Question 1

New classical economists contend that both the short-run and long-run aggregate supply curves are vertical.

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

According to the traditional classical school of thought, aggregate supply is vertical both in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 4

The main reason why the traditional classical school ceased to be widely accepted was that:

Accepted Answer

A)  it did not reflect the realities of the modern economy. 
B)  when Keynes received the Nobel Prize, the academic establishment started believing?his ideas. 
C)  it could not explain the persistence of the high levels of unemployment seen during the Great Depression. 
D)  it was too abstract to be completely understood. 
E)  it could not explain the relationship between inflation and unemployment. 
A)  it did not reflect the realities of the modern economy. 
B)  when Keynes received the Nobel Prize, the academic establishment started believing?his ideas. 
C)  it could not explain the persistence of the high levels of unemployment seen during the Great Depression. 
D)  it was too abstract to be completely understood. 
E)  it could not explain the relationship between inflation and unemployment.

Question 5

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 6

Reaction lag is the term used to express the fact that some time passes before changes in the money supply are properly translated into changes in real GDP.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following macroeconomic schools of thought has dominated the economics profession from the 1940s through the 1960s?

Accepted Answer

A)  New classical economics 
B)  Classical economics 
C)  Keynesian economics 
D)  Rational economics 
E)  Positive economics 
A)  New classical economics 
B)  Classical economics 
C)  Keynesian economics 
D)  Rational economics 
E)  Positive economics

Question 8

According to the new classical school, if macroeconomic policy is perfectly predictable, then the aggregate supply curve and the Phillips curve must be vertical in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 9

Agreeing with Keynesian economists, monetarists believe that the economy is subject to disequilibrium that must be corrected by government action.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

According to monetarists, changes in the money supply have long-lasting effects on the equilibrium level of real GDP.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following thoughts do the Keynesian and the new Keynesian economists share?

Accepted Answer

A)  The belief that wages and prices are not flexible in the short run 
B)  The belief that the aggregate supply curve is always a horizontal line 
C)  The belief that the government's role in the economy should be minimized 
D)  The belief that the natural rate of unemployment in an economy is always zero 
E)  The belief that prices are constant and that changes in aggregate expenditures determine equilibrium real GDP 
A)  The belief that wages and prices are not flexible in the short run 
B)  The belief that the aggregate supply curve is always a horizontal line 
C)  The belief that the government's role in the economy should be minimized 
D)  The belief that the natural rate of unemployment in an economy is always zero 
E)  The belief that prices are constant and that changes in aggregate expenditures determine equilibrium real GDP

Question 13

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 economy is now at point B. If government officials announce and carry out a policy that will maintain the inflation rate at 15 percent, we would expect:

Accepted Answer

A)  the economy to move to point A. 
B)  the economy to remain at point B. 
C)  the economy to move to point C. 
D)  the economy to move to point D. 
E)  the economy to move to point E. 
A)  the economy to move to point A. 
B)  the economy to remain at point B. 
C)  the economy to move to point C. 
D)  the economy to move to point D. 
E)  the economy to move to point E.

Question 14

Which of the following economic theories became popular in the 1930s in response to the shortcomings of existing theories of the Great Depression?

Accepted Answer

A)  New classical theory 
B)  Classical theory 
C)  Traditional Keynesian theory 
D)  Monetarist theory 
E)  New Keynesian theory 
A)  New classical theory 
B)  Classical theory 
C)  Traditional Keynesian theory 
D)  Monetarist theory 
E)  New Keynesian theory

Question 15

The effect lag occurs because it takes policymakers some time to recognize that a problem exists in an economy.

Accepted Answer

A) True 
 B)False

Question 16

_____ believe that a government that takes an active role in the economy may do more harm than good because economic policy operates with a long and variable lag.

Accepted Answer

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

Question 17

If the traditional Keynesian views turn out to be accurate, an increase in government spending would:

Accepted Answer

A)  increase the price level. 
B)  decrease the level of investment. 
C)  increase the equilibrium level of real GDP. 
D)  decrease the level of consumption. 
E)  decrease the money supply. 
A)  increase the price level. 
B)  decrease the level of investment. 
C)  increase the equilibrium level of real GDP. 
D)  decrease the level of consumption. 
E)  decrease the money supply.

