Exam 17: New Classical Macro Confronts New Keynesian Macro

According to efficiency wage theory, a firm that raises wages by one percent will actually lower the labor cost per unit of output if the wage increase

RBC theory leads to ________ government macro-stabilization policy, due to the theory's assumption of ________.

Countries with stable inflation rates tend to have ________ SAS curves.

Figure 17-3 -After a shift from AD0 to AD1, which of the following patterns of adjustment is consistent with the "Price Fooling" model?

In Figure 17-4, below, initial demand, marginal cost, and marginal revenue curves (none of them shown) caused the firm to produce the profit-maximizing quantity Y₀ at a price of P0. Now the demand and marginal cost curves have moved to those shown, with the marginal revenue curve running through point L. Figure 17-4 -If the firm in the figure above maintains its set price of P0, rather than dropping price to P1, this reduces its profit by

In the fooling model's AD/SAS/LAS diagram, short-run equilibria to the right of the LAS curve require the price level to be

Of the four models of the business cycle, which model's implication concerning the change in real wages during recessions is consistent with actual observed changes in real wages during recessions?

"Non-market-clearing" approaches to macroeconomics include

About what percentage of the U.S. labor force works under union wage contracts?

Figure 17-3 -In the figure above, suppose we are working under the assumption of the Lucas model. The Fed has been following an announced policy of "zero money growth for an indefinite period." Suddenly and without warning it produces positive money growth and a "money surprise." This would result in a movement between points

A favorable supply shock shifts the production function curve ________ and the labor demand curve ________.

Figure 17-3 -In the figure above, SAS0 must shift to SAS1 when

If the labor supply curve is vertical, an adverse supply shock causes ________ in employment and ________ in the real wage.

In the fooling model, AD/SAS equilibria to the left of LAS are unstable because ________ nominal wages shift ________.

According to the Keynesian model, real wages should

Which of the following theories of business cycles implies that efficient markets, characterized by perfect information and by rational business firms and households, will still be characterized by business cycles?

Long-term contracts are desirable for both firms and workers for each of the following reasons EXCEPT one. Which of the following does not explain the desirability of long-term contracts?

In the "non-market-clearing model" the level of final goods sales and unemployment during a recession are

While much of New Classical macroeconomics is being refuted by the evidence, at least one part of it may be a permanent legacy to all macroeconomists: the assumption of

With the assumption that some voluntary exchanges that would make both parties better off are somehow being blocked, we have the basis for a ________ macroeconomic model, such as those constructed by ________ economists.