Exam 17: Alternative Views in Macroeconomics

Refer to the information provided in Figure 17.2 below to answer the questions that follow. Figure 17.2 -Refer to Figure 17.2. According to the new classical economists, under rational expectations an expected increase in government spending would

If income is $30 billion, the price level is 3, and the stock of money is $18 billion, what is the velocity of money?

New Keynesian economics assumes rational expectations and

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

Many economists challenged the idea of passive government involvement in the economy following the inflation of the 1970s and early 1980s, and the recessions of 1974-1975 and 1980-1982.

According to supply-side economists, as tax rates are reduced, labor supply should increase. This implies that

Refer to the information provided in Figure 17.1 below to answer the questions that follow. Figure 17.1 -Refer to Figure 17.1. The tax rate that will ________ is associated with Point B.

Refer to the information provided in Figure 17.2 below to answer the questions that follow. Figure 17.2 -Refer to Figure 17.2. According to the new classical economists, under rational expectations an expected decrease in government spending would

Refer to the information provided in Figure 17.1 below to answer the questions that follow. Figure 17.1 -Refer to Figure 17.1. A cut in tax rates will decrease tax revenue if the economy moves from Point

If nominal GDP is $600 billion and the money supply is $200 billion, the velocity of money is

If tax rates increased, giving people a decreased incentive to work and businesses a decreased incentive to invest

If the demand for money depends on the interest rate, then a ________ in the money supply will increase nominal GDP by ________.

Despite the cut in taxes during the 1980s, federal receipts rose all but one year during that decade.

Refer to the information provided in Figure 17.1 below to answer the questions that follow. Figure 17.1 -Refer to Figure 17.1. At Point ________, any change in tax rates will decrease tax revenue.

Monetarists and Keynesians

If firms have ________ and if they set prices and wages on this basis, then prices and wages will, on average, be set at market-clearing levels.

The rational-expectations hypothesis suggests that errors in forecasting future inflation rates are due to

Suppose that the stock of money is $250 billion and nominal GDP is $2,000 billion. The velocity of money is

The Lucas supply function, in combination with the assumption that expectations are rational, implies that if a monetary policy change is announced to the public,

According to the rational expectations theory, if all firms have rational expectations and wages and prices are flexible, disequilibrium in a market