Question 1

According to the real-business-cycle perspective,

Accepted Answer

A) the economy cannot be stabilized by policy activism. 
B) the Phillips curve is very important. 
C) active policy making is important. 
D) passive policy making is important. 
A) the economy cannot be stabilized by policy activism. 
B) the Phillips curve is very important. 
C) active policy making is important. 
D) passive policy making is important. A

Question 2

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. A

Question 3

-Use the above figure.Graph ________ correctly depicts the short-run Phillips Curve.

Accepted Answer

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

Question 4

Policymakers' attempts to use the Phillips curve to reduce the unemployment rate below the natural rate

Accepted Answer

A) will be successful since the Phillips curve shows the relationship between the inflation rate and the unemployment rate. 
B) will be successful if monetary policy is used. 
C) will be unsuccessful if monetary policy is used since monetary policy leads to higher prices. 
D) will be unsuccessful since workers' expectations adjust to attempts to reduce unemployment below the natural rate. 
A) will be successful since the Phillips curve shows the relationship between the inflation rate and the unemployment rate. 
B) will be successful if monetary policy is used. 
C) will be unsuccessful if monetary policy is used since monetary policy leads to higher prices. 
D) will be unsuccessful since workers' expectations adjust to attempts to reduce unemployment below the natural rate.

Question 5

-In the above figure,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 6

If the average interval between firms' price adjustments is relatively long,

Accepted Answer

A) an increase in aggregate demand will cause a relatively short-lived increase in real GDP. 
B) an increase in aggregate demand will cause a relatively long-lived increase in real GDP. 
C) a reduction in aggregate demand will cause a relatively short-lived reduction in real GDP. 
D) none of the above 
A) an increase in aggregate demand will cause a relatively short-lived increase in real GDP. 
B) an increase in aggregate demand will cause a relatively long-lived increase in real GDP. 
C) a reduction in aggregate demand will cause a relatively short-lived reduction in real GDP. 
D) none of the above

Question 7

The new Keynesian sticky-price theory indicates that an increase in aggregate demand generates

Accepted Answer

A) a speedy rise in real GDP but a sluggish increase in the price level. 
B) a speedy rise in the price level but a sluggish increase in real GDP. 
C) sluggish increases in both real GDP and the price level. 
D) rapid increases in both real GDP and the price level. 
A) a speedy rise in real GDP but a sluggish increase in the price level. 
B) a speedy rise in the price level but a sluggish increase in real GDP. 
C) sluggish increases in both real GDP and the price level. 
D) rapid increases in both real GDP and the price level.

Question 8

According to a theory that relies on the rational expectations hypothesis and the assumption that wages and prices are flexible,why do anticipated expansionary monetary actions NOT boost real GDP?

Accepted Answer

A) Anticipated expansionary monetary policy actions do not increase aggregate demand. 
B) The short-run aggregate supply curve shifts upward simultaneously with the rightward shift of aggregate demand. 
C) The short-run aggregate supply curve shifts downward simultaneously with the upward shift of aggregate demand. 
D) The higher interest rates associated with anticipated expansionary monetary policy actions will dampen investment spending. 
A) Anticipated expansionary monetary policy actions do not increase aggregate demand. 
B) The short-run aggregate supply curve shifts upward simultaneously with the rightward shift of aggregate demand. 
C) The short-run aggregate supply curve shifts downward simultaneously with the upward shift of aggregate demand. 
D) The higher interest rates associated with anticipated expansionary monetary policy actions will dampen investment spending.

Question 9

Which of the following is the rate of unemployment that occurs after all adjustments in the labor market have occurred?

Accepted Answer

A) the frictional rate of unemployment. 
B) the natural rate of unemployment. 
C) the cyclical rate of unemployment. 
D) the structural rate of unemployment. 
A) the frictional rate of unemployment. 
B) the natural rate of unemployment. 
C) the cyclical rate of unemployment. 
D) the structural rate of unemployment.

Question 10

-In the above figure,suppose the economy is in equilibrium at point A.The Fed engages in an expansionary monetary policy that is fully anticipated by the public.Other things being equal,what point represents the new equilibrium according to the rational expectations theory?

Accepted Answer

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

Question 11

Describe new Keynesian economics and the arguments used to support the ideas.

Accepted Answer

New Keynesian economics are models based

Question 12

Real business cycle theory emphasizes the effect of ________ on economic performance.

Accepted Answer

A) government spending 
B) the money supply 
C) aggregate supply shocks 
D) tax rates 
A) government spending 
B) the money supply 
C) aggregate supply shocks 
D) tax rates

Question 13

The idea that policy actions have no real effects in the short run if they are anticipated and no real effects in the long run is called the

Accepted Answer

A) Keynesian proposition. 
B) policy irrelevance proposition. 
C) adaptive proposition. 
D) activism proposition. 
A) Keynesian proposition. 
B) policy irrelevance proposition. 
C) adaptive proposition. 
D) activism proposition.

Question 14

The natural rate of unemployment has increased in the United States and Europe over the last twenty years.What are things that could account for this?

Accepted Answer

The natural rate of unemployment is affe

Question 15

Which statement is true when rational expectations exist and there is a change in monetary policy which is expected?

