Question 1

The Friedman natural rate theory is based on rational expectations and is also called the new classical theory.

Accepted Answer

A) True 
 B)False

Question 2

Which theory of the business cycle emphasizes initiating changes in aggregate supply?

Accepted Answer

A) the Friedman "fooling" theory 
B) the real business cycle theory 
C) the Keynesian theory 
D) the new classical theory 
A) the Friedman "fooling" theory 
B) the real business cycle theory 
C) the Keynesian theory 
D) the new classical theory

Question 3

An increase in the actual inflation rate is represented by a

Accepted Answer

A) movement up and along a given Phillips curve. 
B) movement down and along a given Phillips curve. 
C) leftward shift in the Phillips curve. 
D) rightward shift in the Phillips curve. 
A) movement up and along a given Phillips curve. 
B) movement down and along a given Phillips curve. 
C) leftward shift in the Phillips curve. 
D) rightward shift in the Phillips curve.

Question 4

New classical economists believe that there is

Accepted Answer

A) a short-run tradeoff between inflation and unemployment when policy is unanticipated. 
B) a short-run tradeoff between inflation and unemployment when policy is correctly anticipated. 
C) no short-run tradeoff between inflation and unemployment when policy is correctly anticipated. 
D) a and b 
E) a and c 
A) a short-run tradeoff between inflation and unemployment when policy is unanticipated. 
B) a short-run tradeoff between inflation and unemployment when policy is correctly anticipated. 
C) no short-run tradeoff between inflation and unemployment when policy is correctly anticipated. 
D) a and b 
E) a and c

Question 5

A rise in the expected price level leads to an expectation that real wages will ____________,which will cause people to work __________,shifting the SRAS curve _______________.

Accepted Answer

A) rise;more;rightward 
B) rise;less;leftward 
C) fall;more;rightward 
D) fall;less;leftward 
A) rise;more;rightward 
B) rise;less;leftward 
C) fall;more;rightward 
D) fall;less;leftward

Question 6

The Samuelson-Solow version of the Phillips curve showed the relationship between unemployment rates and

Accepted Answer

A) Real GDP growth rates. 
B) price inflation rates. 
C) wage inflation rates. 
D) imports. 
A) Real GDP growth rates. 
B) price inflation rates. 
C) wage inflation rates. 
D) imports.

Question 7

The Phillips curve that Samuelson and Solow fitted to their data was

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) vertical. 
D) horizontal. 
A) upward sloping. 
B) downward sloping. 
C) vertical. 
D) horizontal.

Question 8

Explain why there is an inverse relationship between wage inflation and unemployment as aggregate demand changes.

Accepted Answer

In an economy with increasing aggregate

Question 9

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

Accepted Answer

A) there is not only a temporary tradeoff between inflation and unemployment,but a permanent tradeoff as well. 
B) the tradeoff between unemployment and inflation exists only in the long run,but not in the short run. 
C) people's expectations about economic events affect economic outcomes. 
D) a and b 
A) there is not only a temporary tradeoff between inflation and unemployment,but a permanent tradeoff as well. 
B) the tradeoff between unemployment and inflation exists only in the long run,but not in the short run. 
C) people's expectations about economic events affect economic outcomes. 
D) a and b

Question 10

Exhibit 16-4  
-According to real business cycle theorists,changes in Real GDP are the result of initial changes in

Accepted Answer

A) aggregate demand. 
B) the money supply. 
C) the expected inflation rate. 
D) prices. 
E) none of the above 
A) aggregate demand. 
B) the money supply. 
C) the expected inflation rate. 
D) prices. 
E) none of the above

Question 11

As incorrectly low inflation expectations catch up with the higher actual inflation rate,the SRAS curve shifts __________ and the short-run Phillips curve shifts __________.

Accepted Answer

A) leftward;downward 
B) rightward;upward 
C) leftward;upward 
D) rightward;downward 
A) leftward;downward 
B) rightward;upward 
C) leftward;upward 
D) rightward;downward

Question 12

Exhibit 16-2  
-Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD2.A rise in Real GDP is likely if the economy operates under __________ assumptions,such as wage and price __________.

Accepted Answer

A) new classical;flexibility 
B) new classical;inflexibilities 
C) new Keynesian;flexibility 
D) new Keynesian;inflexibilities 
A) new classical;flexibility 
B) new classical;inflexibilities 
C) new Keynesian;flexibility 
D) new Keynesian;inflexibilities

The Friedman natural rate theory is based on rational expectations and is also called the new classical theory.

Which theory of the business cycle emphasizes initiating changes in aggregate supply?

An increase in the actual inflation rate is represented by a

New classical economists believe that there is

A rise in the expected price level leads to an expectation that real wages will ,which will cause people to work ,shifting the SRAS curve _____.

The Samuelson-Solow version of the Phillips curve showed the relationship between unemployment rates and

The Phillips curve that Samuelson and Solow fitted to their data was

Explain why there is an inverse relationship between wage inflation and unemployment as aggregate demand changes.

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

Exhibit 16-4 -According to real business cycle theorists,changes in Real GDP are the result of initial changes in

As incorrectly low inflation expectations catch up with the higher actual inflation rate,the SRAS curve shifts and the short-run Phillips curve shifts .

Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD₂.A rise in Real GDP is likely if the economy operates under assumptions,such as wage and price .

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Stocks, bonds, futures, and Options

Filters

Exam 16: Expectations Theory and the Economy

The Friedman natural rate theory is based on rational expectations and is also called the new classical theory.

Which theory of the business cycle emphasizes initiating changes in aggregate supply?

An increase in the actual inflation rate is represented by a

New classical economists believe that there is

A rise in the expected price level leads to an expectation that real wages will ____________,which will cause people to work __________,shifting the SRAS curve _______________.

The Samuelson-Solow version of the Phillips curve showed the relationship between unemployment rates and

The Phillips curve that Samuelson and Solow fitted to their data was

Explain why there is an inverse relationship between wage inflation and unemployment as aggregate demand changes.

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

Exhibit 16-4 -According to real business cycle theorists,changes in Real GDP are the result of initial changes in

As incorrectly low inflation expectations catch up with the higher actual inflation rate,the SRAS curve shifts __________ and the short-run Phillips curve shifts __________.

Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD2.A rise in Real GDP is likely if the economy operates under __________ assumptions,such as wage and price __________.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Stocks, bonds, futures, and Options

Filters

A rise in the expected price level leads to an expectation that real wages will ,which will cause people to work ,shifting the SRAS curve _____.

As incorrectly low inflation expectations catch up with the higher actual inflation rate,the SRAS curve shifts and the short-run Phillips curve shifts .

Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD₂.A rise in Real GDP is likely if the economy operates under assumptions,such as wage and price .