Question 17

In 1936, Keynes described his views on the economy in

Accepted Answer

A) Macroeconomic Stabilization Policy in Canada. 
B) Some Evidence on the Importance of Sticky Prices. 
C) The General Theory of Employment, Interest, and Money. 
D) Essays in Positive Economics. 
E) Mr. Keynes and the Classics; A Suggested Interpretation. 
A) Macroeconomic Stabilization Policy in Canada. 
B) Some Evidence on the Importance of Sticky Prices. 
C) The General Theory of Employment, Interest, and Money. 
D) Essays in Positive Economics. 
E) Mr. Keynes and the Classics; A Suggested Interpretation.

Question 18

An important feature of the New Keynesian model is that

Accepted Answer

A) the labour market may not clear. 
B) the goods market always clears. 
C) all markets clear. 
D) the money market may not clear. 
E) the labour market always clears. 
A) the labour market may not clear. 
B) the goods market always clears. 
C) all markets clear. 
D) the money market may not clear. 
E) the labour market always clears.

Question 19

Prices may be sticky in the short run because

Accepted Answer

A) firms are set in their ways of conducting business. 
B) it's too costly for firms to change prices. 
C) government regulated money prices. 
D) there is no upward pressure on prices in the market. 
E) consumers are irrational and do not react fast enough. 
A) firms are set in their ways of conducting business. 
B) it's too costly for firms to change prices. 
C) government regulated money prices. 
D) there is no upward pressure on prices in the market. 
E) consumers are irrational and do not react fast enough.

Question 20

In the New Keynesian model, an increase in the money supply

Accepted Answer

A) increases output and increases the real interest rate. 
B) increases output and decreases the real interest rate. 
C) decreases output and increases the real interest rate. 
D) decreases output and increases the real wage rate. 
E) decreases output and decreases the real interest rate. 
A) increases output and increases the real interest rate. 
B) increases output and decreases the real interest rate. 
C) decreases output and increases the real interest rate. 
D) decreases output and increases the real wage rate. 
E) decreases output and decreases the real interest rate.

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

The basic real business cycle model has some difficulty explaining why

In the long run, most Keynesians believe

Using the New Keynesian model, determine the effects on output, the real interest rate, investment, employment, the price level, and the real wage of an increase in total factor productivity.

A negative nominal interest rate may not be good policy because

The Yd(IS)curve in the New Keynesian model represents output demand at different levels of

According to the New Keynesian model, after a negative shock to output

The Yd(IS)curve is downward sloping to reflect the

New Keynesian economics refers to

Changes in the money supply in the New Keynesian model are NOT a likely explanation of the typical business cycle, because the model counterfactually predicts that

When there is Keynesian unemployment in the New Keynesian model, a Pareto optimum can be reached by

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

An increase in future total factor productivity shifts the

If a shock results in a positive output gap and the government's policy choice is to do nothing

The natural rate of interest is

According to real business cycle theorists, the tendency of money to lead output may be due to

In 1936, Keynes described his views on the economy in

An important feature of the New Keynesian model is that

Prices may be sticky in the short run because

In the New Keynesian model, an increase in the money supply

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

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

The basic real business cycle model has some difficulty explaining why

In the long run, most Keynesians believe

Using the New Keynesian model, determine the effects on output, the real interest rate, investment, employment, the price level, and the real wage of an increase in total factor productivity.

A negative nominal interest rate may not be good policy because

The Yd(IS)curve in the New Keynesian model represents output demand at different levels of

According to the New Keynesian model, after a negative shock to output

The Yd(IS)curve is downward sloping to reflect the

New Keynesian economics refers to

Changes in the money supply in the New Keynesian model are NOT a likely explanation of the typical business cycle, because the model counterfactually predicts that

When there is Keynesian unemployment in the New Keynesian model, a Pareto optimum can be reached by

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

An increase in future total factor productivity shifts the

If a shock results in a positive output gap and the government's policy choice is to do nothing

The natural rate of interest is

According to real business cycle theorists, the tendency of money to lead output may be due to

In 1936, Keynes described his views on the economy in

An important feature of the New Keynesian model is that

Prices may be sticky in the short run because

In the New Keynesian model, an increase in the money supply

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