Question 1

New Keynesians argue that a decrease in government spending reduces inflation.

Accepted Answer

A) True 
 B)False

Question 2

The Federal Reserve System is an independent body so, it does not require to report to Congress on its goals and money targets.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is true from the New Keynesian perspective?

Accepted Answer

A)  Fluctuations in private spending does not affect aggregate demand in an economy. 
B)  Investment spending remains relatively constant irrespective of the supply shocks. 
C)  Fluctuations in aggregate demand are not the primary source of problems for policymakers. 
D)  The government should limit its role to administrative functions. 
E)  Monetary and fiscal policies often fail to restore macroeconomic equilibrium. 
A)  Fluctuations in private spending does not affect aggregate demand in an economy. 
B)  Investment spending remains relatively constant irrespective of the supply shocks. 
C)  Fluctuations in aggregate demand are not the primary source of problems for policymakers. 
D)  The government should limit its role to administrative functions. 
E)  Monetary and fiscal policies often fail to restore macroeconomic equilibrium.

Question 4

Which of the following is true of the simple Keynesian model?

Accepted Answer

A)  Price level increases with increase in aggregate demand 
B)  The aggregate supply curve is assumed to be perfectly inelastic 
C)  The aggregate demand curve is assumed to perfectly elastic 
D)  Price level is solely determined by the aggregate demand curve 
E)  Changes in aggregate demand determine equilibrium real GDP 
A)  Price level increases with increase in aggregate demand 
B)  The aggregate supply curve is assumed to be perfectly inelastic 
C)  The aggregate demand curve is assumed to perfectly elastic 
D)  Price level is solely determined by the aggregate demand curve 
E)  Changes in aggregate demand determine equilibrium real GDP

Question 5

New classical economics assumes that government has direct control over the equilibrium level of GDP and indirect control over the money supply.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following schools of thought stressed on a fixed-price model for macroeconomic equilibrium?

Accepted Answer

A)  Traditional Keynesians 
B)  New Keynesians 
C)  Monetarists 
D)  Classical economists 
E)  New classical economists 
A)  Traditional Keynesians 
B)  New Keynesians 
C)  Monetarists 
D)  Classical economists 
E)  New classical economists

Question 7

New classical economists believe that wages are inflexible.

Accepted Answer

A) True 
 B)False

Question 8

Monetarists would argue that in the short run, increases in the money supply act to raise both investment and consumption, while also increasing the price level.

Accepted Answer

A) True 
 B)False

Question 9

"The market is not a self-regulating mechanism because prices are not flexible and nothing ensures that planned leakages will be offset by planned injections. To bring the economy out of depression and end high unemployment, some way of stimulating aggregate demand is required. This can be best achieved by a combination of government deficit spending and regulation of tax rates." Which school of thought does this statement best represent?

Accepted Answer

A)  Rationalist economics 
B)  Monetarist economics 
C)  Classical economics 
D)  Keynesian economics 
E)  Marxist economics 
A)  Rationalist economics 
B)  Monetarist economics 
C)  Classical economics 
D)  Keynesian economics 
E)  Marxist economics

Question 10

Which of the following schools of thought believes that wages and prices are rigid in the short run?

Accepted Answer

A)  Keynesians and new Keynesians 
B)  Only monetarists 
C)  Only new classical economists 
D)  Monetarists and new classical economists 
E)  Monetarists and Keynesians 
A)  Keynesians and new Keynesians 
B)  Only monetarists 
C)  Only new classical economists 
D)  Monetarists and new classical economists 
E)  Monetarists and Keynesians

Question 11

According to the monetarists, deliberate government intervention:

Accepted Answer

A)  will stabilize the economy if the money supply is increased during recessions and decreased during expansions. 
B)  will effectively reduce the unemployment rate below its natural rate. 
C)  will stabilize the economy if the money supply is reduced during recessions and increased during expansions. 
D)  will destabilize the economy only if the government uses fiscal policy to change equilibrium income. 
E)  will destabilize the economy and cause a business cycle of its own, regardless of whether fiscal or monetary policy is used. 
A)  will stabilize the economy if the money supply is increased during recessions and decreased during expansions. 
B)  will effectively reduce the unemployment rate below its natural rate. 
C)  will stabilize the economy if the money supply is reduced during recessions and increased during expansions. 
D)  will destabilize the economy only if the government uses fiscal policy to change equilibrium income. 
E)  will destabilize the economy and cause a business cycle of its own, regardless of whether fiscal or monetary policy is used.

