Question 1

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

Accepted Answer

A) information about the Fed's plans will inevitably be leaked to the public. 
B) the Fed announces its goals before Congress and publishes its policy actions in the Federal Reserve Bulletin six weeks after they take place. 
C) the public would eventually figure out what the Fed's policies were,negating the Fed's surprise. 
D) competition in the money markets would neutralize the Fed's intervention. 
A) information about the Fed's plans will inevitably be leaked to the public. 
B) the Fed announces its goals before Congress and publishes its policy actions in the Federal Reserve Bulletin six weeks after they take place. 
C) the public would eventually figure out what the Fed's policies were,negating the Fed's surprise. 
D) competition in the money markets would neutralize the Fed's intervention.

Question 2

According to the misperceptions theory,when P < Pe,output is ________ its full-employment level and the short-run aggregate supply curve must shift ________ to restore full employment.

Accepted Answer

A) below; upward 
B) below; downward 
C) above; upward 
D) above; downward 
A) below; upward 
B) below; downward 
C) above; upward 
D) above; downward

Question 3

The most common measure of productivity shocks used by real business cycle theorists is

Accepted Answer

A) the Solow residual. 
B) average labor productivity. 
C) the change in the capital stock. 
D) unit labor costs. 
A) the Solow residual. 
B) average labor productivity. 
C) the change in the capital stock. 
D) unit labor costs.

Question 4

How is the Solow residual measured? What problems arise in its measurement when resource utilization varies over the business cycle? What implications do these measurement issues have for evidence supporting the RBC model?

Accepted Answer

The Solow residual is measured as Y / (K

Question 5

The Solow residual is

Accepted Answer

A) the waste from the production process. 
B) the most common measure of productivity shocks. 
C) a measure of the efficiency of the production process. 
D) a measure of the proportion of involuntarily unemployed workers. 
A) the waste from the production process. 
B) the most common measure of productivity shocks. 
C) a measure of the efficiency of the production process. 
D) a measure of the proportion of involuntarily unemployed workers.

Question 6

Why doesn't stabilization policy work,according to economists using the misperceptions theory?

Accepted Answer

Stabilization policy requires taking sys

Question 7

Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?

Accepted Answer

A) Business cycles are always and everywhere a monetary phenomenon. 
B) Wars and military buildups could be considered productivity shocks. 
C) Business cycles could be caused by the accumulation of small productivity shocks. 
D) Business cycles are often caused by unobservable productivity shocks,which aren't apparent at the time they occur. 
A) Business cycles are always and everywhere a monetary phenomenon. 
B) Wars and military buildups could be considered productivity shocks. 
C) Business cycles could be caused by the accumulation of small productivity shocks. 
D) Business cycles are often caused by unobservable productivity shocks,which aren't apparent at the time they occur.

Question 8

The basic classical model can account for the procyclical behavior of money if there

Accepted Answer

A) are real business cycles caused by productivity shocks. 
B) is reverse causation from future output to money. 
C) are rational expectations among the public. 
D) are propagation mechanisms in the economy. 
A) are real business cycles caused by productivity shocks. 
B) is reverse causation from future output to money. 
C) are rational expectations among the public. 
D) are propagation mechanisms in the economy.

Question 9

Use the classical (RBC)IS-LM-FE model to show the effects on the economy of a temporary beneficial supply shock-for example,a decrease in the price of oil.You should show the impact on the real wage,employment,output,the real interest rate,consumption,investment,and the price level.

Accepted Answer

The marginal productivity of labor is in

Question 10

The primary reason why the Fed cannot systematically surprise the public with its monetary policy is

Accepted Answer

A) the nonneutrality of money. 
B) the presence of productivity shocks that generate real business cycles independent of the monetary side of the economy. 
C) the presence of rational expectations among the public. 
D) the presence of propagation mechanisms within the economy. 
A) the nonneutrality of money. 
B) the presence of productivity shocks that generate real business cycles independent of the monetary side of the economy. 
C) the presence of rational expectations among the public. 
D) the presence of propagation mechanisms within the economy.

Question 11

During a recession,would classical economists propose that changes in government spending or taxes be used to improve economic conditions? Briefly explain.

Accepted Answer

No.Classical economists do not endorse c

Question 12

Labor hoarding occurs when

Accepted Answer

A) firms keep good workers so other firms can't hire them. 
B) the unemployment rate exceeds the natural rate of unemployment. 
C) involuntary unemployment exceeds voluntary unemployment. 
D) because of hiring and firing costs,firms retain workers in a recession that they would otherwise lay off. 
A) firms keep good workers so other firms can't hire them. 
B) the unemployment rate exceeds the natural rate of unemployment. 
C) involuntary unemployment exceeds voluntary unemployment. 
D) because of hiring and firing costs,firms retain workers in a recession that they would otherwise lay off.

Question 13

Which of the following equations is most likely to represent short-run aggregate supply according to the misperceptions theory?

Accepted Answer

A) Y = 6000 
B) Y = 6000 + 50(P - Pe) 
C) P = 2 
D) PY = 12,000 
A) Y = 6000 
B) Y = 6000 + 50(P - Pe) 
C) P = 2 
D) PY = 12,000

Question 14

Which of the following would not be an example of a productivity shock?

Accepted Answer

A) The introduction of new management techniques 
B) A change in government regulations affecting production 
C) A change in the level of government transfer programs 
D) A spell of unusually good or unusually bad weather 
A) The introduction of new management techniques 
B) A change in government regulations affecting production 
C) A change in the level of government transfer programs 
D) A spell of unusually good or unusually bad weather

Question 15

According to the misperceptions theory,an anticipated 10% decrease in the money supply leads to a short-run reduction in the price level of

Accepted Answer

A) 0%. 
B) 5%. 
C) some amount between 0% and 10%. 
D) 10%. 
A) 0%. 
B) 5%. 
C) some amount between 0% and 10%. 
D) 10%.

