Question 1

New Keynesian economists generally argue that

Accepted Answer

A) there is an exploitable tradeoff between unemployment and inflation. 
B) changes in aggregate demand will have relatively greater effects on real GDP when firms change prices less frequently. 
C) activist policy can be used to reduce the fluctuations in real GDP. 
D) all of the above 
A) there is an exploitable tradeoff between unemployment and inflation. 
B) changes in aggregate demand will have relatively greater effects on real GDP when firms change prices less frequently. 
C) activist policy can be used to reduce the fluctuations in real GDP. 
D) all of the above

Question 2

-Use the above figure.Assuming that policy actions are unanticipated,if the economy is at point A and the policy makers want to get to point B,they could

Accepted Answer

A) increase the money supply. 
B) decrease taxation. 
C) decrease the money supply. 
D) increase government spending. 
A) increase the money supply. 
B) decrease taxation. 
C) decrease the money supply. 
D) increase government spending.

Question 3

Empirical evidence suggests that,when unemployment benefits run out,the probability that an unemployed person will find a job

Accepted Answer

A) remains constant. 
B) goes down by 20 percent. 
C) about doubles. 
D) about triples. 
A) remains constant. 
B) goes down by 20 percent. 
C) about doubles. 
D) about triples.

Question 4

Costs that deter firms from changing prices in response to demand changes are known as

Accepted Answer

A) sticky costs. 
B) menu costs. 
C) policy costs. 
D) production costs. 
A) sticky costs. 
B) menu costs. 
C) policy costs. 
D) production costs.

Question 5

Explain the difference between active and passive policy making.

Accepted Answer

Active policy making,or discretionary po

Question 6

According to Friedman and Phelps,which of the following statements is a correct characterization of unemployment and inflation in the United States since the 1950s?

Accepted Answer

A) A trade-off between inflation and unemployment as pictured in the Phillips curve existed over the entire time period. 
B) A trade-off between inflation and unemployment as pictured in the Phillips curve existed in the 1970s and 1980s,but not over the entire period. 
C) The relationship between inflation and unemployment is very different from the Phillips curve.A positive relationship is evident rather than an inverse relationship. 
D) There is no clear relationship between unemployment and inflation. 
A) A trade-off between inflation and unemployment as pictured in the Phillips curve existed over the entire time period. 
B) A trade-off between inflation and unemployment as pictured in the Phillips curve existed in the 1970s and 1980s,but not over the entire period. 
C) The relationship between inflation and unemployment is very different from the Phillips curve.A positive relationship is evident rather than an inverse relationship. 
D) There is no clear relationship between unemployment and inflation.

Question 7

Which of the following statements concerning price rigidity is true?

Accepted Answer

A) Since the economy experiences continued inflation prices are not rigid. 
B) Prices will be rigid when there is unanticipated monetary policy but not when there is anticipated monetary policy. 
C) Data has clearly demonstrated that the long run aggregate supply curve is horizontal. 
D) When there are demand changes,firms will not change their price because of the costs associated with renegotiating contracts and informing customers of price changes. 
A) Since the economy experiences continued inflation prices are not rigid. 
B) Prices will be rigid when there is unanticipated monetary policy but not when there is anticipated monetary policy. 
C) Data has clearly demonstrated that the long run aggregate supply curve is horizontal. 
D) When there are demand changes,firms will not change their price because of the costs associated with renegotiating contracts and informing customers of price changes.

Question 8

Which type of unemployment is associated with the slump in aggregate demand that accompanies a recession?

Accepted Answer

A) Expansionary unemployment 
B) Cyclical unemployment 
C) Frictional unemployment 
D) Structural unemployment 
A) Expansionary unemployment 
B) Cyclical unemployment 
C) Frictional unemployment 
D) Structural unemployment

Question 9

In the aggregate supply-aggregate demand model,if every person in the economy correctly anticipates the inflation rate,the unemployment rate will

Accepted Answer

A) be less than the natural rate of unemployment. 
B) be more than the natural rate of unemployment. 
C) equal the natural rate of unemployment. 
D) equal zero. 
A) be less than the natural rate of unemployment. 
B) be more than the natural rate of unemployment. 
C) equal the natural rate of unemployment. 
D) equal zero.

