Question 1

According to the new classical theory,why may output differ from its full-employment level in the short run?

Accepted Answer

When the actual price level is greater than the expected price level,firms increase output.When the actual price level is less than the expected price level,firms decrease output.As a result,output can be higher or lower than the full-employment level in the short run-until firms can distinguish changes in relative prices from changes in the general price level.

Question 2

In the long run,one-time increases or decreases in the nominal money supply affect

Accepted Answer

A)  real output, but not the price level. 
B)  the price level, but not real output. 
C)  both real output and the price level. 
D)  neither real output nor the price level. 
A)  real output, but not the price level. 
B)  the price level, but not real output. 
C)  both real output and the price level. 
D)  neither real output nor the price level. B

Question 3

Which of the following is NOT an example of a monopolistically competitive market?

Accepted Answer

A)  high fashion clothing 
B)  medical care 
C)  wheat 
D)  automobiles 
A)  high fashion clothing 
B)  medical care 
C)  wheat 
D)  automobiles C

Question 4

Suppose that initially U.S.households are saving only a small fraction of their incomes because they are relying on rapid increases in stock prices to increase their wealth.If stock prices decline and households decide to increase their saving rate,what will be impact on output in the new Keynesian view? Be sure to distinguish the short run from the long run.

Accepted Answer

The increase in the saving rate will shi

Question 5

If labor costs rise at the same time that the federal government decreases its purchases,in the short run

Accepted Answer

A)  aggregate output and the price level will both increase. 
B)  aggregate output will increase, but the price level will fall. 
C)  aggregate output and the price level will both fall. 
D)  aggregate output will fall, but the price level may either increase or decrease. 
A)  aggregate output and the price level will both increase. 
B)  aggregate output will increase, but the price level will fall. 
C)  aggregate output and the price level will both fall. 
D)  aggregate output will fall, but the price level may either increase or decrease.

Question 6

What is the principal source of change in productivity growth?

Accepted Answer

The principal source of change

Question 7

Economists who are skeptical of hysteresis in Europe during the 1980s and 1990s cite all of the following as reasons for persistently high unemployment in Europe EXCEPT

Accepted Answer

A)  generous unemployment benefits. 
B)  restrictions on firms' ability to hire and fire workers. 
C)  the existence of an ongoing recession. 
D)  high tax rates. 
A)  generous unemployment benefits. 
B)  restrictions on firms' ability to hire and fire workers. 
C)  the existence of an ongoing recession. 
D)  high tax rates.

Question 8

Which of the following will NOT shift the aggregate demand curve to the right?

Accepted Answer

A)  a decline in the price level 
B)  an increase in government expenditures 
C)  an increase in investment 
D)  an increase in the money supply 
A)  a decline in the price level 
B)  an increase in government expenditures 
C)  an increase in investment 
D)  an increase in the money supply

Question 9

Productivity growth occurs when

Accepted Answer

A)  there are more inputs. 
B)  firms can produce more output per unit of input. 
C)  more output is produced. 
D)  employees work extra hours. 
A)  there are more inputs. 
B)  firms can produce more output per unit of input. 
C)  more output is produced. 
D)  employees work extra hours.

Question 10

In the new Keynesian view,a monopolistically competitive firm may fail to increase the price of its product as demand increases because

Accepted Answer

A)  if it does, it will lose all of its customers. 
B)  the cost to it of changing prices may exceed the benefit of doing so. 
C)  prices of monopolistically competitive firms are regulated by the federal government and may only be changed with permission. 
D)  for a monopolistically competitive firm, price is below marginal cost. 
A)  if it does, it will lose all of its customers. 
B)  the cost to it of changing prices may exceed the benefit of doing so. 
C)  prices of monopolistically competitive firms are regulated by the federal government and may only be changed with permission. 
D)  for a monopolistically competitive firm, price is below marginal cost.

Question 11

The proposition of monetary neutrality states that changes in the money supply have

Accepted Answer

A)  no impact on output in the short run. 
B)  no impact on output in the long run. 
C)  no impact on the price level in the short run. 
D)  no impact on the price level in the long run. 
A)  no impact on output in the short run. 
B)  no impact on output in the long run. 
C)  no impact on the price level in the short run. 
D)  no impact on the price level in the long run.

Question 12

An increase in the price level

Accepted Answer

A)  shifts the short-run aggregate supply curve up and to the left. 
B)  shifts the short-run aggregate supply curve down and to the right. 
C)  shifts the long-run aggregate supply curve to the left. 
D)  results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve. 
A)  shifts the short-run aggregate supply curve up and to the left. 
B)  shifts the short-run aggregate supply curve down and to the right. 
C)  shifts the long-run aggregate supply curve to the left. 
D)  results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve.

Question 13

Explain why some economists claim that the persistence of high unemployment rates during the recovery from the recession of 2007-2009 is evidence of "hysteresis."

Accepted Answer

Some economists believe that large negat

Question 14

In the new Keynesian view,the larger the proportion of firms in the economy with sticky prices

Accepted Answer

A)  the steeper the SRAS curve will be. 
B)  the flatter the SRAS curve will be. 
C)  the greater the increase in the price level for a given shift in the AD curve. 
D)  the less effective is fiscal policy in increasing output. 
A)  the steeper the SRAS curve will be. 
B)  the flatter the SRAS curve will be. 
C)  the greater the increase in the price level for a given shift in the AD curve. 
D)  the less effective is fiscal policy in increasing output.

