Question 1

The key implication for macroeconomic instability is that eﬃciency wages

Accepted Answer

A)  contribute to the downward inﬂexibility of wages. 
B)  help reduce the downward inﬂexibility of wages. 
C)  increase the velocity of money. 
D)  reduce the velocity of money. 
A)  contribute to the downward inﬂexibility of wages. 
B)  help reduce the downward inﬂexibility of wages. 
C)  increase the velocity of money. 
D)  reduce the velocity of money.

Question 2

Given the equation of exchange, if V is stable, an increase in M will necessarily increase

Accepted Answer

A)  the demand for money. 
B)  the price level. 
C)  nominal GDP. 
D)  real GDP. 
A)  the demand for money. 
B)  the price level. 
C)  nominal GDP. 
D)  real GDP.

Question 3

The policy position that the supply of money should be increased at a constant rate each year is most closely associated with the views of

Accepted Answer

A)  monetarism. 
B)  real-business-cycle theory. 
C)  mainstream economics. 
D)  supply-side economics. 
A)  monetarism. 
B)  real-business-cycle theory. 
C)  mainstream economics. 
D)  supply-side economics.

Question 4

If prices and wages are inﬂexible downward, a decrease in aggregate demand will

Accepted Answer

A)  reduce the price level but not real output. 
B)  increase short-run aggregate supply. 
C)  decrease short-run aggregate supply. 
D)  reduce real output but not the price level. 
A)  reduce the price level but not real output. 
B)  increase short-run aggregate supply. 
C)  decrease short-run aggregate supply. 
D)  reduce real output but not the price level.

Question 5

Mainstream economists believe that economic instability is primarily due to unexpected changes in
consumer spending.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD2 to AD1 would move the economy

Accepted Answer

A)  directly from a to d. 
B)  from a to b to d. 
C)  from a to e to d. 
D)  directly from a to f. 
A)  directly from a to d. 
B)  from a to b to d. 
C)  from a to e to d. 
D)  directly from a to f.

Question 7

According to mainstream economists, the basic determinant of real output, employment, and the price level is

Accepted Answer

A)  information and people's expectations. 
B)  the level of aggregate expenditures. 
C)  the incentive to work, save, and invest. 
D)  the supply of money. 
A)  information and people's expectations. 
B)  the level of aggregate expenditures. 
C)  the incentive to work, save, and invest. 
D)  the supply of money.

Question 8

Deﬁne real-business-cycle theory.

Accepted Answer

Real-business cycle theory is a theory t

Question 9

If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is

Accepted Answer

A)  6. 
B)  $1 / 6 .$ 
C)  4. 
D)  $1 / 4$ 
A)  6. 
B)  $1 / 6 .$ 
C)  4. 
D)  $1 / 4$

Question 10

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD2 to AD3 would move the economy

Accepted Answer

A)  directly from a to h. 
B)  from a to g to h. 
C)  directly from a to d. 
D)  from a to c to h. 
A)  directly from a to h. 
B)  from a to g to h. 
C)  directly from a to d. 
D)  from a to c to h.

Question 11

Adherents of the traditional monetary rule say that the supply of money should be

Accepted Answer

A)  increased at a constant rate each year. 
B)  decreased during recession and increased during inﬂation. 
C)  held constant over time. 
D)  increased during recession and decreased during inﬂation. 
A)  increased at a constant rate each year. 
B)  decreased during recession and increased during inﬂation. 
C)  held constant over time. 
D)  increased during recession and decreased during inﬂation.

Question 12

To determine the velocity of money, you would need to know

Accepted Answer

A)  nominal GDP and real GDP. 
B)  the money supply and the price level. 
C)  nominal GDP and the money supply. 
D)  nominal GDP and the interest rate. 
A)  nominal GDP and real GDP. 
B)  the money supply and the price level. 
C)  nominal GDP and the money supply. 
D)  nominal GDP and the interest rate.

Question 13

What are "coordination failures," and why are they important for interpreting the macro economy?

Accepted Answer

A coordination failure is a situation in

Question 14

The equation of exchange indicates that an increase in money supply will always lead only to
inﬂation.

Accepted Answer

A) True 
 B)False

Question 15

From a monetarist perspective, instability in the macroeconomy arises from

Accepted Answer

A)  secular trends in the economy. 
B)  the instability of velocity as a policy tool. 
C)  discretionary changes in monetary policy. 
D)  the use of a monetary rule for monetary policy. 
A)  secular trends in the economy. 
B)  the instability of velocity as a policy tool. 
C)  discretionary changes in monetary policy. 
D)  the use of a monetary rule for monetary policy.

Question 16

The idea that business ﬂuctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

Accepted Answer

A)  eﬃciency wage theory. 
B)  real-business-cycle theory. 
C)  mainstream economics. 
D)  monetarism. 
A)  eﬃciency wage theory. 
B)  real-business-cycle theory. 
C)  mainstream economics. 
D)  monetarism.