Question 10

Suppose the economy is initially operating at point A in the above figure.Which of the following statements is true?

Accepted Answer

A) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the long run. 
B) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the short run. 
C) An unexpected reduction in aggregate demand will cause the economy to move from point A to point C in the short run. 
D) none of the above 
A) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the long run. 
B) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the short run. 
C) An unexpected reduction in aggregate demand will cause the economy to move from point A to point C in the short run. 
D) none of the above

Question 11

The Fed initiates a contractionary monetary policy that is correctly anticipated by economic agents in the economy.The result is

Accepted Answer

A) decreased prices,but no change in real GDP. 
B) decreased prices and decreased real GDP in the short run,but only decreased prices in the long run. 
C) decreased real GDP in the short run and decreased prices in the long run. 
D) decreased real GDP and prices in both the short run and the long run. 
A) decreased prices,but no change in real GDP. 
B) decreased prices and decreased real GDP in the short run,but only decreased prices in the long run. 
C) decreased real GDP in the short run and decreased prices in the long run. 
D) decreased real GDP and prices in both the short run and the long run.

Question 12

When a supply shock is permanent

Accepted Answer

A) only the long-run aggregate supply curve shifts leftward. 
B) only the short-run aggregate supply curve shifts leftward. 
C) both the long-run and short-run aggregate supply curves shift leftward. 
D) there are no shifts in either the long-run or short-run aggregate supply curve. 
A) only the long-run aggregate supply curve shifts leftward. 
B) only the short-run aggregate supply curve shifts leftward. 
C) both the long-run and short-run aggregate supply curves shift leftward. 
D) there are no shifts in either the long-run or short-run aggregate supply curve.

Question 13

From 1950 until the late 1980s,the natural rate of unemployment in the United States

Accepted Answer

A) fell sharply as government retraining programs helped put the unemployed back to work. 
B) cycled up and down in tandem with the actual rate of unemployment. 
C) rose sharply,always exceeding the actual rate of unemployment. 
D) trended upward. 
A) fell sharply as government retraining programs helped put the unemployed back to work. 
B) cycled up and down in tandem with the actual rate of unemployment. 
C) rose sharply,always exceeding the actual rate of unemployment. 
D) trended upward.

Question 14

An economist who would most likely use active policy making would support which of the following conclusions?

Accepted Answer

A) Pure competition is not typical in most markets. 
B) Price flexibility is common in most markets. 
C) Demand shocks have little or no short-run effects on real Gross Domestic Product (GDP)and unemployment. 
D) Supply shocks explain most business cycles. 
A) Pure competition is not typical in most markets. 
B) Price flexibility is common in most markets. 
C) Demand shocks have little or no short-run effects on real Gross Domestic Product (GDP)and unemployment. 
D) Supply shocks explain most business cycles.

Question 15

The U.S.economic data for the last 50 years indicates that

Accepted Answer

A) there is an inverse relationship between unemployment rate and inflation rate. 
B) there is a direct relationship between unemployment rate and inflation rate. 
C) during recessions the unemployment rate was always twice as high as the inflation rate. 
D) there has been no long-run relationship between unemployment and inflation rates. 
A) there is an inverse relationship between unemployment rate and inflation rate. 
B) there is a direct relationship between unemployment rate and inflation rate. 
C) during recessions the unemployment rate was always twice as high as the inflation rate. 
D) there has been no long-run relationship between unemployment and inflation rates.

Question 16

When policy makers take actions in response to or in anticipation of some change in the overall economy,there is

Accepted Answer

A) active policy making. 
B) passive policy making. 
C) rationalization policy making. 
D) rational expectations policy making. 
A) active policy making. 
B) passive policy making. 
C) rationalization policy making. 
D) rational expectations policy making.

Question 17

Using a graph,show and explain the difference between an anticipated and an unanticipated increase in aggregate demand.

Accepted Answer

@#IMG-DLM& In the above figure,an unanticipated in

Question 18

A key implication of the policy irrelevance proposition is that

Accepted Answer

A) only fully anticipated policy actions can influence real Gross Domestic Product (GDP). 
B) only unanticipated policy actions can influence real Gross Domestic Product (GDP). 
C) the rational expectations hypothesis is incorrect. 
D) none of the above. 
A) only fully anticipated policy actions can influence real Gross Domestic Product (GDP). 
B) only unanticipated policy actions can influence real Gross Domestic Product (GDP). 
C) the rational expectations hypothesis is incorrect. 
D) none of the above.

