Question 1

What are the principal sources of change in productivity growth?

Accepted Answer

The principal sources of chang

Question 2

The new classical explanation of aggregate supply in the short run builds on research by

Accepted Answer

A) Irving Fisher. 
B) John Maynard Keynes. 
C) Robert Lucas. 
D) Robert Solow. 
A) Irving Fisher. 
B) John Maynard Keynes. 
C) Robert Lucas. 
D) Robert Solow.

Question 3

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 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 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 4

Which of the following is NOT a reason for the weak recovery following the 2007-2009 recession?

Accepted Answer

A) Recessions started by financial crises are almost always severe. 
B) The decline in the automobile industry appeared to be structural. 
C) The collapse of the housing market was long lived. 
D) The recession was caused by a decline in short-run aggregate supply. 
A) Recessions started by financial crises are almost always severe. 
B) The decline in the automobile industry appeared to be structural. 
C) The collapse of the housing market was long lived. 
D) The recession was caused by a decline in short-run aggregate supply.

Question 5

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 6

All of the following have been proposed as reasons for an unusually high level of uncertainty following the financial crisis of 2007-2009 EXCEPT:

Accepted Answer

A) the severity of the financial crisis 
B) concerns of small businesses regarding how the Affordable Care Act would affect the cost of hiring workers 
C) concerns by households and firms regarding potential tax increases and spending cuts scheduled to take place in January 2013 
D) the Fed indicating that it would withdraw stimulus as soon as there was any evidence of economic recovery 
A) the severity of the financial crisis 
B) concerns of small businesses regarding how the Affordable Care Act would affect the cost of hiring workers 
C) concerns by households and firms regarding potential tax increases and spending cuts scheduled to take place in January 2013 
D) the Fed indicating that it would withdraw stimulus as soon as there was any evidence of economic recovery

Question 7

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.

Question 8

Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news, but at least prices starting to go up means that output must be starting to go up as well."

Accepted Answer

If the increase in the price level is du

Question 9

Suppose that many households look to the stock market to gauge how the economy is likely to perform in the future. When stock prices are rising, then households will be optimistic about the future state of the economy and will increase their spending on houses and consumer durables, such as cars and furniture. When stock prices are falling, then households will be pessimistic about the future and will cut back on their spending. If this view of the link between stock prices and household spending is correct, then what will be the effect of a decline in stock prices on output in the new Keynesian view? Be sure to distinguish the short run from the long run.

Accepted Answer

The fall in stock prices will reduce hou

Question 10

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.

Question 11

What does the coefficient a in the new classical expression for short-run aggregate supply represent?

Accepted Answer

A) the full employment level of output 
B) the price level in the previous period 
C) how much output responds when the actual price level differs from the expected price level 
D) how much the price level responds when the actual level of output differs from the full employment level of output 
A) the full employment level of output 
B) the price level in the previous period 
C) how much output responds when the actual price level differs from the expected price level 
D) how much the price level responds when the actual level of output differs from the full employment level of output

Question 12

Which of the following statements is correct?

Accepted Answer

A) New classicals believe that the aggregate supply curve is a vertical line in both the short run and the long run. 
B) Both new classicals and new Keynesians believe that the aggregate supply curve is vertical in the long run. 
C) New Keynesians believe that the aggregate supply curve is vertical in the short run but not in the long run. 
D) New Keynesians believe that the aggregate supply curve slopes upward in the long run. 
A) New classicals believe that the aggregate supply curve is a vertical line in both the short run and the long run. 
B) Both new classicals and new Keynesians believe that the aggregate supply curve is vertical in the long run. 
C) New Keynesians believe that the aggregate supply curve is vertical in the short run but not in the long run. 
D) New Keynesians believe that the aggregate supply curve slopes upward in the long run.

Question 13

How do new Keynesians use menu costs to help explain price stickiness in the short run?

Accepted Answer

New Keynesian economists argue that pric

Question 14

Most economists believe that the short-run aggregate supply curve

Accepted Answer

A) slopes down. 
B) slopes up. 
C) is a vertical line. 
D) is a horizontal line. 
A) slopes down. 
B) slopes up. 
C) is a vertical line. 
D) is a horizontal line.

