Exam 17: New Classical Macro Confronts New Keynesian Macro

Which of the following is an important assumption about the labor market that is shared by both the original Keynesian model and the Friedman "Fooling Model?"

In the "fooling" model, it is assumed that ________ can have inaccurate perceptions of the price level in the economy.

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, the welfare loss to society due to this decision is

"Input-output" macroeconomics stresses that a change in nominal aggregate demand ________ produces an equal-proportional change in every firm's marginal cost, so that firms should consider indexing their price to nominal aggregate demand a very ________ pricing strategy.

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

A macroeconomic model obeys the "natural rate hypothesis" by incorporating

In the fooling model's labor market diagram, from an initial intersection point of the labor supply and demand curves, tracing "northwest" up the labor demand curve shows

Evidence from the United States and Japan on "multifactor productivity" shows it to be highly ________, which is ________ with the RBC theory of technological shocks and their consequences for the business cycle.

Initially a firm pays a wage and gets an output per worker which are given index numbers of 1.00. Five possible 5 percent increases in the wage and the accompanying output per worker are as follows: 1.05 and 1.09, 1.10 and 1.17, 1.15 and 1.24, 1.21 and 1.28, 1.27 and 1.31. What is the efficiency wage?

If it is less costly for business firms to adjust the labor demanded as the price level changes than it is for households to adjust Ns, then in the short-run

If forecasting errors are rational then

One fundamental difference between New Classical and the New Keynesian macroeconomics is that the New Keynesians model firms as ________ competitive price ________.

An adverse supply shock with a vertical supply of labor curve will

Which of the following statements best describes the rational expectations hypothesis?

Which of the following are NOT included among Gordon's criticisms of Friedman's fooling model?

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 economists. It is the insistence on a certain aspect of macroeconomic policy:

A central concept of New Keynesian macroeconomics is that in setting prices and wages, self-interested firms and workers are acting

In the RBC model, an adverse supply shock causes the decrease in natural real GDP to be maximized when the labor supply curve is

According to the real business cycle theory, the supply side shock from dramatic increases in oil prices in the 1970's led to higher unemployment because

Suppose nominal aggregate demand falls by 3 percent while nominal wages are fixed. If firms were to lower their prices by 3 percent, this would ________ the drop in real output, with such pricing ________ an assumption that firms are profit-maximizers.