Question 19

During the 1970s,the shocks to the United States' economy resulted in

Accepted Answer

A) an increase in the unemployment rate,but a decrease in the inflation rate. 
B) a decrease in the unemployment rate,but an increase in the inflation rate. 
C) an increase in both the unemployment rate and the inflation rate. 
D) a decrease in both the unemployment rate and the inflation rate. 
A) an increase in the unemployment rate,but a decrease in the inflation rate. 
B) a decrease in the unemployment rate,but an increase in the inflation rate. 
C) an increase in both the unemployment rate and the inflation rate. 
D) a decrease in both the unemployment rate and the inflation rate.

Question 20

Examination of data since 1953 indicates that during this period stretching more than half a century,the Phillips curve

Accepted Answer

A) fails to exist. 
B) is smoothly upward sloping. 
C) is smoothly downward sloping. 
D) slopes smoothly upward at first but then slopes smoothly downward. 
A) fails to exist. 
B) is smoothly upward sloping. 
C) is smoothly downward sloping. 
D) slopes smoothly upward at first but then slopes smoothly downward.

New Keynesian economists generally argue that

-Use the above figure.Assuming that policy actions are unanticipated,if the economy is at point A and the policy makers want to get to point B,they could

Empirical evidence suggests that,when unemployment benefits run out,the probability that an unemployed person will find a job

Costs that deter firms from changing prices in response to demand changes are known as

Explain the difference between active and passive policy making.

According to Friedman and Phelps,which of the following statements is a correct characterization of unemployment and inflation in the United States since the 1950s?

Which of the following statements concerning price rigidity is true?

Which type of unemployment is associated with the slump in aggregate demand that accompanies a recession?

In the aggregate supply-aggregate demand model,if every person in the economy correctly anticipates the inflation rate,the unemployment rate will

Suppose the economy is initially operating at point A in the above figure.Which of the following statements is true?

The Fed initiates a contractionary monetary policy that is correctly anticipated by economic agents in the economy.The result is

When a supply shock is permanent

From 1950 until the late 1980s,the natural rate of unemployment in the United States

An economist who would most likely use active policy making would support which of the following conclusions?

The U.S.economic data for the last 50 years indicates that

When policy makers take actions in response to or in anticipation of some change in the overall economy,there is

Using a graph,show and explain the difference between an anticipated and an unanticipated increase in aggregate demand.

A key implication of the policy irrelevance proposition is that

During the 1970s,the shocks to the United States' economy resulted in

Examination of data since 1953 indicates that during this period stretching more than half a century,the Phillips curve

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

Exam 17: Stabilization in an Integrated World Economy

New Keynesian economists generally argue that

-Use the above figure.Assuming that policy actions are unanticipated,if the economy is at point A and the policy makers want to get to point B,they could

Empirical evidence suggests that,when unemployment benefits run out,the probability that an unemployed person will find a job

Costs that deter firms from changing prices in response to demand changes are known as

Explain the difference between active and passive policy making.

According to Friedman and Phelps,which of the following statements is a correct characterization of unemployment and inflation in the United States since the 1950s?

Which of the following statements concerning price rigidity is true?

Which type of unemployment is associated with the slump in aggregate demand that accompanies a recession?

In the aggregate supply-aggregate demand model,if every person in the economy correctly anticipates the inflation rate,the unemployment rate will

Suppose the economy is initially operating at point A in the above figure.Which of the following statements is true?

The Fed initiates a contractionary monetary policy that is correctly anticipated by economic agents in the economy.The result is

When a supply shock is permanent

From 1950 until the late 1980s,the natural rate of unemployment in the United States

An economist who would most likely use active policy making would support which of the following conclusions?

The U.S.economic data for the last 50 years indicates that

When policy makers take actions in response to or in anticipation of some change in the overall economy,there is

Using a graph,show and explain the difference between an anticipated and an unanticipated increase in aggregate demand.

A key implication of the policy irrelevance proposition is that

During the 1970s,the shocks to the United States' economy resulted in

Examination of data since 1953 indicates that during this period stretching more than half a century,the Phillips curve

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