Exam 25: Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Agreeing with Keynesian economists, monetarists believe that the economy is subject to disequilibrium that must be corrected by government action.

The new classical school holds that:

Which of the following is true of the simple Keynesian model?

According to monetarists, changes in the money supply have long-lasting effects on the equilibrium level of real GDP.

Which of the following economic theories takes into account the rational expectations of people in the economy?

The time it takes for a particular monetary policy to change income is called the _____.

The new classical school of thought is usually associated with the theory of rational expectations.

Which of the following schools of thought believes that wages and prices are rigid in the short run?

Which of the following statements accurately expresses the assumptions on which new Keynesian and new classical theory are based?

Which of the following thoughts do the Keynesian and the new Keynesian economists share?

Which of the following is the basic tenet of new classical economics?

The recognition lag refers to the:

In traditional Keynesian economics:

If the traditional Keynesian views turn out to be accurate, an increase in government spending would:

Suppose the central bank increases the money supply in an economy unexpectedly during a year.If the current inflation rate in this country is 3.4 percent, then according to new classical economists the expected inflation rate for the following year would be:

Both new classical economists and monetarists disagree with Keynesians about the optimal degree of involvement of the government in determining the equilibrium level of real GDP.

Which of the following economic theories favors an active role for government in promoting low inflation and economic growth?

Monetarists and new classical economistsfavor an active role of government in promoting low inflation and economic growth.

In the fixed-price Keynesian model, what would be the impact of an increase in aggregate expenditure on the aggregate demand curve and real GDP?

According to the new Keynesians: