Question 1

Which school calls for more information from policymakers so that people can incorporate government plans into their outlook for the future?

Accepted Answer

A)   The new classical school
B)   The new Keynesian school
C)   The traditional Keynesian school
D)   The monetarist school
E)   The classical school

Question 2

The new Keynesian economists believed that:

Accepted Answer

A)   wages and prices are flexible in the short run.
B)   wages and real GDP are not flexible in the long run.
C)   wages and real GDP are flexible in the short run.
D)   wages and prices are not flexible in the short run.
E)   wages and prices are not flexible in the long run.

Question 3

New classical economists believe that wages are inflexible.

Accepted Answer

A) True 
 B)False

Question 4

"The market is not a self-regulating mechanism because prices are not flexible and nothing ensures that planned leakages will be offset by planned injections. To bring the economy out of depression and end high unemployment, some way of stimulating aggregate demand is required. This can be best achieved by a combination of government deficit spending and regulation of tax rates." Which school of thought does this statement best represent?

Accepted Answer

A)   Rationalist economics
B)   Monetarist economics
C)   Classical economics
D)   Keynesian economics
E)   Marxist economics

Question 5

Which of the following is true of the simple Keynesian model?

Accepted Answer

A)   Price level increases with increase in aggregate demand
B)   The aggregate supply curve is assumed to be perfectly inelastic
C)   The aggregate demand curve is assumed to perfectly elastic
D)   Price level is solely determined by the aggregate demand curve
E)   Changes in aggregate demand determine equilibrium real GDP

Question 6

Traditional Keynesian economists believed that:

Accepted Answer

A)   the aggregate supply curve is a vertical line at a fixed level of prices.
B)   an increase in aggregate demand would cause a change in the price level.
C)   the government should take an active role in the economy to restore equilibrium.
D)   changes in aggregate demand does not determine equilibrium real GDP.
E)   the private sector is not an important source for shifts in aggregate demand.

Question 7

New classical economics assumes that government has direct control over the equilibrium level of GDP and indirect control over the money supply.

Accepted Answer

A) True 
 B)False

Question 8

Monetarists would argue that in the short run, increases in the money supply act to raise both investment and consumption, while also increasing the price level.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following events challenged Keynesian views, and led to the popularity of Milton Friedman's ideas?

Accepted Answer

A)   The hippie community started advocating socialist values.
B)   Hard-core republicans came into office.
C)   The U.S. economy faced high levels of inflation and unemployment simultaneously.
D)   The oil crisis exploded.
E)   Countries that followed Friedman's ideas performed better.

Question 10

According to new Keynesian economics:

Accepted Answer

A)   the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.
B)   the aggregate supply curve is negatively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output.
C)   the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes positively sloped, as more and more industries reach their full capacity level of output.
D)   the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output.
E)   the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.

Question 11

Traditional classical economists believe that:

Accepted Answer

A)   wage rates are perfectly flexible.
B)   people do not have perfect information about the economy.
C)   prices are fixed for long periods of time.
D)   the price of resources, technology, and expectations cannot influence the equilibrium level of real GDP.
E)   changes in aggregate demand change only the real GDP.

Question 12

Which of the following schools of thought believes that wages and prices are rigid in the short run?

Accepted Answer

A)   Keynesians and new Keynesians
B)   Only monetarists
C)   Only new classical economists
D)   Monetarists and new classical economists
E)   Monetarists and Keynesians

Question 13

Which of the following is the basic tenet of new classical economics?

Accepted Answer

A)   A change in the fiscal policy affects the equilibrium level of real GDP but has no impact on the equilibrium price level.
B)   A government-induced shift in aggregate demand affects the real GDP only if they are expected by the economic agents.
C)   A change in aggregate demand affects the aggregate price level only if the aggregate supply curve is perfectly elastic.
D)   A change in monetary policy affects the equilibrium level of real GDP only if those changes are unexpected.
E)   An expected change in a monetary or fiscal policy leads to a proportional shift of the long run supply curve.

Question 14

_____ is the theory that was popular before _____ changed the face of economics post Great Depression in the 1930s.

Accepted Answer

A)   Classical economics; Milton Friedman
B)   Keynesian economics; Monetarists
C)   Classical economics; Keynes
D)   Monetarist economics; Adam Smith
E)   Keynesian economics; Milton Friedman

Question 15

According to the monetarists, deliberate government intervention:

Accepted Answer

A)   will stabilize the economy if the money supply is increased during recessions and decreased during expansions.
B)   will effectively reduce the unemployment rate below its natural rate.
C)   will stabilize the economy if the money supply is reduced during recessions and increased during expansions.
D)   will destabilize the economy only if the government uses fiscal policy to change equilibrium income.
E)   will destabilize the economy and cause a business cycle of its own, regardless of whether fiscal or monetary policy is used.

Question 16

Monetarists and new classical economists favor an active role of government in promoting low inflation and economic growth.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following schools of thought stressed on a fixed-price model for macroeconomic equilibrium?

Accepted Answer

A)   Traditional Keynesians
B)   New Keynesians
C)   Monetarists
D)   Classical economists
E)   New classical economists

Question 18

New Keynesians argue that a decrease in government spending reduces inflation.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true from the New Keynesian perspective?

Accepted Answer

A)   Fluctuations in private spending does not affect aggregate demand in an economy.
B)   Investment spending remains relatively constant irrespective of the supply shocks.
C)   Fluctuations in aggregate demand are not the primary source of problems for policymakers.
D)   The government should limit its role to administrative functions.
E)   Monetary and fiscal policies often fail to restore macroeconomic equilibrium.

Question 20

The Federal Reserve System is an independent body so, it does not require to report to Congress on its goals and money targets.

Accepted Answer

A) True 
 B)False

Exam 15: Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Federal Reserve System is an independent body so, it does not require to report to Congress on its goals and money targets.

Correct Answer
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Which of the following is true from the New Keynesian perspective?

Correct Answer
verified

Which of the following schools of thought stressed on a fixed-price model for macroeconomic equilibrium?

Correct Answer
verified

_ is the theory that was popular before _ changed the face of economics post Great Depression in the 1930s.

Correct Answer
verified

Which school calls for more information from policymakers so that people can incorporate government plans into their outlook for the future?

Correct Answer
verified

Which of the following schools of thought believes that wages and prices are rigid in the short run?

Correct Answer
verified

Correct Answer
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According to the monetarists, deliberate government intervention:

Correct Answer
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Which of the following events challenged Keynesian views, and led to the popularity of Milton Friedman's ideas?

Correct Answer
verified

Monetarists would argue that in the short run, increases in the money supply act to raise both investment and consumption, while also increasing the price level.

Correct Answer
verified

Traditional classical economists believe that:

Correct Answer
verified

Which of the following is the basic tenet of new classical economics?

Correct Answer
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The new Keynesian economists believed that:

Correct Answer
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According to new Keynesian economics:

Correct Answer
verified

New classical economics assumes that government has direct control over the equilibrium level of GDP and indirect control over the money supply.

Correct Answer
verified

Which of the following is true of the simple Keynesian model?

Correct Answer
verified

Monetarists and new classical economists favor an active role of government in promoting low inflation and economic growth.

Correct Answer
verified

New classical economists believe that wages are inflexible.

Correct Answer
verified

Traditional Keynesian economists believed that:

Correct Answer
verified

New Keynesians argue that a decrease in government spending reduces inflation.

Correct Answer
verified

Exam 15: Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Federal Reserve System is an independent body so, it does not require to report to Congress on its goals and money targets.

Correct AnswerverifiedShow Answer

Which of the following is true from the New Keynesian perspective?

Correct AnswerverifiedShow Answer

Which of the following schools of thought stressed on a fixed-price model for macroeconomic equilibrium?

Correct AnswerverifiedShow Answer

_____ is the theory that was popular before _____ changed the face of economics post Great Depression in the 1930s.

Correct AnswerverifiedShow Answer

Which school calls for more information from policymakers so that people can incorporate government plans into their outlook for the future?

Correct AnswerverifiedShow Answer

Which of the following schools of thought believes that wages and prices are rigid in the short run?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the monetarists, deliberate government intervention:

Correct AnswerverifiedShow Answer

Which of the following events challenged Keynesian views, and led to the popularity of Milton Friedman's ideas?

Correct AnswerverifiedShow Answer

Monetarists would argue that in the short run, increases in the money supply act to raise both investment and consumption, while also increasing the price level.

Correct AnswerverifiedShow Answer

Traditional classical economists believe that:

Correct AnswerverifiedShow Answer

Which of the following is the basic tenet of new classical economics?

Correct AnswerverifiedShow Answer

The new Keynesian economists believed that:

Correct AnswerverifiedShow Answer

According to new Keynesian economics:

Correct AnswerverifiedShow Answer

New classical economics assumes that government has direct control over the equilibrium level of GDP and indirect control over the money supply.

Correct AnswerverifiedShow Answer

Which of the following is true of the simple Keynesian model?

Correct AnswerverifiedShow Answer

Monetarists and new classical economists favor an active role of government in promoting low inflation and economic growth.

Correct AnswerverifiedShow Answer

New classical economists believe that wages are inflexible.

Correct AnswerverifiedShow Answer

Traditional Keynesian economists believed that:

Correct AnswerverifiedShow Answer

New Keynesians argue that a decrease in government spending reduces inflation.

Correct AnswerverifiedShow Answer

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_ is the theory that was popular before _ changed the face of economics post Great Depression in the 1930s.

Correct Answer
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