Question 1

In the New Keynesian model,an increase in future total factor productivity

Accepted Answer

A)  shifts the output supply curve to the right. 
B)  shifts the output supply curve to the left. 
C)  shifts the output demand curve to the right. 
D)  shifts the output demand curve to the left. 
E)  does not impact current output. 
A)  shifts the output supply curve to the right. 
B)  shifts the output supply curve to the left. 
C)  shifts the output demand curve to the right. 
D)  shifts the output demand curve to the left. 
E)  does not impact current output. C

Question 2

An important feature of the New Keynesian model is that

Accepted Answer

A)  the money market may not clear. 
B)  the goods market always clears. 
C)  the labour market may not clear. 
D)  the labour market always clears. 
E)  all markets clear. 
A)  the money market may not clear. 
B)  the goods market always clears. 
C)  the labour market may not clear. 
D)  the labour market always clears. 
E)  all markets clear. C

Question 3

Keynesian sticky price models are typically called

Accepted Answer

A)  administered cost models. 
B)  faulty pricing models. 
C)  menu cost models. 
D)  classical models. 
E)  inflation forecasting models. 
A)  administered cost models. 
B)  faulty pricing models. 
C)  menu cost models. 
D)  classical models. 
E)  inflation forecasting models. C

Question 4

An increase in future total factor productivity shifts the

Accepted Answer

A)  Yd curve to the right. 
B)  Yd curve to the left. 
C)  Ns curve to the right. 
D)  Ys curve to the left. 
E)  M curve to the right. 
A)  Yd curve to the right. 
B)  Yd curve to the left. 
C)  Ns curve to the right. 
D)  Ys curve to the left. 
E)  M curve to the right.

Question 5

In 1936,Keynes described his views on the economy in

Accepted Answer

A)  Mr. Keynes and the Classics; A Suggested Interpretation. 
B)  Some Evidence on the Importance of Sticky Prices. 
C)  Essays in Positive Economics. 
D)  The General Theory of Employment, Interest, and Money. 
E)  Macroeconomic Stabilization Policy in Canada. 
A)  Mr. Keynes and the Classics; A Suggested Interpretation. 
B)  Some Evidence on the Importance of Sticky Prices. 
C)  Essays in Positive Economics. 
D)  The General Theory of Employment, Interest, and Money. 
E)  Macroeconomic Stabilization Policy in Canada.

Question 6

According to the New Keynesian model,after a negative shock to output,

Accepted Answer

A)  the government increases expenditures and the central bank decreases its target rate. 
B)  the government increases expenditures and the central bank increases its target rate. 
C)  the government decreases expenditures and the central bank increases its target rate. 
D)  the government decreases expenditures and the central bank decreases its target rate. 
E)  the government leaves expenditures unchanged and the central bank increases its target rate. 
A)  the government increases expenditures and the central bank decreases its target rate. 
B)  the government increases expenditures and the central bank increases its target rate. 
C)  the government decreases expenditures and the central bank increases its target rate. 
D)  the government decreases expenditures and the central bank decreases its target rate. 
E)  the government leaves expenditures unchanged and the central bank increases its target rate.

Question 7

According to the Taylor Rule estimated by Glenn Rudebusch,in the 2008-2009 recession,the Bank of Canada's target interest rate should have reached

Accepted Answer

A)  as low as -3.5%. 
B)  as low as 3.5%. 
C)  as high as 6%. 
D)  as low as 1%. 
E)  a level equal to the inflation rate. 
A)  as low as -3.5%. 
B)  as low as 3.5%. 
C)  as high as 6%. 
D)  as low as 1%. 
E)  a level equal to the inflation rate.

Question 8

According to the New Keynesian model,in a liquidity trap,

Accepted Answer

A)  fiscal policy is more effective than monetary policy. 
B)  fiscal and monetary policy are equally effective. 
C)  fiscal policy has little role. 
D)  monetary policy is more effective than fiscal policy. 
E)  niether monetary or fiscal policy is effective. 
A)  fiscal policy is more effective than monetary policy. 
B)  fiscal and monetary policy are equally effective. 
C)  fiscal policy has little role. 
D)  monetary policy is more effective than fiscal policy. 
E)  niether monetary or fiscal policy is effective.

Question 9

Investment demand shocks in the New Keynesian model are not a likely explanation of the typical business cycle,because the model counterfactually predicts that

Accepted Answer

A)  consumption is procyclical, investment is procyclical, and average labour productivity is countercyclical. 
B)  prices are procyclical, the real wage is countercyclical, and average labour productivity is countercyclical. 
C)  prices are countercyclical, the real wage is countercyclical, and average labour productivity is countercyclical. 
D)  employment is procyclical, prices are procyclical, and average labour productivity is countercyclical. 
E)  employment is procyclical, employment is procyclical, and average labour productivity is countercyclical. 
A)  consumption is procyclical, investment is procyclical, and average labour productivity is countercyclical. 
B)  prices are procyclical, the real wage is countercyclical, and average labour productivity is countercyclical. 
C)  prices are countercyclical, the real wage is countercyclical, and average labour productivity is countercyclical. 
D)  employment is procyclical, prices are procyclical, and average labour productivity is countercyclical. 
E)  employment is procyclical, employment is procyclical, and average labour productivity is countercyclical.

Question 10

The Keynesian transmission mechanism for monetary policy asserts that changes in the money supply

Accepted Answer

A)  affect real interest rates, which affect the level of aggregate demand. 
B)  affect real interest rates, which affect the level of aggregate supply. 
C)  affect the price level, which affects the level of aggregate demand. 
D)  affect the price level, which affects the level of aggregate supply. 
E)  affect the price level, which affects the IS curve. 
A)  affect real interest rates, which affect the level of aggregate demand. 
B)  affect real interest rates, which affect the level of aggregate supply. 
C)  affect the price level, which affects the level of aggregate demand. 
D)  affect the price level, which affects the level of aggregate supply. 
E)  affect the price level, which affects the IS curve.

Question 11

In the New Keynesian model,an increase in current total factor productivity

Accepted Answer

A)  increases output and increases the real interest rate. 
B)  does not affect output and decreases employment. 
C)  increases output and increases employment. 
D)  decreases output and decreases employment. 
E)  decreases output and increases the real interest rate. 
A)  increases output and increases the real interest rate. 
B)  does not affect output and decreases employment. 
C)  increases output and increases employment. 
D)  decreases output and decreases employment. 
E)  decreases output and increases the real interest rate.

Question 12

The New Keynesian model and the monetary intertemporal model is essentially identical except that

Accepted Answer

A)  nominal and real interest rates are permitted to fluctuate. 
B)  Bank of Canada policy is restricted. 
C)  total factor productivity is neutral. 
D)  money is neutral. 
E)  the price level is not sufficiently flexible for the goods market to clear in the short run. 
A)  nominal and real interest rates are permitted to fluctuate. 
B)  Bank of Canada policy is restricted. 
C)  total factor productivity is neutral. 
D)  money is neutral. 
E)  the price level is not sufficiently flexible for the goods market to clear in the short run.

Question 13

The argument that the nominal wage is fixed because of long-term labour contracts

Accepted Answer

A)  explains sticky price models. 
B)  closely fits the real world.. 
C)  does not take into account why such a contract would be written. 
D)  explains equilibrium business cycle models.. 
E)  means that productivity shocks are an important cause of business cycles.. 
A)  explains sticky price models. 
B)  closely fits the real world.. 
C)  does not take into account why such a contract would be written. 
D)  explains equilibrium business cycle models.. 
E)  means that productivity shocks are an important cause of business cycles..

Question 14

In the New Keynesian model,an increase in the money supply

Accepted Answer

A)  has no effect on the price level. 
B)  causes a less than proportional increase in the price level. 
C)  causes an equiproportional increase in the price level. 
D)  causes a more than proportional increase in the price level. 
E)  causes a reduction in the price level. 
A)  has no effect on the price level. 
B)  causes a less than proportional increase in the price level. 
C)  causes an equiproportional increase in the price level. 
D)  causes a more than proportional increase in the price level. 
E)  causes a reduction in the price level.

Question 15

In the New Keynesian model,an increase in the money supply

Accepted Answer

A)  decreases the real interest rate, increases real aggregate output, decreases the real wage rate, and increases employment. 
B)  increases the real interest rate, decreases real aggregate output, decreases the real wage rate, and increases employment. 
C)  decreases the real interest rate, increases real aggregate output, increases the real wage rate, and decreases employment. 
D)  decreases the real interest rate, increases real aggregate output, increases the real wage rate, and increases employment. 
E)  decreases the real interest rate, decreases real aggregate output, decreases the real wage rate, and increases employment. 
A)  decreases the real interest rate, increases real aggregate output, decreases the real wage rate, and increases employment. 
B)  increases the real interest rate, decreases real aggregate output, decreases the real wage rate, and increases employment. 
C)  decreases the real interest rate, increases real aggregate output, increases the real wage rate, and decreases employment. 
D)  decreases the real interest rate, increases real aggregate output, increases the real wage rate, and increases employment. 
E)  decreases the real interest rate, decreases real aggregate output, decreases the real wage rate, and increases employment.

