Question 1

Friedman and Schwarz argue that money is not neutral because

Accepted Answer

A) theoretical models of the economy don't show monetary neutrality. 
B) money is a leading,procyclical variable. 
C) they found several historical incidents in which changes in the money supply were not responses to macroeconomic conditions,and output moved in the same direction as money. 
D) they found no evidence that productivity changes or changes in government spending contributed to business cycles; only monetary changes preceded every recession. 
A) theoretical models of the economy don't show monetary neutrality. 
B) money is a leading,procyclical variable. 
C) they found several historical incidents in which changes in the money supply were not responses to macroeconomic conditions,and output moved in the same direction as money. 
D) they found no evidence that productivity changes or changes in government spending contributed to business cycles; only monetary changes preceded every recession.

Question 2

In the classical model,a temporary increase in government purchases causes

Accepted Answer

A) a decrease in output and the real interest rate. 
B) a decrease in output and an increase in the real interest rate. 
C) an increase in output and a decrease in the real interest rate. 
D) an increase in output and the real interest rate. 
A) a decrease in output and the real interest rate. 
B) a decrease in output and an increase in the real interest rate. 
C) an increase in output and a decrease in the real interest rate. 
D) an increase in output and the real interest rate.

Question 3

Describe,in general terms,how an economist calibrates a macroeconomic model.What statistics can be usefully examined to see how well the model corresponds to the data?

Accepted Answer

A model is calibrated by working out a d

Question 4

Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?

Accepted Answer

A) Business cycles are always and everywhere a monetary phenomenon. 
B) Wars and military buildups could be considered productivity shocks. 
C) Business cycles could be caused by the cumulation of small productivity shocks. 
D) Business cycles are often caused by unobservable productivity shocks,which aren't apparent at the time they occur. 
A) Business cycles are always and everywhere a monetary phenomenon. 
B) Wars and military buildups could be considered productivity shocks. 
C) Business cycles could be caused by the cumulation of small productivity shocks. 
D) Business cycles are often caused by unobservable productivity shocks,which aren't apparent at the time they occur.

Question 5

DSGE models are

Accepted Answer

A) similar to RBC models but allow for shocks other than productivity shocks. 
B) similar to RBC models,but government spending shocks play a major role. 
C) similar to Keynesian models except in the long run. 
D) similar to Keynesian models except in the short run. 
A) similar to RBC models but allow for shocks other than productivity shocks. 
B) similar to RBC models,but government spending shocks play a major role. 
C) similar to Keynesian models except in the long run. 
D) similar to Keynesian models except in the short run.

Question 6

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

Accepted Answer

A) information about the Fed's plans will inevitably be leaked to the public. 
B) the Fed announces its goals before Congress and publishes its policy actions in the Federal Reserve Bulletin six weeks after they take place. 
C) the public would eventually figure out what the Fed's policies were,negating the Fed's surprise. 
D) competition in the money markets would neutralize the Fed's intervention. 
A) information about the Fed's plans will inevitably be leaked to the public. 
B) the Fed announces its goals before Congress and publishes its policy actions in the Federal Reserve Bulletin six weeks after they take place. 
C) the public would eventually figure out what the Fed's policies were,negating the Fed's surprise. 
D) competition in the money markets would neutralize the Fed's intervention.

Question 7

According to the misperceptions theory,the amount by which producers increase their output when the general price level rises depends on

Accepted Answer

A) the slope of the aggregate demand curve. 
B) the slope of the long-run aggregate supply curve. 
C) the size of the Solow residual. 
D) how much they think their relative prices have increased. 
A) the slope of the aggregate demand curve. 
B) the slope of the long-run aggregate supply curve. 
C) the size of the Solow residual. 
D) how much they think their relative prices have increased.

Question 8

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift ________ to restore general equilibrium; as it does so,the price level ________.

Accepted Answer

A) downward; rises 
B) downward; falls 
C) upward; rises 
D) upward; falls 
A) downward; rises 
B) downward; falls 
C) upward; rises 
D) upward; falls

Question 9

According to the misperceptions theory,when P e,output is ________ its full-employment level and the short-run aggregate supply curve must shift ________ to restore full employment.

Accepted Answer

A) below; upward 
B) below; downward 
C) above; upward 
D) above; downward 
A) below; upward 
B) below; downward 
C) above; upward 
D) above; downward

Question 10

A temporary adverse productivity shock would

Accepted Answer

A) shift the labor supply curve upward. 
B) decrease the level of employment. 
C) decrease future income. 
D) decrease the expected future marginal product of capital. 
A) shift the labor supply curve upward. 
B) decrease the level of employment. 
C) decrease future income. 
D) decrease the expected future marginal product of capital.

Question 11

Davis and Haltiwanger showed that ________ churning of jobs occurs and that this churning reflects closing of old plants and opening of new ones ________.

Accepted Answer

A) little; in different industries 
B) little; within the same industry 
C) much; within the same industry 
D) much; in different industries 
A) little; in different industries 
B) little; within the same industry 
C) much; within the same industry 
D) much; in different industries

Question 12

Classical economists would cite all of the following as reasons why the government cannot smooth out the business cycle EXCEPT that

Accepted Answer

A) only productivity shocks can cause real fluctuations in the business cycle. 
B) the government has imperfect knowledge of the economy. 
C) political constraints on policy actions prevent the government from carrying out effective policies. 
D) time lags between the onset of a recession and the implementation of effective countermeasures make anti-recessionary macroeconomic policies impractical. 
A) only productivity shocks can cause real fluctuations in the business cycle. 
B) the government has imperfect knowledge of the economy. 
C) political constraints on policy actions prevent the government from carrying out effective policies. 
D) time lags between the onset of a recession and the implementation of effective countermeasures make anti-recessionary macroeconomic policies impractical.

Question 13

According to classical economists,the government should increase government purchases when

Accepted Answer

A) the benefits of the spending exceed the costs. 
B) the economy is in a recession. 
C) the economy is likely to go into a recession in the next six months to a year. 
D) inflation is lower than its targeted level. 
A) the benefits of the spending exceed the costs. 
B) the economy is in a recession. 
C) the economy is likely to go into a recession in the next six months to a year. 
D) inflation is lower than its targeted level.

Question 14

A household-production model more closely matches the U.S.data than a standard RBC model because it has a

Accepted Answer

A) higher standard deviation of market output. 
B) lower standard deviation of market output. 
C) higher rate of job destruction. 
D) lower standard deviation of consumption. 
A) higher standard deviation of market output. 
B) lower standard deviation of market output. 
C) higher rate of job destruction. 
D) lower standard deviation of consumption.

Question 15

The Solow residual is

Accepted Answer

A) the waste from the production process. 
B) the most common measure of productivity shocks. 
C) a measure of the efficiency of the production process. 
D) a measure of the proportion of involuntarily unemployed workers. 
A) the waste from the production process. 
B) the most common measure of productivity shocks. 
C) a measure of the efficiency of the production process. 
D) a measure of the proportion of involuntarily unemployed workers.

Question 16

According to classical economists,unemployment rises in recessions due to an increase in ________ unemployment,not ________ unemployment.

Accepted Answer

A) cyclical; frictional and structural 
B) frictional and cyclical; structural 
C) structural; frictional and cyclical 
D) frictional and structural; cyclical 
A) cyclical; frictional and structural 
B) frictional and cyclical; structural 
C) structural; frictional and cyclical 
D) frictional and structural; cyclical

Question 17

The theory of rational expectations suggests that

Accepted Answer

A) people never make forecast errors. 
B) people make intelligent use of available information. 
C) people make systematic forecast errors. 
D) people are slow to incorporate new information into their forecasts. 
A) people never make forecast errors. 
B) people make intelligent use of available information. 
C) people make systematic forecast errors. 
D) people are slow to incorporate new information into their forecasts.

