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

Which of the following economic theories favors an active role for government in promoting low inflation and economic growth?

Suppose the central bank increases the money supply in an economy unexpectedly during a year. If the current inflation rate in this country is 3.4 percent, then according to new classical economists the expected inflation rate for the following year would be:

The figure given below represents the new classical long run and short run Phillips curve measuring inflation rate on vertical axis and unemployment rate on horizontal axis. Figure 15.2 -Refer to Figure 15.2. Assume that the government adopted an unexpected expansionary monetary policy that has the economy currently at point D. If people expect that this inflation rate will persist next year, the economy will now: