Question 1

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. C

Question 2

According to New Keynesians,why can firms increase output in the short run in response to higher prices?

Accepted Answer

In the new Keynesian view,in the short run many input costs are fixed,so firms can expand output without experiencing an increase in input cost that is proportional to the increase in the prices of their products.

Question 3

According to Robert Gordon,what led to the decline in unemployment in the 1940s?

Accepted Answer

A)  structural barriers to expanding output and employment disappeared once a sufficiently large increase in aggregate demand had taken place 
B)  decline in unionization of the workforce 
C)  President Truman moving away from the policies implemented by President Roosevelt 
D)  the strengthening of property rights following the end of the New Deal 
A)  structural barriers to expanding output and employment disappeared once a sufficiently large increase in aggregate demand had taken place 
B)  decline in unionization of the workforce 
C)  President Truman moving away from the policies implemented by President Roosevelt 
D)  the strengthening of property rights following the end of the New Deal A

Question 4

Suppose that initially U.S.households are saving only a small fraction of their incomes because they are relying on rapid increase in stock prices to increase their wealth.If stock prices decline and households decide to increase their saving rate,what will be impact on output in the new Keynesian view? Be sure to distinguish the short run from the long run.

Accepted Answer

The increase in the saving rate will shi

Question 5

In the aggregate demand-aggregate supply model,if the Federal Reserve decides to decrease the nominal money supply,

Accepted Answer

A)  current output will fall, but the price level will rise. 
B)  current output will rise, but the price level will fall. 
C)  current output and the price level will both rise. 
D)  current output and the price level will both fall. 
A)  current output will fall, but the price level will rise. 
B)  current output will rise, but the price level will fall. 
C)  current output and the price level will both rise. 
D)  current output and the price level will both fall.

Question 6

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place,in the short run aggregate output will

Accepted Answer

A)  fall in the new classical view, but not in the new Keynesian view. 
B)  fall in the new Keynesian view, but not in the new classical view. 
C)  fall in both the new Keynesian and new classical views. 
D)  remain at full employment in both the new classical and new Keynesian views. 
A)  fall in the new classical view, but not in the new Keynesian view. 
B)  fall in the new Keynesian view, but not in the new classical view. 
C)  fall in both the new Keynesian and new classical views. 
D)  remain at full employment in both the new classical and new Keynesian views.

Question 7

The Polish experience indicates that

Accepted Answer

A)  the aggregate supply curve is vertical, even in the short run. 
B)  changes in the expected price level do not affect aggregate supply. 
C)  the transition from a centrally planned to a market economy can result in an upward shift in the short-run aggregate supply curve. 
D)  increases in the factor productivity will shift the long-run aggregate supply curve to the left. 
A)  the aggregate supply curve is vertical, even in the short run. 
B)  changes in the expected price level do not affect aggregate supply. 
C)  the transition from a centrally planned to a market economy can result in an upward shift in the short-run aggregate supply curve. 
D)  increases in the factor productivity will shift the long-run aggregate supply curve to the left.

Question 8

According to the New Classical theory,why may output differ from its full-employment level in the short run?

Accepted Answer

When the actual price level is greater t

Question 9

An argument in support of hysteresis is

Accepted Answer

A)  companies may be reluctant to hire workers until AD increases. 
B)  prices are sticky in the short run. 
C)  the skills of unemployed workers may deteriorate making it more difficult to find a job. 
D)  overlapping wage contracts. 
A)  companies may be reluctant to hire workers until AD increases. 
B)  prices are sticky in the short run. 
C)  the skills of unemployed workers may deteriorate making it more difficult to find a job. 
D)  overlapping wage contracts.

Question 10

If in the short run prices did not respond at all to changes in aggregate demand,the short-run aggregate supply curve would

Accepted Answer

A)  be vertical. 
B)  be horizontal. 
C)  slope up. 
D)  slope down. 
A)  be vertical. 
B)  be horizontal. 
C)  slope up. 
D)  slope down.

Question 11

If labor costs rise at the same time that the federal government decreases its purchases,in the short run

Accepted Answer

A)  aggregate output and the price level will both increase. 
B)  aggregate output will increase, but the price level will fall. 
C)  aggregate output and the price level will both fall. 
D)  aggregate output will fall, but the price level may either increase or decrease. 
A)  aggregate output and the price level will both increase. 
B)  aggregate output will increase, but the price level will fall. 
C)  aggregate output and the price level will both fall. 
D)  aggregate output will fall, but the price level may either increase or decrease.

Question 12

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero,

Accepted Answer

A)  aggregate output would always be at its full-employment level. 
B)  the short-run aggregate supply curve would slope down. 
C)  the short-run aggregate supply curve would be a horizontal line. 
D)  aggregate output would only differ from its full-employment level if the actual price level did not equal the expected price level. 
A)  aggregate output would always be at its full-employment level. 
B)  the short-run aggregate supply curve would slope down. 
C)  the short-run aggregate supply curve would be a horizontal line. 
D)  aggregate output would only differ from its full-employment level if the actual price level did not equal the expected price level.