Question 15

When output exceeds its full-employment level

Accepted Answer

A)  the short-run aggregate supply curve shifts to the left. 
B)  wages fall. 
C)  the short-run aggregate supply curve shifts to the right. 
D)  aggregate supply exceeds aggregate demand. 
A)  the short-run aggregate supply curve shifts to the left. 
B)  wages fall. 
C)  the short-run aggregate supply curve shifts to the right. 
D)  aggregate supply exceeds aggregate demand.

Question 16

Which of the following will NOT shift the short-run aggregate supply function?

Accepted Answer

A)  changes in labor costs 
B)  changes in the costs of nonlabor inputs 
C)  changes in the price level 
D)  changes in the expected price level 
A)  changes in labor costs 
B)  changes in the costs of nonlabor inputs 
C)  changes in the price level 
D)  changes in the expected price level

Question 17

How does an increase in the price level result in higher interest rates?

Accepted Answer

A)  It increases the real money supply. 
B)  It decreases the real money supply. 
C)  It increases the real money demand. 
D)  It decreases the real money demand. 
A)  It increases the real money supply. 
B)  It decreases the real money supply. 
C)  It increases the real money demand. 
D)  It decreases the real money demand.

Question 18

According to the new classical view,when the actual price level is greater than the expected price level

Accepted Answer

A)  aggregate output is above the full employment level. 
B)  aggregate output is below the full employment level. 
C)  the aggregate supply curve will slope downward. 
D)  the coefficient a is equal to zero. 
A)  aggregate output is above the full employment level. 
B)  aggregate output is below the full employment level. 
C)  the aggregate supply curve will slope downward. 
D)  the coefficient a is equal to zero.

Question 19

The best explanation of why the aggregate demand curve has a negative slope is that

Accepted Answer

A)  at a higher price level households cut back on their spending on goods and services. 
B)  at a higher price level business firms wish to produce more goods and services. 
C)  a higher price level results in lower real money balances and a higher real interest rate. 
D)  a higher price level results in less government spending on transfers, such as unemployment insurance and social security payments. 
A)  at a higher price level households cut back on their spending on goods and services. 
B)  at a higher price level business firms wish to produce more goods and services. 
C)  a higher price level results in lower real money balances and a higher real interest rate. 
D)  a higher price level results in less government spending on transfers, such as unemployment insurance and social security payments.

Question 20

Stabilization policy refers to attempts to

Accepted Answer

A)  shift the AD curve to smooth short-run fluctuations in output. 
B)  shift the SRAS curve to smooth short-run fluctuations in output. 
C)  shift the AD curve to keep the price level as low as possible. 
D)  shift the SRAS curve to keep the nominal interest rate as low as possible. 
A)  shift the AD curve to smooth short-run fluctuations in output. 
B)  shift the SRAS curve to smooth short-run fluctuations in output. 
C)  shift the AD curve to keep the price level as low as possible. 
D)  shift the SRAS curve to keep the nominal interest rate as low as possible.

According to the new classical theory,why may output differ from its full-employment level in the short run?

In the long run,one-time increases or decreases in the nominal money supply affect

Which of the following is NOT an example of a monopolistically competitive market?

If labor costs rise at the same time that the federal government decreases its purchases,in the short run

What is the principal source of change in productivity growth?

Economists who are skeptical of hysteresis in Europe during the 1980s and 1990s cite all of the following as reasons for persistently high unemployment in Europe EXCEPT

Which of the following will NOT shift the aggregate demand curve to the right?

Productivity growth occurs when

In the new Keynesian view,a monopolistically competitive firm may fail to increase the price of its product as demand increases because

The proposition of monetary neutrality states that changes in the money supply have

An increase in the price level

Explain why some economists claim that the persistence of high unemployment rates during the recovery from the recession of 2007-2009 is evidence of "hysteresis."

In the new Keynesian view,the larger the proportion of firms in the economy with sticky prices

When output exceeds its full-employment level

Which of the following will NOT shift the short-run aggregate supply function?

How does an increase in the price level result in higher interest rates?

According to the new classical view,when the actual price level is greater than the expected price level

The best explanation of why the aggregate demand curve has a negative slope is that

Stabilization policy refers to attempts to

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 17: Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

According to the new classical theory,why may output differ from its full-employment level in the short run?

In the long run,one-time increases or decreases in the nominal money supply affect

Which of the following is NOT an example of a monopolistically competitive market?

If labor costs rise at the same time that the federal government decreases its purchases,in the short run

What is the principal source of change in productivity growth?

Economists who are skeptical of hysteresis in Europe during the 1980s and 1990s cite all of the following as reasons for persistently high unemployment in Europe EXCEPT

Which of the following will NOT shift the aggregate demand curve to the right?

Productivity growth occurs when

In the new Keynesian view,a monopolistically competitive firm may fail to increase the price of its product as demand increases because

The proposition of monetary neutrality states that changes in the money supply have

An increase in the price level

Explain why some economists claim that the persistence of high unemployment rates during the recovery from the recession of 2007-2009 is evidence of "hysteresis."

In the new Keynesian view,the larger the proportion of firms in the economy with sticky prices

When output exceeds its full-employment level

Which of the following will NOT shift the short-run aggregate supply function?

How does an increase in the price level result in higher interest rates?

According to the new classical view,when the actual price level is greater than the expected price level

The best explanation of why the aggregate demand curve has a negative slope is that

Stabilization policy refers to attempts to

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory Ii: the Is-Mp Model

Filters