Question 18

Braun and Evans found that

Accepted Answer

A) the measured Solow residual varied sharply over the seasons. 
B) electricity use by producers rises sharply in economic upturns. 
C) professional forecasters have rational expectations of inflation. 
D) shocks to fiscal policy are the main source of business cycle fluctuations. 
A) the measured Solow residual varied sharply over the seasons. 
B) electricity use by producers rises sharply in economic upturns. 
C) professional forecasters have rational expectations of inflation. 
D) shocks to fiscal policy are the main source of business cycle fluctuations.

Question 19

The most common measure of productivity shocks is known as

Accepted Answer

A) the Solow residual. 
B) the Lucas supply curve. 
C) the Prescott productivity parameter. 
D) the Kydland factor. 
A) the Solow residual. 
B) the Lucas supply curve. 
C) the Prescott productivity parameter. 
D) the Kydland factor.

Question 20

When RBC economists work out a detailed numerical example of a more general theory,they are performing

Accepted Answer

A) econometrics. 
B) number theory. 
C) calibration. 
D) topology. 
A) econometrics. 
B) number theory. 
C) calibration. 
D) topology.

Friedman and Schwarz argue that money is not neutral because

In the classical model,a temporary increase in government purchases causes

Describe,in general terms,how an economist calibrates a macroeconomic model.What statistics can be usefully examined to see how well the model corresponds to the data?

Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?

DSGE models are

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

According to the misperceptions theory,the amount by which producers increase their output when the general price level rises depends on

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift to restore general equilibrium; as it does so,the price level .

According to the misperceptions theory,when P < P^e,output is its full-employment level and the short-run aggregate supply curve must shift to restore full employment.

A temporary adverse productivity shock would

Davis and Haltiwanger showed that churning of jobs occurs and that this churning reflects closing of old plants and opening of new ones .

Classical economists would cite all of the following as reasons why the government cannot smooth out the business cycle EXCEPT that

According to classical economists,the government should increase government purchases when

A household-production model more closely matches the U.S.data than a standard RBC model because it has a

The Solow residual is

According to classical economists,unemployment rises in recessions due to an increase in unemployment,not unemployment.

The theory of rational expectations suggests that

Braun and Evans found that

The most common measure of productivity shocks is known as

When RBC economists work out a detailed numerical example of a more general theory,they are performing

Introduction to Macroeconomics

The Measurement and Structure of the National 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-Lmad-As Model

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 10: Classical Business Cycle Analysis

Friedman and Schwarz argue that money is not neutral because

In the classical model,a temporary increase in government purchases causes

Describe,in general terms,how an economist calibrates a macroeconomic model.What statistics can be usefully examined to see how well the model corresponds to the data?

Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?

DSGE models are

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

According to the misperceptions theory,the amount by which producers increase their output when the general price level rises depends on

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift ________ to restore general equilibrium; as it does so,the price level ________.

According to the misperceptions theory,when P < Pe,output is ________ its full-employment level and the short-run aggregate supply curve must shift ________ to restore full employment.

A temporary adverse productivity shock would

Davis and Haltiwanger showed that ________ churning of jobs occurs and that this churning reflects closing of old plants and opening of new ones ________.

Classical economists would cite all of the following as reasons why the government cannot smooth out the business cycle EXCEPT that

According to classical economists,the government should increase government purchases when

A household-production model more closely matches the U.S.data than a standard RBC model because it has a

The Solow residual is

According to classical economists,unemployment rises in recessions due to an increase in ________ unemployment,not ________ unemployment.

The theory of rational expectations suggests that

Braun and Evans found that

The most common measure of productivity shocks is known as

When RBC economists work out a detailed numerical example of a more general theory,they are performing

Introduction to Macroeconomics

The Measurement and Structure of the National 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-Lmad-As Model

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift to restore general equilibrium; as it does so,the price level .

According to the misperceptions theory,when P < P^e,output is its full-employment level and the short-run aggregate supply curve must shift to restore full employment.

Davis and Haltiwanger showed that churning of jobs occurs and that this churning reflects closing of old plants and opening of new ones .

According to classical economists,unemployment rises in recessions due to an increase in unemployment,not unemployment.