Question 13

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 14

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 15

The new classical approach to the aggregate supply curve assumes that businesses are

Accepted Answer

A)  better informed about the general price level than they are about prices in their own markets. 
B)  better informed about prices in their own markets than they are about the general price level. 
C)  equally well informed about prices in their own markets and the general price level. 
D)  reluctant to engage in investment spending because of a lack of information concerning future prices. 
A)  better informed about the general price level than they are about prices in their own markets. 
B)  better informed about prices in their own markets than they are about the general price level. 
C)  equally well informed about prices in their own markets and the general price level. 
D)  reluctant to engage in investment spending because of a lack of information concerning future prices.

Question 16

If oil prices fall at the same time that the federal government increases its purchases,in the short run

Accepted Answer

A)  aggregate output and the price level will both increase. 
B)  aggregate output will increase, but the price level will fall. 
C)  aggregate output and the price level will both fall. 
D)  aggregate output will increase, but the price level may either increase or decrease. 
A)  aggregate output and the price level will both increase. 
B)  aggregate output will increase, but the price level will fall. 
C)  aggregate output and the price level will both fall. 
D)  aggregate output will increase, but the price level may either increase or decrease.

Question 17

In the new Keynesian view,the larger the proportion of firms in the economy with sticky prices,

Accepted Answer

A)  the steeper the SRAS curve will be. 
B)  the flatter the SRAS curve will be. 
C)  the greater the increase in the price level for a given shift in the AD curve. 
D)  the less effective is fiscal policy in increasing output. 
A)  the steeper the SRAS curve will be. 
B)  the flatter the SRAS curve will be. 
C)  the greater the increase in the price level for a given shift in the AD curve. 
D)  the less effective is fiscal policy in increasing output.

Question 18

The result of the supply shocks of 1973-1974 was to

Accepted Answer

A)  reduce aggregate output and raise the price level. 
B)  reduce the price level and raise aggregate output. 
C)  reduce both aggregate output and the price level. 
D)  raise both aggregate output and the price level. 
A)  reduce aggregate output and raise the price level. 
B)  reduce the price level and raise aggregate output. 
C)  reduce both aggregate output and the price level. 
D)  raise both aggregate output and the price level.

Question 19

Why is the short-term nominal interest rate the opportunity cost of holding money?

Accepted Answer

The higher the interest rate o

Question 20

An increase in the price level

Accepted Answer

A)  shifts the short-run aggregate supply curve up and to the left. 
B)  shifts the short-run aggregate supply curve down and to the right. 
C)  shifts the long-run aggregate supply curve to the left. 
D)  results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve. 
A)  shifts the short-run aggregate supply curve up and to the left. 
B)  shifts the short-run aggregate supply curve down and to the right. 
C)  shifts the long-run aggregate supply curve to the left. 
D)  results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve.

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

According to New Keynesians,why can firms increase output in the short run in response to higher prices?

According to Robert Gordon,what led to the decline in unemployment in the 1940s?

In the aggregate demand-aggregate supply model,if the Federal Reserve decides to decrease the nominal money supply,

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place,in the short run aggregate output will

The Polish experience indicates that

According to the New Classical theory,why may output differ from its full-employment level in the short run?

An argument in support of hysteresis is

If in the short run prices did not respond at all to changes in aggregate demand,the short-run aggregate supply curve would

If labor costs rise at the same time that the federal government decreases its purchases,in the short run

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero,

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

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

The new classical approach to the aggregate supply curve assumes that businesses are

If oil prices fall at the same time that the federal government increases its purchases,in the short run

In the new Keynesian view,the larger the proportion of firms in the economy with sticky prices,

The result of the supply shocks of 1973-1974 was to

Why is the short-term nominal interest rate the opportunity cost of holding money?

An increase in the price level

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

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Exam 17: Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

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

According to New Keynesians,why can firms increase output in the short run in response to higher prices?

According to Robert Gordon,what led to the decline in unemployment in the 1940s?

In the aggregate demand-aggregate supply model,if the Federal Reserve decides to decrease the nominal money supply,

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place,in the short run aggregate output will

The Polish experience indicates that

According to the New Classical theory,why may output differ from its full-employment level in the short run?

An argument in support of hysteresis is

If in the short run prices did not respond at all to changes in aggregate demand,the short-run aggregate supply curve would

If labor costs rise at the same time that the federal government decreases its purchases,in the short run

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero,

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

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

The new classical approach to the aggregate supply curve assumes that businesses are

If oil prices fall at the same time that the federal government increases its purchases,in the short run

In the new Keynesian view,the larger the proportion of firms in the economy with sticky prices,

The result of the supply shocks of 1973-1974 was to

Why is the short-term nominal interest rate the opportunity cost of holding money?

An increase in the price level

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