Question 1

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.

Accepted Answer

A) Lucas information-barrier 
B) Friedman fooling 
C) New Keynesian 
D) real business cycle

Question 2

The natural real GDP will ________ following a fall in energy prices because

Accepted Answer

A) rise;labor productivity increases. 
B) fall;labor productivity declines. 
C) rise;employment is more attractive relative to leisure. 
D) A and C are both correct

Question 3

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

Accepted Answer

A) can be maintained only by reducing the money supply. 
B) can be maintained only by holding constant the money supply, 
C) can be maintained only by increasing the money supply. 
D) cannot be maintained by any monetary policy.

Question 4

Figure 17-2 represents a monopolist faced with a decrease in the demand for her product.She initially charges P₀ and produces Q0.
Figure 17-2
 
-If the firm is able to reduce MC from MC₀ to MC₁ the firm will produce at point ________ on the new demand curve and lower price to ________.

Accepted Answer

A) E₁;P₁ 
B) E₀;P₀ 
C) E₂;P₂ 
D) E₀ or E₁;P₀

Question 5

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

Accepted Answer

A) flat 
B) steep 
C) flat or steep 
D) None of the above.All countries have SAS curves with almost the same slope.

Question 6

A principle difference between the original Keynesian model and the new Keynesian model is that in the new version

Accepted Answer

A) the traditional assumptions of profit maximization is no longer included. 
B) monetary policy is impotent. 
C) wages and prices adjust slowly to market conditions. 
D) All of the above are correct.

Question 7

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

Accepted Answer

A) 50 percent 
B) 35 percent 
C) 25 percent 
D) 10 percent

Question 8

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

Accepted Answer

A) continuous clearing of all markets. 
B) rational expectations. 
C) the unimportance of nominal variables. 
D) supply shocks as the main cause of business cycles.

Question 9

Figure 17-1
 
-In the Friedman "Fooling Model" if P(e)is less than P then the labor supply curve in Figure 17-1 above

Accepted Answer

A) shifts leftward when workers realize their error. 
B) always shifts rightward. 
C) initially remains the same. 
D) Both A and C are correct.

Question 10

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

Accepted Answer

A) Ns has a positive slope and the demand for labor (Nd)negative slope. 
B) Nd has a negative slope and the supply of labor (Ns)a positive slope. 
C) AD has a negative slope. 
D) SAS has a positive slope.

Exam 17: New Classical Macro and New Keynesian Macro

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 natural real GDP will ________ following a fall in energy prices because

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

Figure 17-2 represents a monopolist faced with a decrease in the demand for her product.She initially charges P₀ and produces Q0. Figure 17-2 -If the firm is able to reduce MC from MC₀ to MC₁ the firm will produce at point on the new demand curve and lower price to .

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

A principle difference between the original Keynesian model and the new Keynesian model is that in the new version

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

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

Figure 17-1 -In the Friedman "Fooling Model" if P(e) is less than P then the labor supply curve in Figure 17-1 above

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

Exam 17: New Classical Macro and New Keynesian Macro

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 natural real GDP will ________ following a fall in energy prices because

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

Figure 17-2 represents a monopolist faced with a decrease in the demand for her product.She initially charges P₀ and produces Q0. Figure 17-2 -If the firm is able to reduce MC from MC₀ to MC₁ the firm will produce at point ________ on the new demand curve and lower price to ________.

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

A principle difference between the original Keynesian model and the new Keynesian model is that in the new version

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

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

Figure 17-1 -In the Friedman "Fooling Model" if P(e) is less than P then the labor supply curve in Figure 17-1 above

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

Figure 17-2 represents a monopolist faced with a decrease in the demand for her product.She initially charges P₀ and produces Q0. Figure 17-2 -If the firm is able to reduce MC from MC₀ to MC₁ the firm will produce at point on the new demand curve and lower price to .