Question 1

One assumption of the new classical model is that

Accepted Answer

A) wages are "sticky" downward. 
B) prices are "sticky" upward. 
C) the rational expectations hypothesis is correct. 
D) markets are not purely competitive. 
A) wages are "sticky" downward. 
B) prices are "sticky" upward. 
C) the rational expectations hypothesis is correct. 
D) markets are not purely competitive.

Question 2

Economist A.W.Phillips,looking at British data,concluded that

Accepted Answer

A) there is no trade-off between inflation and unemployment. 
B) high inflation rates were associated with low unemployment rates,and vice-versa. 
C) unemployment could be effectively combated by raising wages. 
D) higher rates of inflation are associated with higher rates of unemployment. 
A) there is no trade-off between inflation and unemployment. 
B) high inflation rates were associated with low unemployment rates,and vice-versa. 
C) unemployment could be effectively combated by raising wages. 
D) higher rates of inflation are associated with higher rates of unemployment.

Question 3

Deviations of the actual unemployment rate from the natural rate of unemployment are called

Accepted Answer

A) frictional unemployment. 
B) cyclical unemployment. 
C) seasonal unemployment. 
D) underemployment. 
A) frictional unemployment. 
B) cyclical unemployment. 
C) seasonal unemployment. 
D) underemployment.

Question 4

In the short run,an unanticipated cut in the rate of inflation would

Accepted Answer

A) increase the unemployment rate. 
B) decrease the unemployment rate. 
C) unambiguously improve the misery index. 
D) lower the natural rate of unemployment. 
A) increase the unemployment rate. 
B) decrease the unemployment rate. 
C) unambiguously improve the misery index. 
D) lower the natural rate of unemployment.

Question 5

Suppose the economy is in equilibrium when there is a change in environmental policy that bans all pesticides and herbicides on farm land.We would expect to observe

Accepted Answer

A) a decrease in aggregate supply and an increase in aggregate demand. 
B) a decrease in both real output and the natural rate of unemployment. 
C) a decrease in real output and an increase in the natural rate of unemployment. 
D) a decrease in real output and an increase in the price level. 
A) a decrease in aggregate supply and an increase in aggregate demand. 
B) a decrease in both real output and the natural rate of unemployment. 
C) a decrease in real output and an increase in the natural rate of unemployment. 
D) a decrease in real output and an increase in the price level.

Question 6

Figure 15-4  
-In Figure 15-4,if initial equilibrium is at point A and there is an anticipated increase in aggregate demand from A D₁ to A D₂ due to an anticipated increase in the money supply,then

Accepted Answer

A) the economy will move directly from point A to point C without passing through point B. 
B) the economy will move directly from point A to point B,and will remain at point B in the long run. 
C) the price level will shift to P₂ in the short run. 
D) the price level will shift to P₂ in the long run. 
A) the economy will move directly from point A to point C without passing through point B. 
B) the economy will move directly from point A to point B,and will remain at point B in the long run. 
C) the price level will shift to P₂ in the short run. 
D) the price level will shift to P₂ in the long run.

Question 7

An unexpected increase in aggregate demand causes

Accepted Answer

A) the unemployment rate to fall,with no change in the price level. 
B) the price level to rise,but the duration of unemployment will remain constant,so the unemployment rate remains constant. 
C) simultaneously the price level to rise and the unemployment rate to fall. 
D) simultaneously the price level to fall and the unemployment rate to fall. 
A) the unemployment rate to fall,with no change in the price level. 
B) the price level to rise,but the duration of unemployment will remain constant,so the unemployment rate remains constant. 
C) simultaneously the price level to rise and the unemployment rate to fall. 
D) simultaneously the price level to fall and the unemployment rate to fall.

Question 8

The natural rate of unemployment includes

Accepted Answer

A) frictional and cyclical unemployment. 
B) only cyclical unemployment. 
C) only unemployment due to lay-offs and corporate downsizing. 
D) frictional unemployment and structural unemployment. 
A) frictional and cyclical unemployment. 
B) only cyclical unemployment. 
C) only unemployment due to lay-offs and corporate downsizing. 
D) frictional unemployment and structural unemployment.

Question 9

Explain what the Phillips curve is and how it is used in practical applications.

Accepted Answer

1.A description of the Phillip

Question 10

According to the new classical model,the impact of an anticipated expansionary monetary policy will be

Accepted Answer

A) to increase the price level in the long run. 
B) to increase the real national income in the long run. 
C) to decrease the natural rate of unemployment. 
D) to decrease the price level and the unemployment rate. 
A) to increase the price level in the long run. 
B) to increase the real national income in the long run. 
C) to decrease the natural rate of unemployment. 
D) to decrease the price level and the unemployment rate.

Question 11

We observe the duration of unemployment falling and wage rates rising.It is likely that

Accepted Answer

A) the government has initiated expansionary fiscal policy but the policies haven't taken effect yet. 
B) summer has arrived. 
C) aggregate demand has increased. 
D) aggregate supply has increased. 
A) the government has initiated expansionary fiscal policy but the policies haven't taken effect yet. 
B) summer has arrived. 
C) aggregate demand has increased. 
D) aggregate supply has increased.

Question 12

Under the new classical model,monetary policy can

Accepted Answer

A) have an effect in both the short and the long run. 
B) have an effect on the long run,but not the short run. 
C) have an effect only on the short run and only if the policy is unanticipated. 
D) have an effect only on the long run and only if the policy is fully anticipated. 
A) have an effect in both the short and the long run. 
B) have an effect on the long run,but not the short run. 
C) have an effect only on the short run and only if the policy is unanticipated. 
D) have an effect only on the long run and only if the policy is fully anticipated.

Question 13

Figure 15-2  
-In Figure 15-2,suppose the economy is initially at a short run equilibrium at point D and there is an unanticipated increase in the money supply.Which point represents the new short run equilibrium?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 14

The inflation rate has been 3 percent per year for several years,and the unemployment rate has been stable at 5 percent.Unanticipated changes in government policy cause the inflation rate to increase to 6 percent.In the short run,we would expect the unemployment rate to

Accepted Answer

A) remain constant. 
B) increase to 10 percent. 
C) increase,but the exact amount cannot be known for sure. 
D) decrease. 
A) remain constant. 
B) increase to 10 percent. 
C) increase,but the exact amount cannot be known for sure. 
D) decrease.

Question 15

Describe and explain the policy irrelevance proposition.

Accepted Answer

The policy irrelevance proposition is th

One assumption of the new classical model is that

Economist A.W.Phillips,looking at British data,concluded that

Deviations of the actual unemployment rate from the natural rate of unemployment are called

In the short run,an unanticipated cut in the rate of inflation would

Suppose the economy is in equilibrium when there is a change in environmental policy that bans all pesticides and herbicides on farm land.We would expect to observe

Figure 15-4 -In Figure 15-4,if initial equilibrium is at point A and there is an anticipated increase in aggregate demand from A D₁ to A D₂ due to an anticipated increase in the money supply,then

An unexpected increase in aggregate demand causes

The natural rate of unemployment includes

Explain what the Phillips curve is and how it is used in practical applications.

According to the new classical model,the impact of an anticipated expansionary monetary policy will be

We observe the duration of unemployment falling and wage rates rising.It is likely that

Under the new classical model,monetary policy can

Figure 15-2 -In Figure 15-2,suppose the economy is initially at a short run equilibrium at point D and there is an unanticipated increase in the money supply.Which point represents the new short run equilibrium?

The inflation rate has been 3 percent per year for several years,and the unemployment rate has been stable at 5 percent.Unanticipated changes in government policy cause the inflation rate to increase to 6 percent.In the short run,we would expect the unemployment rate to

Describe and explain the policy irrelevance proposition.

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 15: Issues in Stabilization Policy

One assumption of the new classical model is that

Economist A.W.Phillips,looking at British data,concluded that

Deviations of the actual unemployment rate from the natural rate of unemployment are called

In the short run,an unanticipated cut in the rate of inflation would

Suppose the economy is in equilibrium when there is a change in environmental policy that bans all pesticides and herbicides on farm land.We would expect to observe

Figure 15-4 -In Figure 15-4,if initial equilibrium is at point A and there is an anticipated increase in aggregate demand from A D₁ to A D₂ due to an anticipated increase in the money supply,then

An unexpected increase in aggregate demand causes

The natural rate of unemployment includes

Explain what the Phillips curve is and how it is used in practical applications.

According to the new classical model,the impact of an anticipated expansionary monetary policy will be

We observe the duration of unemployment falling and wage rates rising.It is likely that

Under the new classical model,monetary policy can

Figure 15-2 -In Figure 15-2,suppose the economy is initially at a short run equilibrium at point D and there is an unanticipated increase in the money supply.Which point represents the new short run equilibrium?

The inflation rate has been 3 percent per year for several years,and the unemployment rate has been stable at 5 percent.Unanticipated changes in government policy cause the inflation rate to increase to 6 percent.In the short run,we would expect the unemployment rate to

Describe and explain the policy irrelevance proposition.

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters