Exam 17: New Classical Macro Confronts New Keynesian Macro

In New Keynesian macroeconomics, when marginal costs are too sticky to change in proportion to nominal aggregate demand, prices ________ and so menu costs ________ needed to explain business cycles.

Gordon presents several modern business cycle theories. He clearly states after all have been explained that he believes the most plausible of them to be the ________ model.

The "old" Keynesian approach dominated macroeconomic theory until the

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 loss of consumer surplus due to this decision is

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

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

A New Keynesian firm chooses

In the fooling model, what is held constant along a SAS curve?

It is reasonable to assume that in a developed economy technological shocks occur ________ across industries, which ________ the RBC theory of business cycles.

By the theory of intertemporal substitution of labor, a higher current real interest rate ________ the amount of labor ________ at each real wage rate in the current period.