Accepted Answer

A) The change in monetary policy leads to a change in aggregate demand that leads to a temporary short-run equilibrium that is different from the long-run equilibrium. 
B) The change in monetary policy leads to a simultaneous shift of the short-run aggregate supply curve. 
C) The change in monetary policy lead to a simultaneous shift in the long-run aggregate supply curve. 
D) The change in monetary policy does not change equilibrium in either the short-run or long-run. 
A) The change in monetary policy leads to a change in aggregate demand that leads to a temporary short-run equilibrium that is different from the long-run equilibrium. 
B) The change in monetary policy leads to a simultaneous shift of the short-run aggregate supply curve. 
C) The change in monetary policy lead to a simultaneous shift in the long-run aggregate supply curve. 
D) The change in monetary policy does not change equilibrium in either the short-run or long-run.

Question 16

New Keynesians hypothesize that

Accepted Answer

A) the relationship between inflation and unemployment is exploitable in the long run. 
B) the relationship between inflation and unemployment is exploitable in the short run. 
C) there is no relationship between inflation and unemployment. 
D) fluctuations in output are largely caused by supply shocks. 
A) the relationship between inflation and unemployment is exploitable in the long run. 
B) the relationship between inflation and unemployment is exploitable in the short run. 
C) there is no relationship between inflation and unemployment. 
D) fluctuations in output are largely caused by supply shocks.

Question 17

What happens to the Phillips curve when the expected rate of inflation rises?

Accepted Answer

A) The curve shifts to the right 
B) The curve shifts to the left 
C) The curve becomes horizontal 
D) The Phillips curve is unaffected 
A) The curve shifts to the right 
B) The curve shifts to the left 
C) The curve becomes horizontal 
D) The Phillips curve is unaffected

Question 18

How do rational expectations models differ from traditional classical economics? How does the new Keynesian model differ from the traditional Keynesian view?

Accepted Answer

A rational expectations model sees no re

Question 19

An unexpected increase in aggregate demand typically causes

Accepted Answer

A) frictional unemployment to increase but structural unemployment to decrease. 
B) the price level to increase but has no effect on the unemployment rate. 
C) the price level to increase and the unemployment rate to fall. 
D) the price level to increase and the unemployment rate to increase. 
A) frictional unemployment to increase but structural unemployment to decrease. 
B) the price level to increase but has no effect on the unemployment rate. 
C) the price level to increase and the unemployment rate to fall. 
D) the price level to increase and the unemployment rate to increase.

Question 20

Compare and contrast the arguments favoring active versus passive policy making.

Accepted Answer

The models that stress wage and price fl

According to the real-business-cycle perspective,

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

-Use the above figure.Graph ________ correctly depicts the short-run Phillips Curve.

Policymakers' attempts to use the Phillips curve to reduce the unemployment rate below the natural rate

-In the above figure,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?

If the average interval between firms' price adjustments is relatively long,

The new Keynesian sticky-price theory indicates that an increase in aggregate demand generates

According to a theory that relies on the rational expectations hypothesis and the assumption that wages and prices are flexible,why do anticipated expansionary monetary actions NOT boost real GDP?

Which of the following is the rate of unemployment that occurs after all adjustments in the labor market have occurred?

-In the above figure,suppose the economy is in equilibrium at point A.The Fed engages in an expansionary monetary policy that is fully anticipated by the public.Other things being equal,what point represents the new equilibrium according to the rational expectations theory?

Describe new Keynesian economics and the arguments used to support the ideas.

Real business cycle theory emphasizes the effect of ________ on economic performance.

The idea that policy actions have no real effects in the short run if they are anticipated and no real effects in the long run is called the

The natural rate of unemployment has increased in the United States and Europe over the last twenty years.What are things that could account for this?

Which statement is true when rational expectations exist and there is a change in monetary policy which is expected?

New Keynesians hypothesize that

What happens to the Phillips curve when the expected rate of inflation rises?

How do rational expectations models differ from traditional classical economics? How does the new Keynesian model differ from the traditional Keynesian view?

An unexpected increase in aggregate demand typically causes

Compare and contrast the arguments favoring active versus passive policy making.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 17: Stabilization in an Integrated World Economy

According to the real-business-cycle perspective,

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

-Use the above figure.Graph ________ correctly depicts the short-run Phillips Curve.

Policymakers' attempts to use the Phillips curve to reduce the unemployment rate below the natural rate

-In the above figure,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?

If the average interval between firms' price adjustments is relatively long,

The new Keynesian sticky-price theory indicates that an increase in aggregate demand generates

According to a theory that relies on the rational expectations hypothesis and the assumption that wages and prices are flexible,why do anticipated expansionary monetary actions NOT boost real GDP?

Which of the following is the rate of unemployment that occurs after all adjustments in the labor market have occurred?

-In the above figure,suppose the economy is in equilibrium at point A.The Fed engages in an expansionary monetary policy that is fully anticipated by the public.Other things being equal,what point represents the new equilibrium according to the rational expectations theory?

Describe new Keynesian economics and the arguments used to support the ideas.

Real business cycle theory emphasizes the effect of ________ on economic performance.

The idea that policy actions have no real effects in the short run if they are anticipated and no real effects in the long run is called the

The natural rate of unemployment has increased in the United States and Europe over the last twenty years.What are things that could account for this?

Which statement is true when rational expectations exist and there is a change in monetary policy which is expected?

New Keynesians hypothesize that

What happens to the Phillips curve when the expected rate of inflation rises?

How do rational expectations models differ from traditional classical economics? How does the new Keynesian model differ from the traditional Keynesian view?

An unexpected increase in aggregate demand typically causes

Compare and contrast the arguments favoring active versus passive policy making.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters