Exam 17: New Classical Macro Confronts New Keynesian Macro

The RBC approach has workers allocating their labor effort over blocks of time, with periods of intense activity when wages are high alternating with slack periods of vacation and leisure. This makes the labor supply curve rather ________, with unemployment an entirely ________ phenomenon.

The use of bar codes, computerized price lists, and scanners in supermarkets is an example of

Suppose the AD and SAS curves shift upward by the same amount. Real GDP would ________ while the price level ________.

The flaw of the Real Business Cycle model is that it

Figure 17-3 -In the figure above, suppose we are working under the assumption of the Lucas model. It is the year of the presidential election, and fiscal policy becomes more expansionary. If every firm is convinced that its price increase is being duplicated across the economy, we would picture this as a movement between points

Figure 17-1 -In the Friedman "Fooling Model" a ________ causes the labor supply curve to shift, and in the figure above, if the initial equilibrium is at point C then, the new level of price expectations, POe is ________ than the initial level of Pe.

The flaw of the Classical model of the business cycle is that it

Much of macroeconomic theory has been developed under the simplifying assumption that relative prices and wages are fixed, or equivalently that the economy is producing one good using one input (labor) with one wage rate. Such an assumption is clearly ________ of New Keynesian macroeconomics, given its emphasis on the importance of ________ in explaining business cycles.

Consider an adverse supply shock in the RBC model. The central bank knows that the pre-shock level of output

Information on money growth is available to the public with ________ lags, causing difficulty for the ________ of the New Classical approach.

In the short-run, a supply shock will lead to

In the United States since the 1920s, there has been only one decade that appears to accord fairly well with the RBC theory of business cycles:

According to the theory of rational expectations, the "fooling" of workers in Friedman's model

Which of the following is a New Keynesian explanation of wage and price stickiness must be discounted?

A supply shock, such as the OPEC oil-price increases in the 1970s,

A recent development in the RBC literature is the growing admission of the possible importance of

Which of the following theories fails to explain persistent unemployment?

Which of the following assumptions is found in Friedman's model but not in the new classical model?

The basic RBC model produces ________ movements in the real wage, which in fact are ________ in the statistical evidence.

The new Keynesian models, are examples of