Question 15

When economists state that money is neutral in the long run, they mean that in the long run,

Accepted Answer

A) fluctuations in the money supply are equally likely to lead to recessions as to expansions. 
B) changes in the money supply have the same impact on the rich as they do on the poor. 
C) the level of output is independent of the nominal money supply. 
D) the price level is independent of the nominal money supply. 
A) fluctuations in the money supply are equally likely to lead to recessions as to expansions. 
B) changes in the money supply have the same impact on the rich as they do on the poor. 
C) the level of output is independent of the nominal money supply. 
D) the price level is independent of the nominal money supply.

Question 16

Fracking involves:

Accepted Answer

A) extracting certain forms of energy from shale rock formations 
B) deep water drilling for energy with minimal externalities 
C) the reduction of menu costs thus allowing prices to adjust more freely 
D) breaking down the production of goods resulting in more competitive markets 
A) extracting certain forms of energy from shale rock formations 
B) deep water drilling for energy with minimal externalities 
C) the reduction of menu costs thus allowing prices to adjust more freely 
D) breaking down the production of goods resulting in more competitive markets

Question 17

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

Question 18

According to AD-AS model, the primary long-run effect of increases in the money supply is

Accepted Answer

A) higher price level. 
B) higher GDP. 
C) lower price level. 
D) lower GDP. 
A) higher price level. 
B) higher GDP. 
C) lower price level. 
D) lower GDP.

Question 19

Which of the following is NOT an example of a supply shock?

Accepted Answer

A) a drought in the Midwest 
B) a decline in natural gas prices following discovery of new fields 
C) the introduction of a new line of computer-controlled machine tools in manufacturing 
D) a substantial increase in federal government spending on Medicare 
A) a drought in the Midwest 
B) a decline in natural gas prices following discovery of new fields 
C) the introduction of a new line of computer-controlled machine tools in manufacturing 
D) a substantial increase in federal government spending on Medicare

Question 20

Why are many economists skeptical of the Fed's ability to fine tune the economy?

Accepted Answer

A) Monetary policy only affects output in the long run. 
B) Lags in policy make it difficult to properly time policy. 
C) Fiscal policy can be implemented more quickly than monetary policy. 
D) Monetary policy does not have any effect on output. 
A) Monetary policy only affects output in the long run. 
B) Lags in policy make it difficult to properly time policy. 
C) Fiscal policy can be implemented more quickly than monetary policy. 
D) Monetary policy does not have any effect on output.

What are the principal sources of change in productivity growth?

The new classical explanation of aggregate supply in the short run builds on research by

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

Which of the following is NOT a reason for the weak recovery following the 2007-2009 recession?

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

All of the following have been proposed as reasons for an unusually high level of uncertainty following the financial crisis of 2007-2009 EXCEPT:

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

Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news, but at least prices starting to go up means that output must be starting to go up as well."

Stabilization policy refers to attempts to

What does the coefficient a in the new classical expression for short-run aggregate supply represent?

Which of the following statements is correct?

How do new Keynesians use menu costs to help explain price stickiness in the short run?

Most economists believe that the short-run aggregate supply curve

When economists state that money is neutral in the long run, they mean that in the long run,

Fracking involves:

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

According to AD-AS model, the primary long-run effect of increases in the money supply is

Which of the following is NOT an example of a supply shock?

Why are many economists skeptical of the Fed's ability to fine tune the economy?

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

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

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

What are the principal sources of change in productivity growth?

The new classical explanation of aggregate supply in the short run builds on research by

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

Which of the following is NOT a reason for the weak recovery following the 2007-2009 recession?

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

All of the following have been proposed as reasons for an unusually high level of uncertainty following the financial crisis of 2007-2009 EXCEPT:

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

Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news, but at least prices starting to go up means that output must be starting to go up as well."

Stabilization policy refers to attempts to

What does the coefficient a in the new classical expression for short-run aggregate supply represent?

Which of the following statements is correct?

How do new Keynesians use menu costs to help explain price stickiness in the short run?

Most economists believe that the short-run aggregate supply curve

When economists state that money is neutral in the long run, they mean that in the long run,

Fracking involves:

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

According to AD-AS model, the primary long-run effect of increases in the money supply is

Which of the following is NOT an example of a supply shock?

Why are many economists skeptical of the Fed's ability to fine tune the economy?

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

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

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