Question 18

In the Keynesian region of the aggregate supply curve:

Accepted Answer

A)  increases in aggregate demand are associated with decreases in output, but not with increases in prices. 
B)  decreases in aggregate demand are associated with increases in prices, but not with increases in output. 
C)  increases in aggregate demand are associated with increases in output, but not with increases in prices. 
D)  decreases in aggregate demand are associated with increases in output, but not with increases in prices. 
E)  increases in aggregate demand are associated with increases in prices, but not with increases in output. 
A)  increases in aggregate demand are associated with decreases in output, but not with increases in prices. 
B)  decreases in aggregate demand are associated with increases in prices, but not with increases in output. 
C)  increases in aggregate demand are associated with increases in output, but not with increases in prices. 
D)  decreases in aggregate demand are associated with increases in output, but not with increases in prices. 
E)  increases in aggregate demand are associated with increases in prices, but not with increases in output.

Question 19

The new classical school holds that:

Accepted Answer

A)  macroeconomic equilibrium is achieved only through active government intervention. 
B)  unemployment is only temporary, because the economy tends naturally toward equilibrium. 
C)  rigid prices and wages prevent the economy from achieving equilibrium. 
D)  macroeconomic equilibrium cannot occur as long as the aggregate supply curve is?vertical. 
E)  rational expectations result in involuntary unemployment and prolonged periods of macroeconomic disequilibrium. 
A)  macroeconomic equilibrium is achieved only through active government intervention. 
B)  unemployment is only temporary, because the economy tends naturally toward equilibrium. 
C)  rigid prices and wages prevent the economy from achieving equilibrium. 
D)  macroeconomic equilibrium cannot occur as long as the aggregate supply curve is?vertical. 
E)  rational expectations result in involuntary unemployment and prolonged periods of macroeconomic disequilibrium.

Question 20

Monetarists argue that government actions, particularly monetary policy, worsens the negative aspects of the business cycle.

Accepted Answer

A) True 
 B)False

New classical economists contend that both the short-run and long-run aggregate supply curves are vertical.

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

According to the traditional classical school of thought, aggregate supply is vertical both in the short run and in the long run.

The main reason why the traditional classical school ceased to be widely accepted was that:

Traditional classical economists believe that:

Reaction lag is the term used to express the fact that some time passes before changes in the money supply are properly translated into changes in real GDP.

Which of the following macroeconomic schools of thought has dominated the economics profession from the 1940s through the 1960s?

According to the new classical school, if macroeconomic policy is perfectly predictable, then the aggregate supply curve and the Phillips curve must be vertical in both the short run and the long run.

Agreeing with Keynesian economists, monetarists believe that the economy is subject to disequilibrium that must be corrected by government action.

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

According to monetarists, changes in the money supply have long-lasting effects on the equilibrium level of real GDP.

Which of the following thoughts do the Keynesian and the new Keynesian economists share?

Which of the following economic theories became popular in the 1930s in response to the shortcomings of existing theories of the Great Depression?

The effect lag occurs because it takes policymakers some time to recognize that a problem exists in an economy.

_____ believe that a government that takes an active role in the economy may do more harm than good because economic policy operates with a long and variable lag.

If the traditional Keynesian views turn out to be accurate, an increase in government spending would:

In the Keynesian region of the aggregate supply curve:

The new classical school holds that:

Monetarists argue that government actions, particularly monetary policy, worsens the negative aspects of the business cycle.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange 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

Exchapterange Rates and Financial Links Between Countries

Filters

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

New classical economists contend that both the short-run and long-run aggregate supply curves are vertical.

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

According to the traditional classical school of thought, aggregate supply is vertical both in the short run and in the long run.

The main reason why the traditional classical school ceased to be widely accepted was that:

Traditional classical economists believe that:

Reaction lag is the term used to express the fact that some time passes before changes in the money supply are properly translated into changes in real GDP.

Which of the following macroeconomic schools of thought has dominated the economics profession from the 1940s through the 1960s?

According to the new classical school, if macroeconomic policy is perfectly predictable, then the aggregate supply curve and the Phillips curve must be vertical in both the short run and the long run.

Agreeing with Keynesian economists, monetarists believe that the economy is subject to disequilibrium that must be corrected by government action.

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

According to monetarists, changes in the money supply have long-lasting effects on the equilibrium level of real GDP.

Which of the following thoughts do the Keynesian and the new Keynesian economists share?

Which of the following economic theories became popular in the 1930s in response to the shortcomings of existing theories of the Great Depression?

The effect lag occurs because it takes policymakers some time to recognize that a problem exists in an economy.

_____ believe that a government that takes an active role in the economy may do more harm than good because economic policy operates with a long and variable lag.

If the traditional Keynesian views turn out to be accurate, an increase in government spending would:

In the Keynesian region of the aggregate supply curve:

The new classical school holds that:

Monetarists argue that government actions, particularly monetary policy, worsens the negative aspects of the business cycle.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange 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

Exchapterange Rates and Financial Links Between Countries

Filters