Question 1

Real business cycle theory explains changes in employment and output by focusing on

Accepted Answer

A) real supply-side factors. 
B) changes in monetary policy. 
C) changes in fiscal policy. 
D) the interaction of fiscal and monetary policies. 
A) real supply-side factors. 
B) changes in monetary policy. 
C) changes in fiscal policy. 
D) the interaction of fiscal and monetary policies.

Question 2

The Phillips curve trade-off relationship implies that

Accepted Answer

A) the government can fine-tune the economy and generate both the natural rate of unemployment and zero inflation. 
B) the government can fine-tune the economy and pick the most preferred combination of unemployment and inflation. 
C) low unemployment can be obtained only by generating rapidly increasing inflation. 
D) there is no relationship between inflation and unemployment, at least in the long run. 
A) the government can fine-tune the economy and generate both the natural rate of unemployment and zero inflation. 
B) the government can fine-tune the economy and pick the most preferred combination of unemployment and inflation. 
C) low unemployment can be obtained only by generating rapidly increasing inflation. 
D) there is no relationship between inflation and unemployment, at least in the long run.

Question 3

Under the assumption of rational expectations, government fiscal and monetary policy changes are effective in the short run

Accepted Answer

A) all of the time. 
B) only when the short-run aggregate supply curve is the same as the long-run aggregate supply curve. 
C) only when the policy changes leave the position of the aggregate demand curve unaffected. 
D) only when the policy changes are unanticipated. 
A) all of the time. 
B) only when the short-run aggregate supply curve is the same as the long-run aggregate supply curve. 
C) only when the policy changes leave the position of the aggregate demand curve unaffected. 
D) only when the policy changes are unanticipated.

Question 4

More recent studies of new Keynesian inflation dynamics indicated that the average price-adjustment intervals in the United States are

Accepted Answer

A) are one year or less. 
B) two years or less. 
C) four years or less. 
D) more than four years. 
A) are one year or less. 
B) two years or less. 
C) four years or less. 
D) more than four years.

Question 5

If the average interval between firms' price adjustments is relatively long

Accepted Answer

A) an increase in aggregate demand will cause a relatively short-lived increase in real GDP. 
B) an increase in aggregate demand will cause a relatively long-lived increase in real GDP. 
C) a reduction in aggregate demand will cause a relatively short-lived reduction in real GDP. 
D) none of the above. 
A) an increase in aggregate demand will cause a relatively short-lived increase in real GDP. 
B) an increase in aggregate demand will cause a relatively long-lived increase in real GDP. 
C) a reduction in aggregate demand will cause a relatively short-lived reduction in real GDP. 
D) none of the above.

Question 6

Under the assumption of rational expectations, expectations people have formed are an important determinant of

Accepted Answer

A) the short-run aggregate supply curve. 
B) the long-run aggregate supply curve. 
C) the short-run aggregate demand curve. 
D) the long-run aggregate demand curve. 
A) the short-run aggregate supply curve. 
B) the long-run aggregate supply curve. 
C) the short-run aggregate demand curve. 
D) the long-run aggregate demand curve.

Question 7

Costs of renewing contracts or printing new price lists are known as

Accepted Answer

A) small business costs. 
B) small menu costs. 
C) small operating costs. 
D) small production costs. 
A) small business costs. 
B) small menu costs. 
C) small operating costs. 
D) small production costs.

Question 8

Costs that tend to deter firms from changing their prices in response to changes in the market equilibrium price are referred to as

Accepted Answer

A) large menu costs. 
B) small menu costs. 
C) real menu costs. 
D) burden costs. 
A) large menu costs. 
B) small menu costs. 
C) real menu costs. 
D) burden costs.

Question 9

Those who favor passive policy making do so because they conclude that

Accepted Answer

A) price and wage flexibility is a common and speedy occurrence. 
B) price and wage flexibility is an uncommon occurrence. 
C) pure competition is not typical in most markets. 
D) there is a stable trade-off between inflation and unemployment in the short run. 
A) price and wage flexibility is a common and speedy occurrence. 
B) price and wage flexibility is an uncommon occurrence. 
C) pure competition is not typical in most markets. 
D) there is a stable trade-off between inflation and unemployment in the short run.

Question 10

If the Fed engages in open market sales in direct response to an increase in the rate of inflation, this is known as

Accepted Answer

A) direct policy making. 
B) active policy making. 
C) passive policy making. 
D) fiscal policy making. 
A) direct policy making. 
B) active policy making. 
C) passive policy making. 
D) fiscal policy making.

Question 11

In the short run, an unanticipated cut in the rate of inflation would

Accepted Answer

A) increase the unemployment rate. 
B) decrease the unemployment rate. 
C) unambiguously improve the misery index. 
D) lower the natural rate of unemployment. 
A) increase the unemployment rate. 
B) decrease the unemployment rate. 
C) unambiguously improve the misery index. 
D) lower the natural rate of unemployment.

Question 12

One economic hypothesis states that people form expectations by combining the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes, and then react accordingly. This is known as the

Accepted Answer

A) relevance hypothesis. 
B) contrary opinion hypothesis. 
C) rational expectations hypothesis. 
D) structural hypothesis. 
A) relevance hypothesis. 
B) contrary opinion hypothesis. 
C) rational expectations hypothesis. 
D) structural hypothesis.

Question 13

Describe and explain the real business cycle theory.

Accepted Answer

The real business cycle theory is a modi

Question 14

The menu cost theory suggests that

Accepted Answer

A) there will be no unemployment. 
B) wages and prices move freely and quickly. 
C) firms find frequent price changes to be costly. 
D) the economy is characterized only by perfect competition. 
A) there will be no unemployment. 
B) wages and prices move freely and quickly. 
C) firms find frequent price changes to be costly. 
D) the economy is characterized only by perfect competition.

