Question 1

In the 1970s, the U.S.economy experienced both inflation and unemployment.This led economists to recognize that
I.stabilization was a much more difficult task than many economists anticipated.
II.the Keynesian doctrine correctly asserts that reducing inflation and unemployment can be addressed by fiscal policies.
III.shifts in aggregate could frustrate policymaking efforts whereas shifts in the short-run
Aggregate were more easily addressed.

Accepted Answer

A)  I only
B)  II only
C)  I and III only
D)  III only

Question 2

If prices and wages are sticky, a decrease in aggregate demand will cause

Accepted Answer

A)  an increase in the price level and employment.
B)  a decrease in the price level and employment.
C)  an increase in the price level and a decrease in employment.
D)  a decrease in the price level and an increase in employment.

Question 3

Classical economists believed
I.there could be temporary periods of unemployment.
II.emphasis should be placed on the long run, and in the long run all would be set right
Because of the smooth functioning of the price system.
III.the Great Depression would be a short-run aberration.

Accepted Answer

A)  I only
B)  I and II only
C)  II only
D)  I, II, and III

Question 4

Figure 17-1
 m; Ym  B) Pn; Yn  C) Pk; Yk  D) Pj; Yj " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-1.Which price level and output level best illustrates where the U.S.economy was before the Great Depression began?

Accepted Answer

A)  Pm; Ym 
B)  Pn; Yn 
C)  Pk; Yk 
D)  Pj; Yj

Question 5

The classical school focused on the long-run forces that determined an economy's potential level of output.

Accepted Answer

A) True 
 B)False

Question 6

The theory that argues most strongly for countercyclical policy activism is

Accepted Answer

A)  Keynesian economics.
B)  classical economics.
C)  monetarism.
D)  rational expectations theory.

Question 7

The theory that dominated macroeconomic thinking in the 1960s was

Accepted Answer

A)  monetarism.
B)  classical economics.
C)  Keynesian economics.
D)  rational expectations theory.

Question 8

In 2009, the Obama administration advocated and Congress passed a massive spending and tax relief package of about $800 billion to stimulate aggregate demand.This policy would be favored by

Accepted Answer

A)  Keynesian economists but not new Keynesian economists.
B)  monetarists but not new classical economists.
C)  Keynesian and new Keynesian economists.
D)  monetarists and new Keynesian economists.

Question 9

The recession in real GDP in 1970 during the Nixon administration

Accepted Answer

A)  did not accord with the Keynesian theory because the price level had risen sharply; in the Keynesian model, prices fell when real GDP and employment were falling.
B)  reinforced the Keynesian theory that prices fell when real GDP and employment were falling.
C)  did not accord with the Keynesian theory because expansionary fiscal policies resulted in deflation; in the Keynesian model, prices rose when expansionary fiscal policies were administered to eliminate a recessionary gap.
D)  reinforced the Keynesian theory that fiscal policies were more effective than monetary policies in reducing output gaps.

Question 10

Figure 17-1
 2 to SRAS1, resulting in a short run equilibrium at point k. B) The short-run aggregate supply curve shifted right, from SRAS1 to SRAS2, resulting in a short run equilibrium at point n. C) The short-run aggregate supply curve shifted right, from SRAS1 to SRAS2, resulting in a short run equilibrium at point j. D) The short-run aggregate supply curve shifted left, from SRAS2 to SRAS1, resulting in a short run equilibrium at point m." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-1.During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap.Nominal wages plunged roughly 20% between 1929 and 1933.How did the economy respond to the falling wages?

Accepted Answer

A)  The short-run aggregate supply curve shifted left, from SRAS2 to SRAS1, resulting in a short run equilibrium at point k.
B)  The short-run aggregate supply curve shifted right, from SRAS1 to SRAS2, resulting in a short run equilibrium at point n.
C)  The short-run aggregate supply curve shifted right, from SRAS1 to SRAS2, resulting in a short run equilibrium at point j.
D)  The short-run aggregate supply curve shifted left, from SRAS2 to SRAS1, resulting in a short run equilibrium at point m.

Question 11

Figure 17-3
 
-Refer to Figure 17-3.Suppose the economy is at point c.A Keynesian economist would advocate

Accepted Answer

A)  allowing the economy's self-correcting mechanism to move the economy to point a.
B)  pursuing expansionary fiscal policies to move the economy to point a.
C)  pursuing expansionary fiscal policies to move the economy to point b.
D)  pursuing expansionary fiscal policies to move the economy to point d.

Question 12

The close relationship between M2 and nominal GDP in the 1960s and 1970s vanished from the 1980s through 2007.Which of the following contributed to this breakdown?
I.deregulation of the banking industry
II.introduction of new financial products (not included in M2) which allowed people to transfer funds into their checking accounts as and when needed
III.monetary policy lags

Accepted Answer

A)  I and II only
B)  II only
C)  II and III only
D)  I, II, and III

Question 13

Who was the economist who laid the foundations for classical economics?

Accepted Answer

A)  John Locke
B)  David Ricardo
C)  Adam Smith
D)  John Maynard Keynes

Question 14

Monetarists argue that impact lags associated with changes in the money supply are long and variable.

Accepted Answer

A) True 
 B)False

Question 15

New Keynesian economics is built on
I.the Keynesian approach
II.the monetarist approach
III.the new classical approach

Accepted Answer

A)  I only
B)  I and II only
C)  II and III only
D)  I, II, and III

Question 16

New classical economists argue that unless people are taken by surprise, a decrease in aggregate demand will cause

Accepted Answer

A)  an increase in the price level and unemployment.
B)  a decrease in the price level and employment.
C)  an increase in the price level and no change in employment.
D)  a decrease in the price level and no change in employment.

Question 17

According to Milton Friedman, any divergence in unemployment from its natural rate is Temporary because

Accepted Answer

A)  anticipated price changes affect nominal wages in the short run but workers will rectify this over time.
B)  unanticipated price changes affect real wages in the short run but workers will rectify this over time.
C)  anticipated price changes affect real wages in the short run but workers will rectify this over time.
D)  unanticipated price changes create inflation which is addressed by policymakers over time.

Question 18

The rational expectations hypothesis assumes that individuals form expectations about the future based on the information available to them and that they act on those expectations.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following groups of economists perceive the economy as essentially stable and self-correcting?

Accepted Answer

A)  Keynesians, monetarists, and classical economists
B)  classical economists, monetarists, and new classical economists.
C)  monetarists, classical economists, and socialists
D)  classical economists, Keynesians, monetarists, and new classical economists.

Question 20

Figure 17-1
 2 to AD1.  B) AD1 to AD2 . C) SRAS2 to SRAS1.  D) YP to Yk." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-1.The Great Depression began with a shift

Accepted Answer

A)  AD2 to AD1. 
B)  AD1 to AD2 .
C)  SRAS2 to SRAS1. 
D)  YP to Yk.

Exam 32: Macro a Brief History of Macroeconomic Thought and Policy

New classical economists argue that unless people are taken by surprise, a decrease in aggregate demand will cause

Correct Answer
verified

Correct Answer
verified

The recession in real GDP in 1970 during the Nixon administration

Correct Answer
verified

Monetarists argue that impact lags associated with changes in the money supply are long and variable.

Correct Answer
verified

The rational expectations hypothesis assumes that individuals form expectations about the future based on the information available to them and that they act on those expectations.

Correct Answer
verified

Classical economists believed I.there could be temporary periods of unemployment. II.emphasis should be placed on the long run, and in the long run all would be set right Because of the smooth functioning of the price system. III.the Great Depression would be a short-run aberration.

Correct Answer
verified

Which of the following groups of economists perceive the economy as essentially stable and self-correcting?

Correct Answer
verified

The classical school focused on the long-run forces that determined an economy's potential level of output.

