Exam 17: New Classical Macro and New Keynesian Macro

Employing the New Keynesian concepts of "macroeconomic externality" and "coordination failure": if nominal aggregate demand and marginal cost fall by the same proportion,society ________ afford to compensate firms for the profit they lose when they ________.

In Figure 17-4,below,initial demand,marginal cost,and marginal revenue curves (none of them shown)caused the firm to produce the profit-maximizing quantity Y₀ at a price of P₀.Now the demand and marginal cost curves have moved to those shown,with the marginal revenue curve running through point L. Figure 17-4 -In Figure 17-4 above,the profit-maximizing quantity,in the absence of "menu costs," ________,with profit equal to ________.

According to Gordon,a major problem with Keynes' "rigid nominal wage" theory of the business cycle is

Long-term contracts are desirable for both firms and workers for each of the following reasons EXCEPT one.Which of the following does NOT explain the desirability of long-term contracts?

A supply shock,such as the OPEC oil-price increases in the 1970s,

Efficiency wage theory provides a reason for uncontracted nominal wages to ________ when nominal aggregate demand falls,thus ________ a recession.

Faced with a decrease in the demand for its product,a monopolist will lower prices and maintain output at its previous level if

If imperfect information characterizes workers' behavior,then there will be a

According to the theory of rational expectations,the "fooling" of workers in Friedman's model

A macroeconomic model obeys the "natural rate hypothesis" by incorporating

A variable that RBC theory is simply not interested in and seldom attempts to explain or predict is

In the fooling model,what is held constant along a SAS curve?

In the non-market-clearing model,"involuntary" unemployment results because

The more a nation depends on imported raw materials,the ________ closely linked is its marginal cost to its nominal aggregate demand,thus the ________ for the typical firm is a policy of indexing price to nominal aggregate demand.

In the fooling model,should an expansion of aggregate demand cause fooling,the actual real wage ________ while the expected real wage ________.

The "information barrier" that is the root cause of business cycles in the Lucas model is that

Which of the following countries has a flat SAS curve?

Which of the following is NOT a reason why natural GDP might fall as a result of a supply shock?

The RBC approach has workers allocating their labor effort over blocks of time,with periods of intense activity when wages are high alternating with slack periods of vacation and leisure.This makes the labor supply curve rather ________,with unemployment an entirely ________ phenomenon.

Business cycles disappear when firms