Exam 16: Interest,rent,and Profit

According to new classical economists,if a decrease in aggregate demand is correctly anticipated,the short-run aggregate supply curve will shift __________ at the same time the AD curve shifts _________ so that there will be no change in Real GDP.

Rational expectations theory is also known as the Friedman fooling theory.

The original (1958)Phillips curve

The Friedman natural rate theory states that

New Keynesian theorists argue that

The Friedman natural rate theory holds that there is an inverse relationship between inflation and unemployment in the long run,but not in the short run.

According to the original Phillips curve,the cost of reducing the unemployment rate in the short run is a

If expectations are formed rationally,wages and prices are completely flexible in both the short run and the long run,and policy is correctly anticipated,increases in aggregate demand will stimulate the economy to higher levels of Real GDP in

The Samuelson-Solow version of the Phillips curve states that

Implied in new Keynesian theory is that when policy is correctly anticipated,there is a tradeoff between inflation and unemployment in

-Refer to Exhibit 16-6.The economy is initially in long-run equilibrium at point A.There is a correctly anticipated increase in aggregate demand,prices and wages are flexible,the economy is self-regulating,and people hold rational expectations.The economy will move to point

In the 1970s and early 1980s,the U.S.economy experienced

Samuelson and Solow,in their 1960 study of the Phillips curve as it applies to the U.S.experience,argued that there was a tradeoff between inflation and unemployment.Later experience showed their analysis to be

The Friedman natural rate theory is built upon

One of the ideas that found a permanent place in macroeconomics after Milton Friedman's presidential address to the American Economic Association in 1967 was that

Which of the following changes would not be considered a likely source of changes in Real GDP according to real business cycle theory?

Stagflation

As long as some people anticipate policy,the economic consequences may be the same as if all persons do so.

-Refer to Exhibit 16-1.According to new classical macroeconomists,if decreases in aggregate demand are unanticipated,then the economy will move from point C to

If there is a stable downward-sloping Phillips curve,it follows that an economy can choose the combination of