Correct Answer
verified

In 2009, the Obama administration advocated and Congress passed a massive spending and tax relief package of about $800 billion to stimulate aggregate demand.This policy would be favored by

Correct Answer
verified

The theory that argues most strongly for countercyclical policy activism is

Correct Answer
verified

New Keynesian economics is built on I.the Keynesian approach II.the monetarist approach III.the new classical approach

Correct Answer
verified

If prices and wages are sticky, a decrease in aggregate demand will cause

Correct Answer
verified

Figure 17-3 -Refer to Figure 17-3.Suppose the economy is at point c.A Keynesian economist would advocate

Correct Answer
verified

The theory that dominated macroeconomic thinking in the 1960s was

Correct Answer
verified

Figure 17-1 -Refer to Figure 17-1.Which price level and output level best illustrates where the U.S.economy was before the Great Depression began?

Correct Answer
verified

Who was the economist who laid the foundations for classical economics?

Correct Answer
verified

According to Milton Friedman, any divergence in unemployment from its natural rate is Temporary because

Correct Answer
verified

Correct Answer
verified

Figure 17-1 -Refer to Figure 17-1.The Great Depression began with a shift

Correct Answer
verified

Figure 17-1 -Refer to Figure 17-1.During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap.Nominal wages plunged roughly 20% between 1929 and 1933.How did the economy respond to the falling wages?

Correct Answer
verified

Exam 32: Macro a Brief History of Macroeconomic Thought and Policy

New classical economists argue that unless people are taken by surprise, a decrease in aggregate demand will cause

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The recession in real GDP in 1970 during the Nixon administration

Correct AnswerverifiedShow Answer

Monetarists argue that impact lags associated with changes in the money supply are long and variable.

Correct AnswerverifiedShow Answer

The rational expectations hypothesis assumes that individuals form expectations about the future based on the information available to them and that they act on those expectations.

Correct AnswerverifiedShow Answer

Classical economists believed I.there could be temporary periods of unemployment. II.emphasis should be placed on the long run, and in the long run all would be set right Because of the smooth functioning of the price system. III.the Great Depression would be a short-run aberration.

Correct AnswerverifiedShow Answer

Which of the following groups of economists perceive the economy as essentially stable and self-correcting?

Correct AnswerverifiedShow Answer

The classical school focused on the long-run forces that determined an economy's potential level of output.

Correct AnswerverifiedShow Answer

In 2009, the Obama administration advocated and Congress passed a massive spending and tax relief package of about $800 billion to stimulate aggregate demand.This policy would be favored by

Correct AnswerverifiedShow Answer

The theory that argues most strongly for countercyclical policy activism is

Correct AnswerverifiedShow Answer

New Keynesian economics is built on I.the Keynesian approach II.the monetarist approach III.the new classical approach

Correct AnswerverifiedShow Answer

If prices and wages are sticky, a decrease in aggregate demand will cause

Correct AnswerverifiedShow Answer

Figure 17-3 -Refer to Figure 17-3.Suppose the economy is at point c.A Keynesian economist would advocate

Correct AnswerverifiedShow Answer

The theory that dominated macroeconomic thinking in the 1960s was

Correct AnswerverifiedShow Answer

Figure 17-1 -Refer to Figure 17-1.Which price level and output level best illustrates where the U.S.economy was before the Great Depression began?

Correct AnswerverifiedShow Answer

Who was the economist who laid the foundations for classical economics?

Correct AnswerverifiedShow Answer

According to Milton Friedman, any divergence in unemployment from its natural rate is Temporary because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 17-1 -Refer to Figure 17-1.The Great Depression began with a shift

Correct AnswerverifiedShow Answer

Figure 17-1 -Refer to Figure 17-1.During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap.Nominal wages plunged roughly 20% between 1929 and 1933.How did the economy respond to the falling wages?

Correct AnswerverifiedShow Answer

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