Exam 17: New Classical Macro and New Keynesian Macro

Figure 17-3 -In Figure 17-3 above,suppose we are working under assumptions of the Lucas model.With an expansionary monetary policy,the "policy ineffectiveness proposition" is shown as a movement between points

Suppose there is a 5 percent increase in nominal demand in every industry in an economy.Factors that keep the price level from also rising by 5 percent are called

In the RBC model,an adverse supply shock causes the decrease in natural real GDP to be minimized when the labor supply curve is

According to the classical model,real wages should

In the RBC model,an adverse supply shock causes the decrease in natural real GDP to be maximized when the labor supply curve is

With the assumption that some voluntary exchanges that would make both parties better off are somehow being blocked,we have the basis for a ________ macroeconomic model,such as those constructed by ________ economists.

Which of the following are NOT included among Gordon's criticisms of Friedman's fooling model?

Suppose a worker signs a contract containing an 8 percent nominal wage increase with inflation expected to be 3 percent.Inflation turns out to be 6 percent,but the contract also contains 60 percent COLA protection.The worker's real wage under the contract

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 -If the firm in Figure 17-4 above maintains its set price of P₀,rather than dropping price to P₁,it must be facing a "menu cost" of adjusting its price that exceeds

After a shift from AD₀ to AD₁,which of the following patterns of adjustment is consistent with the "Price Fooling" model?

Because efficiency wage theory deals with the consequences of a change in a firm's ________ wage,if all wages were indexed to nominal aggregate demand the theory would be ________.

The new Keynesian models,are examples of

The more that firms in an economy believe that the demand for their goods is mainly influenced by "local conditions" and not the aggregate level of demand,the ________ is the SAS curve and thus the ________ are cycles in real GDP.

Robert Lucas Jr.adapted the fooling model to his own way of thinking by replacing that model's assumption of

After a drop in nominal aggregate demand,if menu costs prevent firms from reducing prices,this is considered ________ act by firms ________ a "macroeconomic externality."

"Non-market-clearing" approaches to macroeconomics include

In the fooling model,suppose that from an initial AD/SAS/LAS equilibrium a sudden expansion of aggregate demand occurs.With fooling,we would find employment and the actual real wage in the labor market diagram by moving

In the short-run,a supply shock will lead to

If the markets in the economy are characterized by rational expectations,then

In the fooling model's labor market diagram,from an initial intersection point of the labor supply and demand curves,tracing "northwest" up the labor demand curve shows