Question 16

Friedman and Schwarz argue that money is not neutral because

Accepted Answer

A) theoretical models of the economy don't show monetary neutrality. 
B) money is a leading,procyclical variable. 
C) they found several historical incidents in which changes in the money supply were not responses to macroeconomic conditions,and output moved in the same direction as money. 
D) they found no evidence that productivity changes or changes in government spending contributed to business cycles; only monetary changes preceded every recession. 
A) theoretical models of the economy don't show monetary neutrality. 
B) money is a leading,procyclical variable. 
C) they found several historical incidents in which changes in the money supply were not responses to macroeconomic conditions,and output moved in the same direction as money. 
D) they found no evidence that productivity changes or changes in government spending contributed to business cycles; only monetary changes preceded every recession.

Question 17

According to the misperceptions theory,when the price level falls below the expected price level

Accepted Answer

A) the economy's SRAS curve shifts up. 
B) the economy moves along its AD curve. 
C) the economy moves along its LRAS curve. 
D) the economy moves along its SRAS curve. 
A) the economy's SRAS curve shifts up. 
B) the economy moves along its AD curve. 
C) the economy moves along its LRAS curve. 
D) the economy moves along its SRAS curve.

Question 18

When RBC economists work out a detailed numerical example of a more general theory,they are performing

Accepted Answer

A) econometrics. 
B) number theory. 
C) calibration. 
D) topology. 
A) econometrics. 
B) number theory. 
C) calibration. 
D) topology.

Question 19

If producers believe that the increase in their relative prices is large relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

Accepted Answer

A) infinite. 
B) small. 
C) large. 
D) negative. 
A) infinite. 
B) small. 
C) large. 
D) negative.

Question 20

In the classical model,a temporary decrease in government spending would cause a decrease in

Accepted Answer

A) output,the real interest rate,real wages,and the price level. 
B) employment,the real interest rate,real wages,and the price level. 
C) output,employment,the real interest rate,and the price level. 
D) output,employment,real wages,and the price level. 
A) output,the real interest rate,real wages,and the price level. 
B) employment,the real interest rate,real wages,and the price level. 
C) output,employment,the real interest rate,and the price level. 
D) output,employment,real wages,and the price level.

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

According to the misperceptions theory,when P < Pe,output is its full-employment level and the short-run aggregate supply curve must shift to restore full employment.

The most common measure of productivity shocks used by real business cycle theorists is

How is the Solow residual measured? What problems arise in its measurement when resource utilization varies over the business cycle? What implications do these measurement issues have for evidence supporting the RBC model?

The Solow residual is

Why doesn't stabilization policy work,according to economists using the misperceptions theory?

Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?

The basic classical model can account for the procyclical behavior of money if there

Use the classical (RBC)IS-LM-FE model to show the effects on the economy of a temporary beneficial supply shock-for example,a decrease in the price of oil.You should show the impact on the real wage,employment,output,the real interest rate,consumption,investment,and the price level.

The primary reason why the Fed cannot systematically surprise the public with its monetary policy is

During a recession,would classical economists propose that changes in government spending or taxes be used to improve economic conditions? Briefly explain.

Labor hoarding occurs when

Which of the following equations is most likely to represent short-run aggregate supply according to the misperceptions theory?

Which of the following would not be an example of a productivity shock?

According to the misperceptions theory,an anticipated 10% decrease in the money supply leads to a short-run reduction in the price level of

Friedman and Schwarz argue that money is not neutral because

According to the misperceptions theory,when the price level falls below the expected price level

When RBC economists work out a detailed numerical example of a more general theory,they are performing

If producers believe that the increase in their relative prices is large relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

In the classical model,a temporary decrease in government spending would cause a decrease in

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 10: Classical Business Cycle Analysis

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

According to the misperceptions theory,when P < Pe,output is ________ its full-employment level and the short-run aggregate supply curve must shift ________ to restore full employment.

The most common measure of productivity shocks used by real business cycle theorists is

How is the Solow residual measured? What problems arise in its measurement when resource utilization varies over the business cycle? What implications do these measurement issues have for evidence supporting the RBC model?

The Solow residual is

Why doesn't stabilization policy work,according to economists using the misperceptions theory?

Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?

The basic classical model can account for the procyclical behavior of money if there

Use the classical (RBC)IS-LM-FE model to show the effects on the economy of a temporary beneficial supply shock-for example,a decrease in the price of oil.You should show the impact on the real wage,employment,output,the real interest rate,consumption,investment,and the price level.

The primary reason why the Fed cannot systematically surprise the public with its monetary policy is

During a recession,would classical economists propose that changes in government spending or taxes be used to improve economic conditions? Briefly explain.

Labor hoarding occurs when

Which of the following equations is most likely to represent short-run aggregate supply according to the misperceptions theory?

Which of the following would not be an example of a productivity shock?

According to the misperceptions theory,an anticipated 10% decrease in the money supply leads to a short-run reduction in the price level of

Friedman and Schwarz argue that money is not neutral because

According to the misperceptions theory,when the price level falls below the expected price level

When RBC economists work out a detailed numerical example of a more general theory,they are performing

If producers believe that the increase in their relative prices is large relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

In the classical model,a temporary decrease in government spending would cause a decrease in

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

According to the misperceptions theory,when P < Pe,output is its full-employment level and the short-run aggregate supply curve must shift to restore full employment.