Question 1

Both the new Keynesians and the new classical economists have

Accepted Answer

A)  agreed that changes in the price level are unrelated to changes in the money supply. 
B)  concluded that the U.S. business cycle is dead. 
C)  advocated the elimination of the Federal Reserve System. 
D)  adopted the theory of rational expectations. 
E)  seen their theories become so divergent since the 1960s that they are useless to policy makers. 
A)  agreed that changes in the price level are unrelated to changes in the money supply. 
B)  concluded that the U.S. business cycle is dead. 
C)  advocated the elimination of the Federal Reserve System. 
D)  adopted the theory of rational expectations. 
E)  seen their theories become so divergent since the 1960s that they are useless to policy makers.

Question 2

Those who argue that discretionary fiscal and monetary policies are "time inconsistent" advocate instead

Accepted Answer

A)  fine-tuning. 
B)  policy activism. 
C)  governmental duplicity. 
D)  credible policies. 
E)  ongoing flexibility. 
A)  fine-tuning. 
B)  policy activism. 
C)  governmental duplicity. 
D)  credible policies. 
E)  ongoing flexibility.

Question 3

When individuals and firms base their expectations on the best use of whatever information is available,they conform to the theory of ________ expectations.

Accepted Answer

A)  great 
B)  passive 
C)  limited 
D)  systematic 
E)  rational 
A)  great 
B)  passive 
C)  limited 
D)  systematic 
E)  rational

Question 4

In the current debate over economic policy,the new classical macroeconomists argue that

Accepted Answer

A)  the economy is at a full-employment equilibrium when money demand equals aggregate demand. 
B)  fiscal policy is effective in stabilizing the economy. 
C)  prices are upwardly flexible. 
D)  economic instability results primarily from the spending behavior of the private sector. 
E)  discretionary monetary and fiscal policies are ineffective in eliminating recessionary and inflationary gaps and may even promote instability. 
A)  the economy is at a full-employment equilibrium when money demand equals aggregate demand. 
B)  fiscal policy is effective in stabilizing the economy. 
C)  prices are upwardly flexible. 
D)  economic instability results primarily from the spending behavior of the private sector. 
E)  discretionary monetary and fiscal policies are ineffective in eliminating recessionary and inflationary gaps and may even promote instability.

Question 5

According to the Stabilization Policy video,one problem with discretionary fiscal stimulus is that

Accepted Answer

A)  as you expand the economy, spending on foreign goods increases, thus reducing its impact on domestic output and employment. 
B)  consumers and businesses do not expect the policies to work, so they are unprepared to take advantage of the opportunities created. 
C)  it works only when monetary authorities reduce the money supply to counter inflation. 
D)  the employment created is primarily in government agencies and not in the private sector. 
E)  it leads to stabilization in the long run while allowing existing economic hardship to persist indefinitely. 
A)  as you expand the economy, spending on foreign goods increases, thus reducing its impact on domestic output and employment. 
B)  consumers and businesses do not expect the policies to work, so they are unprepared to take advantage of the opportunities created. 
C)  it works only when monetary authorities reduce the money supply to counter inflation. 
D)  the employment created is primarily in government agencies and not in the private sector. 
E)  it leads to stabilization in the long run while allowing existing economic hardship to persist indefinitely.

Question 6

In the debate between the monetarists and the Keynesians over how best to achieve economic stability,the monetarists have tended to emphasize the role of

Accepted Answer

A)  aggregate supply shifts. 
B)  economic dualism. 
C)  random events. 
D)  the federal budget. 
E)  the money supply. 
A)  aggregate supply shifts. 
B)  economic dualism. 
C)  random events. 
D)  the federal budget. 
E)  the money supply.

Question 7

The new classical macroeconomists stress that output fluctuations and unemployment

Accepted Answer

A)  result from random errors and cannot be minimized by government stabilization policies. 
B)  require rational government actions to reduce the gap between actual and potential output. 
C)  will disappear if most large industries are nationalized. 
D)  are absent in a free market capitalist economy. 
E)  can be minimized if all sectors of the economy rationally expect high rates of inflation. 
A)  result from random errors and cannot be minimized by government stabilization policies. 
B)  require rational government actions to reduce the gap between actual and potential output. 
C)  will disappear if most large industries are nationalized. 
D)  are absent in a free market capitalist economy. 
E)  can be minimized if all sectors of the economy rationally expect high rates of inflation.

Question 8

Both the new Keynesians and traditional Keynesians would disagree with which of the following ideas?

Accepted Answer

A)  Prices and wages tend to adjust slowly in the short run. 
B)  Real GDP adjusts to changes in aggregate demand. 
C)  Discretionary monetary and fiscal policies are necessary to keep the economy stabilized. 
D)  Changes in business and consumer spending represent a substantial source of economic instability. 
E)  Markets clear continuously. 
A)  Prices and wages tend to adjust slowly in the short run. 
B)  Real GDP adjusts to changes in aggregate demand. 
C)  Discretionary monetary and fiscal policies are necessary to keep the economy stabilized. 
D)  Changes in business and consumer spending represent a substantial source of economic instability. 
E)  Markets clear continuously.

Question 9

The notion that discretionary fiscal and monetary policies are subject to strong incentives to change them in an attempt to achieve short-term gains is called

Accepted Answer

A)  the separation of powers. 
B)  policy transitivity. 
C)  systematic inefficiency. 
D)  rational expectancy. 
E)  time inconsistency. 
A)  the separation of powers. 
B)  policy transitivity. 
C)  systematic inefficiency. 
D)  rational expectancy. 
E)  time inconsistency.

Question 10

Ampere Electronics estimates that it costs $50,000 to change its catalogs,price lists,and billing system when it changes prices.Under which of the following situations would a price increase be clearly profitable?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E

Both the new Keynesians and the new classical economists have

Those who argue that discretionary fiscal and monetary policies are "time inconsistent" advocate instead

When individuals and firms base their expectations on the best use of whatever information is available,they conform to the theory of ________ expectations.

In the current debate over economic policy,the new classical macroeconomists argue that

According to the Stabilization Policy video,one problem with discretionary fiscal stimulus is that

In the debate between the monetarists and the Keynesians over how best to achieve economic stability,the monetarists have tended to emphasize the role of

The new classical macroeconomists stress that output fluctuations and unemployment

Both the new Keynesians and traditional Keynesians would disagree with which of the following ideas?

The notion that discretionary fiscal and monetary policies are subject to strong incentives to change them in an attempt to achieve short-term gains is called

Ampere Electronics estimates that it costs $50,000 to change its catalogs,price lists,and billing system when it changes prices.Under which of the following situations would a price increase be clearly profitable?

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 26: Controversies Over Stabilization Policy

Both the new Keynesians and the new classical economists have

Those who argue that discretionary fiscal and monetary policies are "time inconsistent" advocate instead

When individuals and firms base their expectations on the best use of whatever information is available,they conform to the theory of ________ expectations.

In the current debate over economic policy,the new classical macroeconomists argue that

According to the Stabilization Policy video,one problem with discretionary fiscal stimulus is that

In the debate between the monetarists and the Keynesians over how best to achieve economic stability,the monetarists have tended to emphasize the role of

The new classical macroeconomists stress that output fluctuations and unemployment

Both the new Keynesians and traditional Keynesians would disagree with which of the following ideas?

The notion that discretionary fiscal and monetary policies are subject to strong incentives to change them in an attempt to achieve short-term gains is called

Ampere Electronics estimates that it costs $50,000 to change its catalogs,price lists,and billing system when it changes prices.Under which of the following situations would a price increase be clearly profitable?

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

International Trade

Exchange Rates and the Balance of Payments

Filters