Question 12

Traditional Keynesian economists believed that:

Accepted Answer

A)  the aggregate supply curve is a vertical line at a fixed level of prices. 
B)  an increase in aggregate demand would cause a change in the price level. 
C)  the government should take an active role in the economy to restore equilibrium. 
D)  changes in aggregate demand does not determine equilibrium real GDP. 
E)  the private sector is not an important source for shifts in aggregate demand. 
A)  the aggregate supply curve is a vertical line at a fixed level of prices. 
B)  an increase in aggregate demand would cause a change in the price level. 
C)  the government should take an active role in the economy to restore equilibrium. 
D)  changes in aggregate demand does not determine equilibrium real GDP. 
E)  the private sector is not an important source for shifts in aggregate demand.

Question 13

Which of the following is the basic tenet of new classical economics?

Accepted Answer

A)  A change in the fiscal policy affects the equilibrium level of real GDP but has no impact on the equilibrium price level. 
B)  A government-induced shift in aggregate demand affects the real GDP only if they are expected by the economic agents. 
C)  A change in aggregate demand affects the aggregate price level only if the aggregate supply curve is perfectly elastic. 
D)  A change in monetary policy affects the equilibrium level of real GDP only if those changes are unexpected. 
E)  An expected change in a monetary or fiscal policy leads to a proportional shift of the long run supply curve. 
A)  A change in the fiscal policy affects the equilibrium level of real GDP but has no impact on the equilibrium price level. 
B)  A government-induced shift in aggregate demand affects the real GDP only if they are expected by the economic agents. 
C)  A change in aggregate demand affects the aggregate price level only if the aggregate supply curve is perfectly elastic. 
D)  A change in monetary policy affects the equilibrium level of real GDP only if those changes are unexpected. 
E)  An expected change in a monetary or fiscal policy leads to a proportional shift of the long run supply curve.

Question 14

According to new Keynesian economics:

Accepted Answer

A)  the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output. 
B)  the aggregate supply curve is negatively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output. 
C)  the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes positively sloped, as more and more industries reach their full capacity level of output. 
D)  the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output. 
E)  the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output. 
A)  the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output. 
B)  the aggregate supply curve is negatively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output. 
C)  the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes positively sloped, as more and more industries reach their full capacity level of output. 
D)  the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output. 
E)  the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.

Question 15

Traditional classical economists believe that:

Accepted Answer

A)  wage rates are perfectly flexible. 
B)  people do not have perfect information about the economy. 
C)  prices are fixed for long periods of time. 
D)  the price of resources, technology, and expectations cannot influence the equilibrium level of real GDP. 
E)  changes in aggregate demand change only the real GDP. 
A)  wage rates are perfectly flexible. 
B)  people do not have perfect information about the economy. 
C)  prices are fixed for long periods of time. 
D)  the price of resources, technology, and expectations cannot influence the equilibrium level of real GDP. 
E)  changes in aggregate demand change only the real GDP.

Question 16

_____ is the theory that was popular before _____ changed the face of economics post Great Depression in the 1930s.

Accepted Answer

A)  Classical economics; Milton Friedman 
B)  Keynesian economics; Monetarists 
C)  Classical economics; Keynes 
D)  Monetarist economics; Adam Smith 
E)  Keynesian economics; Milton Friedman 
A)  Classical economics; Milton Friedman 
B)  Keynesian economics; Monetarists 
C)  Classical economics; Keynes 
D)  Monetarist economics; Adam Smith 
E)  Keynesian economics; Milton Friedman

Question 17

The new Keynesian economists believed that:

Accepted Answer

A)  wages and prices are flexible in the short run. 
B)  wages and real GDP are not flexible in the long run. 
C)  wages and real GDP are flexible in the short run. 
D)  wages and prices are not flexible in the short run. 
E)  wages and prices are not flexible in the long run. 
A)  wages and prices are flexible in the short run. 
B)  wages and real GDP are not flexible in the long run. 
C)  wages and real GDP are flexible in the short run. 
D)  wages and prices are not flexible in the short run. 
E)  wages and prices are not flexible in the long run.