Question 16

In comparing the outcomes of increasing government spending to reduce Keynesian unemployment as opposed to increasing the money supply,the increase in government spending results in

Accepted Answer

A)  higher consumption and higher output. 
B)  higher consumption and lower output. 
C)  lower consumption and higher output. 
D)  lower consumption and lower output. 
E)  lowers consumption and the real wage rate. 
A)  higher consumption and higher output. 
B)  higher consumption and lower output. 
C)  lower consumption and higher output. 
D)  lower consumption and lower output. 
E)  lowers consumption and the real wage rate.

Question 17

In the New Keynesian model,an increase in current government spending shifts

Accepted Answer

A)  the output supply curve to the right. 
B)  the output supply curve to the left. 
C)  the output demand curve to the right. 
D)  the output demand curve to the left. 
E)  the production function up. 
A)  the output supply curve to the right. 
B)  the output supply curve to the left. 
C)  the output demand curve to the right. 
D)  the output demand curve to the left. 
E)  the production function up.

Question 18

In the New Keynesian model,an increase in current total factor productivity

Accepted Answer

A)  decreases employment. 
B)  decreases output. 
C)  increases employment. 
D)  leaves employment unchanged. 
E)  decreases unemployment. 
A)  decreases employment. 
B)  decreases output. 
C)  increases employment. 
D)  leaves employment unchanged. 
E)  decreases unemployment.

Question 19

Different business cycle models

Accepted Answer

A)  have similar implications for monetary and fiscal policy.. 
B)  all justify active government stabilization policy. 
C)  have contradictory implications for monetary and fiscal policy. 
D)  all imply that active government intervention is detrimental. 
E)  support monetary policy but not fiscal policy. 
A)  have similar implications for monetary and fiscal policy.. 
B)  all justify active government stabilization policy. 
C)  have contradictory implications for monetary and fiscal policy. 
D)  all imply that active government intervention is detrimental. 
E)  support monetary policy but not fiscal policy.

Question 20

Using the New Keynesian model,determine the effects on output,the real interest rate,investment,employment,the price level,and the real wage of an increase in total factor productivity.

Accepted Answer

An increase in current total factor prod

In the New Keynesian model,an increase in future total factor productivity

An important feature of the New Keynesian model is that

Keynesian sticky price models are typically called

An increase in future total factor productivity shifts the

In 1936,Keynes described his views on the economy in

According to the New Keynesian model,after a negative shock to output,

According to the Taylor Rule estimated by Glenn Rudebusch,in the 2008-2009 recession,the Bank of Canada's target interest rate should have reached

According to the New Keynesian model,in a liquidity trap,

Investment demand shocks in the New Keynesian model are not a likely explanation of the typical business cycle,because the model counterfactually predicts that

The Keynesian transmission mechanism for monetary policy asserts that changes in the money supply

In the New Keynesian model,an increase in current total factor productivity

The New Keynesian model and the monetary intertemporal model is essentially identical except that

The argument that the nominal wage is fixed because of long-term labour contracts

In the New Keynesian model,an increase in the money supply

In the New Keynesian model,an increase in the money supply

In comparing the outcomes of increasing government spending to reduce Keynesian unemployment as opposed to increasing the money supply,the increase in government spending results in

In the New Keynesian model,an increase in current government spending shifts

In the New Keynesian model,an increase in current total factor productivity

Different business cycle models

Using the New Keynesian model,determine the effects on output,the real interest rate,investment,employment,the price level,and the real wage of an increase in total factor productivity.

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 14: New Keynesian Economics: Sticky Prices

In the New Keynesian model,an increase in future total factor productivity

An important feature of the New Keynesian model is that

Keynesian sticky price models are typically called

An increase in future total factor productivity shifts the

In 1936,Keynes described his views on the economy in

According to the New Keynesian model,after a negative shock to output,

According to the Taylor Rule estimated by Glenn Rudebusch,in the 2008-2009 recession,the Bank of Canada's target interest rate should have reached

According to the New Keynesian model,in a liquidity trap,

Investment demand shocks in the New Keynesian model are not a likely explanation of the typical business cycle,because the model counterfactually predicts that

The Keynesian transmission mechanism for monetary policy asserts that changes in the money supply

In the New Keynesian model,an increase in current total factor productivity

The New Keynesian model and the monetary intertemporal model is essentially identical except that

The argument that the nominal wage is fixed because of long-term labour contracts

In the New Keynesian model,an increase in the money supply

In the New Keynesian model,an increase in the money supply

In comparing the outcomes of increasing government spending to reduce Keynesian unemployment as opposed to increasing the money supply,the increase in government spending results in

In the New Keynesian model,an increase in current government spending shifts

In the New Keynesian model,an increase in current total factor productivity

Different business cycle models

Using the New Keynesian model,determine the effects on output,the real interest rate,investment,employment,the price level,and the real wage of an increase in total factor productivity.

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters