Exam 38: Current Issues in Macro Theory and Policy

The key policy target in the Taylor rule is the:

A higher wage could result in a lower labor cost per unit of output than a lower wage if the higher wage:

Suppose that real GDP falls to 2 percent below potential GDP.Then,according to the Taylor rule,the Fed should reduce the federal funds,relative to the current rate of inflation,by:

The idea that the economy will "self-correct" when confronted with changes in aggregate demand is associated with new classical economics.

New classical economists say that an unanticipated increase in aggregate demand first:

Monetarists say:

Economist Milton Friedman is most closely associated with:

According to the equation of exchange,changes in the money supply can affect:

Efficiency wage theory says that an above-market wage can reduce labor costs per unit of output by eliciting greater work effort,lowering supervision costs,and reducing job turnover.

Rational expectations theory assumes that:

An efficiency wage is:

Mainstream economists say that recessions are unlikely to occur today because prices and wages are highly flexible downward.

If the money supply is constant when both nominal and real GDP are rising,we can conclude that:

The equation of exchange is MV = PQ.

According to monetarists,an expansionary fiscal policy:

To determine the velocity of money,you would need to know:

According to monetarists,an expansionary fiscal policy is a weak stabilization tool because:

In the insider-outsider theory:

The idea of coordination failures suggests the possibility of less-than-desirable price-level and real-output equilibriums in the economy.

New classical economists say that an unanticipated decrease in aggregate demand first: