Question 1

In the Keynesian model,money is

Accepted Answer

A) neutral in both the short run and the long run. 
B) neutral in neither the short run nor the long run. 
C) neutral in the short run,but not in the long run. 
D) neutral in the long run,but not in the short run. 
A) neutral in both the short run and the long run. 
B) neutral in neither the short run nor the long run. 
C) neutral in the short run,but not in the long run. 
D) neutral in the long run,but not in the short run. D

Question 2

According to the menu cost theory,firms will be slow in changing their prices because

Accepted Answer

A) if prices changed frequently,individuals would reduce their demand for that good because of uncertainty. 
B) frequent price changes would be a sign of monopolistic behaviour. 
C) the cost of changing the price might exceed the additional revenue the price change would generate. 
D) demand for their product would fall because consumers would purchase goods from firms that had not raised their prices. 
A) if prices changed frequently,individuals would reduce their demand for that good because of uncertainty. 
B) frequent price changes would be a sign of monopolistic behaviour. 
C) the cost of changing the price might exceed the additional revenue the price change would generate. 
D) demand for their product would fall because consumers would purchase goods from firms that had not raised their prices. C

Question 3

Which one of the following is NOT a criticism of the nominal-wage rigidity assumption?

Accepted Answer

A) Less than one-third of the labour force in Canada is covered by a labour contract. 
B) Some labour contracts contain cost-of-living adjustments. 
C) Real wages are procyclical. 
D) Both employees and employers make their decisions based on rational expectations. 
A) Less than one-third of the labour force in Canada is covered by a labour contract. 
B) Some labour contracts contain cost-of-living adjustments. 
C) Real wages are procyclical. 
D) Both employees and employers make their decisions based on rational expectations. D

Question 4

According to Keynesian theory,the SRAS curve is positively sloped because

Accepted Answer

A) employers and employees fail to predict prices correctly. 
B) employers and employees have misperception about the change in relative price level. 
C) labour contracts are signed for a period in which labour market conditions are not known. 
D) wages are flexible,but prices are not. 
A) employers and employees fail to predict prices correctly. 
B) employers and employees have misperception about the change in relative price level. 
C) labour contracts are signed for a period in which labour market conditions are not known. 
D) wages are flexible,but prices are not.

Question 5

In the Keynesian model,the difference between using monetary and fiscal policy to eliminate a recession is that

Accepted Answer

A) monetary policy will eliminate a recession quicker than fiscal policy will. 
B) fiscal policy will eliminate a recession quicker than monetary policy will. 
C) an expansionary monetary policy will leave the economy with a lower real interest rate than an expansionary fiscal policy. 
D) an expansionary fiscal policy will leave the economy with a lower real interest rate than an expansionary monetary policy. 
A) monetary policy will eliminate a recession quicker than fiscal policy will. 
B) fiscal policy will eliminate a recession quicker than monetary policy will. 
C) an expansionary monetary policy will leave the economy with a lower real interest rate than an expansionary fiscal policy. 
D) an expansionary fiscal policy will leave the economy with a lower real interest rate than an expansionary monetary policy.

Question 6

In the Keynesian model,

Accepted Answer

A) the short-run aggregate supply slopes upward because of price misperception by firms. 
B) the short-run aggregate supply slopes upward because the actual price may be different from the expected price during the term of wage contract. 
C) the short-run aggregate supply is horizontal because of price misperception by firms. 
D) the short-run aggregate supply is horizontal because the actual price may be different from the expected price during the term of wage contract. 
A) the short-run aggregate supply slopes upward because of price misperception by firms. 
B) the short-run aggregate supply slopes upward because the actual price may be different from the expected price during the term of wage contract. 
C) the short-run aggregate supply is horizontal because of price misperception by firms. 
D) the short-run aggregate supply is horizontal because the actual price may be different from the expected price during the term of wage contract.

Question 7

In the Keynesian model,a decrease in the money supply would cause prices to ________ in the short run and ________ in the long run.

Accepted Answer

A) remain unchanged;remain unchanged. 
B) remain unchanged;decrease 
C) decrease;remain unchanged 
D) decrease;decrease 
A) remain unchanged;remain unchanged. 
B) remain unchanged;decrease 
C) decrease;remain unchanged 
D) decrease;decrease

Question 8

Anticipated changes in the aggregate demand,in the Keynesian model

Accepted Answer

A) would affect the output in the short run. 
B) would affect the output in the long run. 
C) would not affect the output in the short and long runs. 
D) would affect the output in the case of the money supply changes. 
A) would affect the output in the short run. 
B) would affect the output in the long run. 
C) would not affect the output in the short and long runs. 
D) would affect the output in the case of the money supply changes.

Question 9

A model in which individual producers act as price setters,because there are only a few sellers and the product they sell is not standardized,is called

Accepted Answer

A) imperfect competition. 
B) perfect competition. 
C) monopoly. 
D) monopsony. 
A) imperfect competition. 
B) perfect competition. 
C) monopoly. 
D) monopsony.

Question 10

In the Keynesian model in the long run,a decrease in taxes causes the price level to ________ and the real interest rate to ________.

Accepted Answer

A) fall;rise 
B) fall;fall 
C) rise;rise 
D) rise;fall 
A) fall;rise 
B) fall;fall 
C) rise;rise 
D) rise;fall

Question 11

In the Keynesian model in the long run,an increase in the money supply will cause ________ in the real interest rate and ________ the price level.

Accepted Answer

A) an increase;an increase 
B) a decrease;an increase 
C) no change;an increase 
D) no change;no change 
A) an increase;an increase 
B) a decrease;an increase 
C) no change;an increase 
D) no change;no change

Question 12

When the demand for an imperfect competitor's product is greater than it planned,the firm will

Accepted Answer

A) increase the price of the product until supply equals demand. 
B) meet the demand at its set price. 
C) reduce the price until supply equals demand. 
D) allow a shortage of the product to develop,without changing the product's price. 
A) increase the price of the product until supply equals demand. 
B) meet the demand at its set price. 
C) reduce the price until supply equals demand. 
D) allow a shortage of the product to develop,without changing the product's price.

Question 13

A problem with the use of aggregate demand management to stabilize the business cycle is that

Accepted Answer

A) monetary policy isn't available to use when interest rates are already rising because of higher inflation. 
B) fiscal policy takes a long time to have any impact on the economy. 
C) monetary policy is difficult to use,because the decision-making process is long and complicated. 
D) the precise amount that output will change in response to monetary or fiscal policy isn't known. 
A) monetary policy isn't available to use when interest rates are already rising because of higher inflation. 
B) fiscal policy takes a long time to have any impact on the economy. 
C) monetary policy is difficult to use,because the decision-making process is long and complicated. 
D) the precise amount that output will change in response to monetary or fiscal policy isn't known.

Question 14

An unanticipated increase in the money supply would

Accepted Answer

A) shift the LM curve to the right and the AD curve up and to the right. 
B) shift the LM curve to the left and the AD curve up and to the right. 
C) shift the LM curve to the right and the AD curve down and to the left. 
D) shift the IS curve to the right and the AD curve up and to the right. 
A) shift the LM curve to the right and the AD curve up and to the right. 
B) shift the LM curve to the left and the AD curve up and to the right. 
C) shift the LM curve to the right and the AD curve down and to the left. 
D) shift the IS curve to the right and the AD curve up and to the right.

Question 15

In the Keynesian model in the long run,an increase in the money supply will cause

Accepted Answer

A) an increase in output and a decrease in the real interest rate. 
B) a decrease in the real interest rate but no change in output. 
C) an increase in the real interest rate and an increase in output. 
D) no change in either the real interest rate or output. 
A) an increase in output and a decrease in the real interest rate. 
B) a decrease in the real interest rate but no change in output. 
C) an increase in the real interest rate and an increase in output. 
D) no change in either the real interest rate or output.

Question 16

In the Keynesian model,short-run equilibrium occurs

Accepted Answer

A) where the IS and LM curves intersect. 
B) where the IS curve,LM curve,and FE lines intersect. 
C) where the IS curve intersects the FE line. 
D) where the LM curve intersects the FE line. 
A) where the IS and LM curves intersect. 
B) where the IS curve,LM curve,and FE lines intersect. 
C) where the IS curve intersects the FE line. 
D) where the LM curve intersects the FE line.

Question 17

Consider the following short run aggregate supply equation: Y = $\hat Y$ + b (P - Pᵉ),where Y is the real output, $\hat Y$ is the full employment output,P and Pᵉ are the actual and expected price levels,respectively.Which of the following is correct?

Accepted Answer

A) In the Keynesian model,P is always equal to Pᵉ because of sticky-wage assumption. 
B) In the Keynesian model,P may be different than Pᵉ because of sticky-wage assumption. 
C) In the Keynesian model,P is always greater than Pᵉ because of sticky-wage assumption. 
D) In the Keynesian model,P is always less than Pᵉ because of sticky-wage assumption. 
A) In the Keynesian model,P is always equal to Pᵉ because of sticky-wage assumption. 
B) In the Keynesian model,P may be different than Pᵉ because of sticky-wage assumption. 
C) In the Keynesian model,P is always greater than Pᵉ because of sticky-wage assumption. 
D) In the Keynesian model,P is always less than Pᵉ because of sticky-wage assumption.

Question 18

The reason for disequilibrium in the short run in the Keynesian model of nominal-wage rigidity is

Accepted Answer

A) employers and employees do not know about the actual relative prices. 
B) the contracts according which wages are set for a specific period and can be negotiated only when the contract term ends. 
C) unions which supports fixed wages during the contracts. 
D) that prices and wages move together in the long run. 
A) employers and employees do not know about the actual relative prices. 
B) the contracts according which wages are set for a specific period and can be negotiated only when the contract term ends. 
C) unions which supports fixed wages during the contracts. 
D) that prices and wages move together in the long run.

Question 19

You are the governor of the Central Bank of Atlantis.You believe in a Keynesian model of the economy,and your goal is to keep the economy at the full-employment level of output.How would you respond (tightening or easing policy)in each of the following cases?
a.Government purchases increase.
b.Corporate tax rates increase.
c.Expected inflation increases.
d.There's a beneficial oil price shock (and the LM curve shifts more to the right than the FE line).

Accepted Answer

a.tighten

Question 20

In the short run in the Keynesian model,an oil price shock would leave the economy with a ________ level of output and a ________ real interest rate.

Accepted Answer

A) higher;lower 
B) lower;higher 
C) lower;lower 
D) higher;higher 
A) higher;lower 
B) lower;higher 
C) lower;lower 
D) higher;higher

In the Keynesian model,money is

According to the menu cost theory,firms will be slow in changing their prices because

Which one of the following is NOT a criticism of the nominal-wage rigidity assumption?

According to Keynesian theory,the SRAS curve is positively sloped because

In the Keynesian model,the difference between using monetary and fiscal policy to eliminate a recession is that

In the Keynesian model,

In the Keynesian model,a decrease in the money supply would cause prices to in the short run and in the long run.

Anticipated changes in the aggregate demand,in the Keynesian model

A model in which individual producers act as price setters,because there are only a few sellers and the product they sell is not standardized,is called

In the Keynesian model in the long run,a decrease in taxes causes the price level to and the real interest rate to .

In the Keynesian model in the long run,an increase in the money supply will cause in the real interest rate and the price level.

When the demand for an imperfect competitor's product is greater than it planned,the firm will

A problem with the use of aggregate demand management to stabilize the business cycle is that

An unanticipated increase in the money supply would

In the Keynesian model in the long run,an increase in the money supply will cause

In the Keynesian model,short-run equilibrium occurs

Consider the following short run aggregate supply equation: Y = $\hat Y$ + b (P - Pᵉ),where Y is the real output, $\hat Y$ is the full employment output,P and Pᵉ are the actual and expected price levels,respectively.Which of the following is correct?

The reason for disequilibrium in the short run in the Keynesian model of nominal-wage rigidity is

In the short run in the Keynesian model,an oil price shock would leave the economy with a level of output and a real interest rate.

Introduction to Macroeconomics

The Measurement and Structure of the Canadian Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lm-Fe Model: a General Framework for Macroeconomic Analysis

Exchange Rates, business Cycles, and Macroeconomic Policy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters

Exam 12: Keynesian Business Cycle Analysis: Non Market Clearing Macroeconomics

In the Keynesian model,money is

According to the menu cost theory,firms will be slow in changing their prices because

Which one of the following is NOT a criticism of the nominal-wage rigidity assumption?

According to Keynesian theory,the SRAS curve is positively sloped because

In the Keynesian model,the difference between using monetary and fiscal policy to eliminate a recession is that

In the Keynesian model,

In the Keynesian model,a decrease in the money supply would cause prices to ________ in the short run and ________ in the long run.

Anticipated changes in the aggregate demand,in the Keynesian model

A model in which individual producers act as price setters,because there are only a few sellers and the product they sell is not standardized,is called

In the Keynesian model in the long run,a decrease in taxes causes the price level to ________ and the real interest rate to ________.

In the Keynesian model in the long run,an increase in the money supply will cause ________ in the real interest rate and ________ the price level.

When the demand for an imperfect competitor's product is greater than it planned,the firm will

A problem with the use of aggregate demand management to stabilize the business cycle is that

An unanticipated increase in the money supply would

In the Keynesian model in the long run,an increase in the money supply will cause

In the Keynesian model,short-run equilibrium occurs

Consider the following short run aggregate supply equation: Y = Y^\hat YY^ + b (P - Pᵉ),where Y is the real output, Y^\hat YY^ is the full employment output,P and Pᵉ are the actual and expected price levels,respectively.Which of the following is correct?

The reason for disequilibrium in the short run in the Keynesian model of nominal-wage rigidity is

In the short run in the Keynesian model,an oil price shock would leave the economy with a ________ level of output and a ________ real interest rate.

Introduction to Macroeconomics

The Measurement and Structure of the Canadian Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lm-Fe Model: a General Framework for Macroeconomic Analysis

Exchange Rates, business Cycles, and Macroeconomic Policy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters

In the Keynesian model,a decrease in the money supply would cause prices to in the short run and in the long run.

In the Keynesian model in the long run,a decrease in taxes causes the price level to and the real interest rate to .

In the Keynesian model in the long run,an increase in the money supply will cause in the real interest rate and the price level.

Consider the following short run aggregate supply equation: Y = $\hat Y$ + b (P - Pᵉ),where Y is the real output, $\hat Y$ is the full employment output,P and Pᵉ are the actual and expected price levels,respectively.Which of the following is correct?

In the short run in the Keynesian model,an oil price shock would leave the economy with a level of output and a real interest rate.