Question 17

Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the mainstream economic view, the effect of a signi?cant increase in productivity on the economy can
Best be represented by a shift from

Accepted Answer

A)  $\mathrm { AS } _ { \mathrm { LR } 2 } \text { to } \mathrm { AS } _ { \mathrm { LR1 } }$ 
B)  $A D _ { 1 } \text { to } A D _ { 2 }$ 
C)  $AS _ {  } { } _ { \mathrm { LR } 1 } \text { to } A S _ { \mathrm { LR } 2 } \text {. }$ 
D)  $A D _ { 2 } \text { to } A D _ { 1 }$ 
A)  $\mathrm { AS } _ { \mathrm { LR } 2 } \text { to } \mathrm { AS } _ { \mathrm { LR1 } }$ 
B)  $A D _ { 1 } \text { to } A D _ { 2 }$ 
C)  $AS _ {  } { } _ { \mathrm { LR } 1 } \text { to } A S _ { \mathrm { LR } 2 } \text {. }$ 
D)  $A D _ { 2 } \text { to } A D _ { 1 }$

Question 18

(Consider This) Monetarists would argue that the severe recession of 2007-2009 was primarily caused by

Accepted Answer

A)  adverse aggregate-supply shocks causing tremendous unemployment. 
B)  wide swings in investment expenditures driving erratic ﬂuctuations in aggregate demand. 
C)  excessive money supply creating a bubble in some sectors of the economy. 
D)  too much deregulation of the ﬁnancial sector in previous years. 
A)  adverse aggregate-supply shocks causing tremendous unemployment. 
B)  wide swings in investment expenditures driving erratic ﬂuctuations in aggregate demand. 
C)  excessive money supply creating a bubble in some sectors of the economy. 
D)  too much deregulation of the ﬁnancial sector in previous years.

Question 19

Accepted Answer

A)  new classical economics. 
B)  mainstream economics. 
C)  the real-business-cycle theory. 
D)  a coordination failure. 
A)  new classical economics. 
B)  mainstream economics. 
C)  the real-business-cycle theory. 
D)  a coordination failure.

Question 20

Mainstream economists contend that, as stabilization tools,

Accepted Answer

A)  discretionary ﬁscal policy is effective, but discretionary monetary policy is not. 
B)  discretionary monetary policy is effective, but discretionary ﬁscal policy is not. 
C)  both discretionary ﬁscal policy and discretionary monetary policy can be effective if appropriately used. 
D)  discretionary ﬁscal policy and discretionary monetary policy cause more instability than they cure. 
A)  discretionary ﬁscal policy is effective, but discretionary monetary policy is not. 
B)  discretionary monetary policy is effective, but discretionary ﬁscal policy is not. 
C)  both discretionary ﬁscal policy and discretionary monetary policy can be effective if appropriately used. 
D)  discretionary ﬁscal policy and discretionary monetary policy cause more instability than they cure.

The key implication for macroeconomic instability is that eﬃciency wages

Given the equation of exchange, if V is stable, an increase in M will necessarily increase

The policy position that the supply of money should be increased at a constant rate each year is most closely associated with the views of

If prices and wages are inﬂexible downward, a decrease in aggregate demand will

Mainstream economists believe that economic instability is primarily due to unexpected changes in consumer spending.

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD₂ to AD₁ would move the economy

According to mainstream economists, the basic determinant of real output, employment, and the price level is

Deﬁne real-business-cycle theory.

If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD₂ to AD₃ would move the economy

Adherents of the traditional monetary rule say that the supply of money should be

To determine the velocity of money, you would need to know

What are "coordination failures," and why are they important for interpreting the macro economy?

The equation of exchange indicates that an increase in money supply will always lead only to inﬂation.

From a monetarist perspective, instability in the macroeconomy arises from

The idea that business ﬂuctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the mainstream economic view, the effect of a signi?cant increase in productivity on the economy can Best be represented by a shift from

(Consider This) Monetarists would argue that the severe recession of 2007-2009 was primarily caused by

Mainstream economists contend that, as stabilization tools,

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Exam 19: Current Issues in Macro Theory and Policy

The key implication for macroeconomic instability is that eﬃciency wages

Given the equation of exchange, if V is stable, an increase in M will necessarily increase

The policy position that the supply of money should be increased at a constant rate each year is most closely associated with the views of

If prices and wages are inﬂexible downward, a decrease in aggregate demand will

Mainstream economists believe that economic instability is primarily due to unexpected changes in consumer spending.

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD2 to AD1 would move the economy

According to mainstream economists, the basic determinant of real output, employment, and the price level is

Deﬁne real-business-cycle theory.

If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD2 to AD3 would move the economy

Adherents of the traditional monetary rule say that the supply of money should be

To determine the velocity of money, you would need to know

What are "coordination failures," and why are they important for interpreting the macro economy?

The equation of exchange indicates that an increase in money supply will always lead only to inﬂation.

From a monetarist perspective, instability in the macroeconomy arises from

The idea that business ﬂuctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the mainstream economic view, the effect of a signi?cant increase in productivity on the economy can Best be represented by a shift from

(Consider This) Monetarists would argue that the severe recession of 2007-2009 was primarily caused by

Mainstream economists contend that, as stabilization tools,

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD₂ to AD₁ would move the economy

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD₂ to AD₃ would move the economy