Question 18

Monetarists and new classical economists favor an active role of government in promoting low inflation and economic growth.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following events challenged Keynesian views, and led to the popularity of Milton Friedman's ideas?

Accepted Answer

A)  The hippie community started advocating socialist values. 
B)  Hard-core republicans came into office. 
C)  The U.S. economy faced high levels of inflation and unemployment simultaneously. 
D)  The oil crisis exploded. 
E)  Countries that followed Friedman's ideas performed better. 
A)  The hippie community started advocating socialist values. 
B)  Hard-core republicans came into office. 
C)  The U.S. economy faced high levels of inflation and unemployment simultaneously. 
D)  The oil crisis exploded. 
E)  Countries that followed Friedman's ideas performed better.

Question 20

Which school calls for more information from policymakers so that people can incorporate government plans into their outlook for the future?

Accepted Answer

A)  The new classical school 
B)  The new Keynesian school 
C)  The traditional Keynesian school 
D)  The monetarist school 
E)  The classical school 
A)  The new classical school 
B)  The new Keynesian school 
C)  The traditional Keynesian school 
D)  The monetarist school 
E)  The classical school

New Keynesians argue that a decrease in government spending reduces inflation.

The Federal Reserve System is an independent body so, it does not require to report to Congress on its goals and money targets.

Which of the following is true from the New Keynesian perspective?

Which of the following is true of the simple Keynesian model?

New classical economics assumes that government has direct control over the equilibrium level of GDP and indirect control over the money supply.

Which of the following schools of thought stressed on a fixed-price model for macroeconomic equilibrium?

New classical economists believe that wages are inflexible.

Monetarists would argue that in the short run, increases in the money supply act to raise both investment and consumption, while also increasing the price level.

Which of the following schools of thought believes that wages and prices are rigid in the short run?

According to the monetarists, deliberate government intervention:

Traditional Keynesian economists believed that:

Which of the following is the basic tenet of new classical economics?

According to new Keynesian economics:

Traditional classical economists believe that:

_ is the theory that was popular before _ changed the face of economics post Great Depression in the 1930s.

The new Keynesian economists believed that:

Monetarists and new classical economists favor an active role of government in promoting low inflation and economic growth.

Which of the following events challenged Keynesian views, and led to the popularity of Milton Friedman's ideas?

Which school calls for more information from policymakers so that people can incorporate government plans into their outlook for the future?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 15: Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

New Keynesians argue that a decrease in government spending reduces inflation.

The Federal Reserve System is an independent body so, it does not require to report to Congress on its goals and money targets.

Which of the following is true from the New Keynesian perspective?

Which of the following is true of the simple Keynesian model?

New classical economics assumes that government has direct control over the equilibrium level of GDP and indirect control over the money supply.

Which of the following schools of thought stressed on a fixed-price model for macroeconomic equilibrium?

New classical economists believe that wages are inflexible.

Monetarists would argue that in the short run, increases in the money supply act to raise both investment and consumption, while also increasing the price level.

Which of the following schools of thought believes that wages and prices are rigid in the short run?

According to the monetarists, deliberate government intervention:

Traditional Keynesian economists believed that:

Which of the following is the basic tenet of new classical economics?

According to new Keynesian economics:

Traditional classical economists believe that:

_____ is the theory that was popular before _____ changed the face of economics post Great Depression in the 1930s.

The new Keynesian economists believed that:

Monetarists and new classical economists favor an active role of government in promoting low inflation and economic growth.

Which of the following events challenged Keynesian views, and led to the popularity of Milton Friedman's ideas?

Which school calls for more information from policymakers so that people can incorporate government plans into their outlook for the future?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

_ is the theory that was popular before _ changed the face of economics post Great Depression in the 1930s.