Exam 24: Monetary Policy Theory

The time it takes for policy makers to be sure of what the data are signaling about the future course of the economy is called ________.

The data lag is ________.

According to the new classical model, ________.

The recognition lag is ________.

-In the new classical model in the figure above, the initial impact of an unanticipated monetary contraction ________.

-In the new classical model in the figure above, the long-run effect of an unanticipated monetary expansion ________.

-In the new classical model in the figure above, an anticipated contractionary monetary policy ________.

According to the new classical school of thought, a continually increasing money supply causes ________.

Financial frictions affect the ________ curve by ________ the real interest rate for investment causing investment and aggregate output to ________.

In the new classical model, an anticipated policy of a continually increasing money supply causes ________.

In the new classical model, an expansionary monetary policy causes ________.

The nonactivists who opposed the recent fiscal stimulus package argue that ________.

Steve the economist tells his students that one anticipated policy is just like any other-none has any effect on aggregate output. You can probably infer that he is a ________.

The MP curve is drawn on a graph with the ________ on the horizontal axis and the ________ on the vertical axis.

If workers believe that government policymakers will increase aggregate demand to avoid a politically unpopular increase in unemployment when workers demand higher wages, then workers will not fear higher unemployment and their wage demands will result in ________.

To say that inflation is a monetary phenomenon seems to beg the question: ________.

The time it takes for the policy actually to have an impact on the economy is called ________.

Demonstrate graphically and explain the short-run and long-run effects of an unanticipated monetary expansion in the new classical model.

If workers do not believe that policymakers are serious about fighting inflation, they are most likely to push for higher wages, which will ________ aggregate ________ and lead to unemployment or inflation or both, everything else held constant.

Which of the following is least likely to lead to inflationary monetary policy?