Question 15

Economists who favor policy activism argue that the United States economy is NOT always in equilibrium because

Accepted Answer

A) the national debt is too large. 
B) the Federal Reserve's monetary policy is too restrictive. 
C) the markets are over regulated. 
D) wage and price rigidities exist. 
A) the national debt is too large. 
B) the Federal Reserve's monetary policy is too restrictive. 
C) the markets are over regulated. 
D) wage and price rigidities exist.

Question 16

Which of the following would NOT cause a real business cycle?

Accepted Answer

A) a change in technology 
B) a change in the composition of the labor force 
C) a change in the money supply 
D) a sustained change in the price of oil 
A) a change in technology 
B) a change in the composition of the labor force 
C) a change in the money supply 
D) a sustained change in the price of oil

Question 17

Proponents of the policy irrelevance proposition believe that, under the assumption of rational expectations, the unemployment rate will

Accepted Answer

A) go up whenever the Fed announces an anticipated monetary policy change. 
B) go down whenever the Fed announces an anticipated fiscal policy change. 
C) equal the natural rate of unemployment in the long run, regardless of any monetary policy actions. 
D) always be higher in the long run than the natural rate of employment. 
A) go up whenever the Fed announces an anticipated monetary policy change. 
B) go down whenever the Fed announces an anticipated fiscal policy change. 
C) equal the natural rate of unemployment in the long run, regardless of any monetary policy actions. 
D) always be higher in the long run than the natural rate of employment.

Question 18

According to the rational expectations hypothesis, individuals form their expectations about future values of economic variables by all of the following EXCEPT

Accepted Answer

A) past information. 
B) current information. 
C) their understanding of how the economy operates. 
D) formal models of macroeconomics. 
A) past information. 
B) current information. 
C) their understanding of how the economy operates. 
D) formal models of macroeconomics.

Question 19

What is the Phillips curve?
 What does the Phillips curve suggest about optimal policy?

Accepted Answer

The Phillips curve shows a trade-off bet

Question 20

A theory suggesting that price stickiness leads to sluggish short-run adjustment of the price level to variations in aggregate demand is known as

Accepted Answer

A) new Keynesian flexible-price business cycles. 
B) new Keynesian inflation dynamics. 
C) real-business-cycle fixed-price business cycles. 
D) real-business-cycle inflation dynamics. 
A) new Keynesian flexible-price business cycles. 
B) new Keynesian inflation dynamics. 
C) real-business-cycle fixed-price business cycles. 
D) real-business-cycle inflation dynamics.

Real business cycle theory explains changes in employment and output by focusing on

The Phillips curve trade-off relationship implies that

Under the assumption of rational expectations, government fiscal and monetary policy changes are effective in the short run

More recent studies of new Keynesian inflation dynamics indicated that the average price-adjustment intervals in the United States are

If the average interval between firms' price adjustments is relatively long

Under the assumption of rational expectations, expectations people have formed are an important determinant of

Costs of renewing contracts or printing new price lists are known as

Costs that tend to deter firms from changing their prices in response to changes in the market equilibrium price are referred to as

Those who favor passive policy making do so because they conclude that

If the Fed engages in open market sales in direct response to an increase in the rate of inflation, this is known as

In the short run, an unanticipated cut in the rate of inflation would

One economic hypothesis states that people form expectations by combining the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes, and then react accordingly. This is known as the

Describe and explain the real business cycle theory.

The menu cost theory suggests that

Economists who favor policy activism argue that the United States economy is NOT always in equilibrium because

Which of the following would NOT cause a real business cycle?

Proponents of the policy irrelevance proposition believe that, under the assumption of rational expectations, the unemployment rate will

According to the rational expectations hypothesis, individuals form their expectations about future values of economic variables by all of the following EXCEPT

What is the Phillips curve? What does the Phillips curve suggest about optimal policy?

A theory suggesting that price stickiness leads to sluggish short-run adjustment of the price level to variations in aggregate demand is known as

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 16: Stabilization in an Integrated World Economy

Real business cycle theory explains changes in employment and output by focusing on

The Phillips curve trade-off relationship implies that

Under the assumption of rational expectations, government fiscal and monetary policy changes are effective in the short run

More recent studies of new Keynesian inflation dynamics indicated that the average price-adjustment intervals in the United States are

If the average interval between firms' price adjustments is relatively long

Under the assumption of rational expectations, expectations people have formed are an important determinant of

Costs of renewing contracts or printing new price lists are known as

Costs that tend to deter firms from changing their prices in response to changes in the market equilibrium price are referred to as

Those who favor passive policy making do so because they conclude that

If the Fed engages in open market sales in direct response to an increase in the rate of inflation, this is known as

In the short run, an unanticipated cut in the rate of inflation would

One economic hypothesis states that people form expectations by combining the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes, and then react accordingly. This is known as the

Describe and explain the real business cycle theory.

The menu cost theory suggests that

Economists who favor policy activism argue that the United States economy is NOT always in equilibrium because

Which of the following would NOT cause a real business cycle?

Proponents of the policy irrelevance proposition believe that, under the assumption of rational expectations, the unemployment rate will

According to the rational expectations hypothesis, individuals form their expectations about future values of economic variables by all of the following EXCEPT

What is the Phillips curve? What does the Phillips curve suggest about optimal policy?

A theory suggesting that price stickiness leads to sluggish short-run adjustment of the price level to variations in aggregate demand is known as

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters