Exam 18: Events and Ideas

Which of the following schools of thought believe that expansionary monetary policy is effective in fighting recessions? I. classical macroeconomics II. Great Moderation consensus

Which of the following believes that fiscal policy should have the central role in fighting recessions? I. classical macroeconomics II. Keynesian macroeconomics III. monetarism

Why did the adoption of Keynesian economics come out of the Great Depression?

Some Keynesian economists believed that at the cost of some inflation, the government could reduce the unemployment rate to a permanently low rate.

Which of the following statements is broadly agreed upon by modern macroeconomists?

The theory of rational expectations is CONSISTENT with which of the following statements?

Milton Friedman was a leader and major proponent of:

Keynesian theory argued that monetary policy could be very effective during a depression.

The natural rate hypothesis:

Those who believe in the classical model suggest that expansionary policies would result in:

Explain the rational expectations theory and how it predicts the usefulness of fiscal and monetary policy.

A policy of fiscal stimulus involves _____ taxes and _____ government spending.

Discretionary fiscal policy:

Use the following to answer questions: Scenario: The Quantity Theory of Money Suppose the money supply is equal to $10 billion and the velocity of money is 6. -(Scenario: The Quantity Theory of Money) Look at the scenario The Quantity Theory of Money. If the aggregate price level is 4, then the nominal GDP is:

Which of the following statements is TRUE of the state of modern macroeconomics?

Which of the following theories is consistent with the notion that the short-run aggregate supply curve may be vertical after all?

The recommendation to use monetary policy to stabilize the economy and use fiscal policy only when monetary policy is ineffective is consistent with _____ macroeconomics.

During the Great Recession policy makers were not as worried as usual about the lags associated with discretionary fiscal policy because:

The main reason that the Great Depression ended was:

Prior to the 1930s, the _____ model dominated thinking about how the economy worked.