Question 1

According to the real business cycle theory,________ are responsible for economic growth.

Accepted Answer

A) expansionary fiscal and monetary policies 
B) positive shifts in the AD curve 
C) trade and income policies 
D) positive shifts in the AS curve 
A) expansionary fiscal and monetary policies 
B) positive shifts in the AD curve 
C) trade and income policies 
D) positive shifts in the AS curve

Question 2

The velocity of money is the ratio of

Accepted Answer

A) real GDP to the stock of money. 
B) the overall price level to the stock of money. 
C) nominal GDP to the stock of money. 
D) nominal GDP to the overall price level. 
A) real GDP to the stock of money. 
B) the overall price level to the stock of money. 
C) nominal GDP to the stock of money. 
D) nominal GDP to the overall price level.

Question 3

Which of the following represents the Lucas supply function?

Accepted Answer

A) Y = f(Pe - P) 
B) Y = f(Pe + P) 
C) Y = f(P + Pe) 
D) Y = f(P - Pe) 
A) Y = f(Pe - P) 
B) Y = f(Pe + P) 
C) Y = f(P + Pe) 
D) Y = f(P - Pe)

Question 4

A velocity of 6 means money changes hands,on average,every

Accepted Answer

A) 6 years. 
B) 6 months. 
C) 2 months. 
D) 1/6 of a month. 
A) 6 years. 
B) 6 months. 
C) 2 months. 
D) 1/6 of a month.

Question 5

Refer to the information provided in Figure 18.1 below to answer the questions that follow.   Figure 18.1
-Refer to Figure 18.1.According to the monetarists,a recession can be caused when

Accepted Answer

A) AD1 shifts to the right. 
B) AD1 shifts to the left. 
C) AS1 shifts to the left. 
D) LRAS shifts to the left. 
A) AD1 shifts to the right. 
B) AD1 shifts to the left. 
C) AS1 shifts to the left. 
D) LRAS shifts to the left.

Question 6

The Lucas supply model,in combination with the assumption that expectations are rational,leads to the conclusion that

Accepted Answer

A) expansionary policies,but not contractionary policies,can have an impact on real output. 
B) contractionary policies,but not expansionary policies,can have an impact on real output. 
C) only unanticipated policy changes can have an impact on output. 
D) neither anticipated nor unanticipated policy changes can have an impact on output. 
A) expansionary policies,but not contractionary policies,can have an impact on real output. 
B) contractionary policies,but not expansionary policies,can have an impact on real output. 
C) only unanticipated policy changes can have an impact on output. 
D) neither anticipated nor unanticipated policy changes can have an impact on output.

Question 7

Macroeconomic models differ in ways that are hard to standardize.

Accepted Answer

A) True 
 B)False

Question 8

Critics of supply-side economics agree that shortly after the Reagan tax cuts were put into place,the economy began to expand.These critics,though,argue that the expansion did not result from the supply-side policies,but rather from

Accepted Answer

A) the fact that the Federal Reserve dramatically increased the money supply at the same time that the tax cuts became effective. 
B) the self-correcting nature of the economy. 
C) the increases in government spending that occurred at the same time the tax cuts became effective. 
D) a very large increase in the demand for U.S.exports at the same time that U.S.imports fell dramatically. 
A) the fact that the Federal Reserve dramatically increased the money supply at the same time that the tax cuts became effective. 
B) the self-correcting nature of the economy. 
C) the increases in government spending that occurred at the same time the tax cuts became effective. 
D) a very large increase in the demand for U.S.exports at the same time that U.S.imports fell dramatically.

Question 9

Competing macroeconomic models may be hard to test because people may change how they react when economic policies are changed.

Accepted Answer

A) True 
 B)False

Question 10

According to new classical economists,if the Fed increases the money supply after it announces it,output ________ and the price level ________.

Accepted Answer

A) increases;remains constant 
B) remains constant;increases 
C) remains constant;remains constant 
D) increases;increase 
A) increases;remains constant 
B) remains constant;increases 
C) remains constant;remains constant 
D) increases;increase

Question 11

The Lucas supply function,in combination with the assumption that expectations are rational,implies that

Accepted Answer

A) neither anticipated monetary policy changes nor anticipated fiscal policy changes will have an effect on real output. 
B) an anticipated monetary policy change will have an effect on real output,but an anticipated fiscal policy change will not have an effect on real output. 
C) both anticipated monetary and fiscal policy changes will affect real output. 
D) an anticipated monetary policy change will have no effect on real output,but an anticipated fiscal policy change will have an effect on real output. 
A) neither anticipated monetary policy changes nor anticipated fiscal policy changes will have an effect on real output. 
B) an anticipated monetary policy change will have an effect on real output,but an anticipated fiscal policy change will not have an effect on real output. 
C) both anticipated monetary and fiscal policy changes will affect real output. 
D) an anticipated monetary policy change will have no effect on real output,but an anticipated fiscal policy change will have an effect on real output.

Question 12

According to the Lucas supply function,workers who experience a positive price surprise will work fewer hours when

Accepted Answer

A) there is no substitution effect from a positive price surprise. 
B) there is no income effect from a positive price surprise. 
C) the substitution effect dominates the income effect. 
D) the income effect dominates the substitution effect. 
A) there is no substitution effect from a positive price surprise. 
B) there is no income effect from a positive price surprise. 
C) the substitution effect dominates the income effect. 
D) the income effect dominates the substitution effect.

Question 13

Refer to the information provided in Figure 18.1 below to answer the questions that follow.   Figure 18.1
-Refer to Figure 18.1.According to the new classical economists,under rational expectations an expected decrease in taxes would

Accepted Answer

A) shift AS1 to the right. 
B) shift AD1 to the right. 
C) shift AD1 to the left. 
D) not change AD or AS. 
A) shift AS1 to the right. 
B) shift AD1 to the right. 
C) shift AD1 to the left. 
D) not change AD or AS.

Question 14

The velocity of money is 4.If nominal GDP is $1,200 billion then the stock of money

Accepted Answer

A) is $300 billion. 
B) is $400 billion. 
C) is $500 billion. 
D) is $4,800 billion. 
A) is $300 billion. 
B) is $400 billion. 
C) is $500 billion. 
D) is $4,800 billion.

Question 15

According to the new classical theory,economic policies are

Accepted Answer

A) effective only if anticipated. 
B) ineffective if unanticipated. 
C) ineffective if anticipated. 
D) ineffective,whether anticipated or unanticipated. 
A) effective only if anticipated. 
B) ineffective if unanticipated. 
C) ineffective if anticipated. 
D) ineffective,whether anticipated or unanticipated.

Question 16

A velocity of 4 means money stays with each owner for an average of 4 years.

Accepted Answer

A) True 
 B)False

Question 17

The economic view that retains the assumption of rational expectations but drops the assumption of completely flexible prices and wages is called

Accepted Answer

A) new Keynesian economics. 
B) supply-side economics. 
C) monetarism. 
D) real business-cycle economics 
A) new Keynesian economics. 
B) supply-side economics. 
C) monetarism. 
D) real business-cycle economics

Question 18

If nominal GDP is $200 billion and the stock of money is $40 billion,the velocity is 5.

Accepted Answer

A) True 
 B)False

Question 19

According to the real business cycle theory,technological advances

Accepted Answer

A) increase the marginal product of labor,which causes real wages and output to decline. 
B) decrease the marginal product of labor,which causes real wages and output to increase. 
C) increase the marginal product of labor,which causes real wages to increase and output to decline. 
D) increase the marginal product of labor,which causes real wages and output to increase. 
A) increase the marginal product of labor,which causes real wages and output to decline. 
B) decrease the marginal product of labor,which causes real wages and output to increase. 
C) increase the marginal product of labor,which causes real wages to increase and output to decline. 
D) increase the marginal product of labor,which causes real wages and output to increase.

Question 20

The Keynesian hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.

Accepted Answer

A) True 
 B)False

Exam 18: Alternative Views in Macroeconomics

According to the real business cycle theory,________ are responsible for economic growth.

The velocity of money is the ratio of

Which of the following represents the Lucas supply function?

A velocity of 6 means money changes hands,on average,every

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1.According to the monetarists,a recession can be caused when

The Lucas supply model,in combination with the assumption that expectations are rational,leads to the conclusion that

Macroeconomic models differ in ways that are hard to standardize.

Critics of supply-side economics agree that shortly after the Reagan tax cuts were put into place,the economy began to expand.These critics,though,argue that the expansion did not result from the supply-side policies,but rather from

Competing macroeconomic models may be hard to test because people may change how they react when economic policies are changed.

According to new classical economists,if the Fed increases the money supply after it announces it,output ________ and the price level ________.

The Lucas supply function,in combination with the assumption that expectations are rational,implies that

According to the Lucas supply function,workers who experience a positive price surprise will work fewer hours when

Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1 -Refer to Figure 18.1.According to the new classical economists,under rational expectations an expected decrease in taxes would

The velocity of money is 4.If nominal GDP is $1,200 billion then the stock of money

According to the new classical theory,economic policies are

A velocity of 4 means money stays with each owner for an average of 4 years.

The economic view that retains the assumption of rational expectations but drops the assumption of completely flexible prices and wages is called

If nominal GDP is $200 billion and the stock of money is $40 billion,the velocity is 5.

According to the real business cycle theory,technological advances

The Keynesian hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

International Trade,comparative Advantage,and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters

According to new classical economists,if the Fed increases the money supply after it announces it,output and the price level .