Question 1

In the view of the new classical economists,an increase in the money stock will affect real output and employment only if the increase in the money stock

Accepted Answer

A) was caused by an aggregate supply shock. 
B) is accompanied by an expansionary fiscal policy shift. 
C) was anticipated. 
D) was unanticipated. 
A) was caused by an aggregate supply shock. 
B) is accompanied by an expansionary fiscal policy shift. 
C) was anticipated. 
D) was unanticipated.

Question 2

Aggregate supply in the new classical aggregate supply

Accepted Answer

A) is vertical in the short-run. 
B) is horizontal in the short-run. 
C) is upward sloping in the short-run. 
D) None of the above 
A) is vertical in the short-run. 
B) is horizontal in the short-run. 
C) is upward sloping in the short-run. 
D) None of the above

Question 3

Which of the following statements is (are)correct? Keynesians criticize the new classical theory because

Accepted Answer

A) the new classical model cannot explain changes in expectations. 
B) of the contracting market characterization of the labor market. 
C) the rational expectations assumption ascribes an extreme and unrealistic availability of information to market participants. 
D) All of the above 
A) the new classical model cannot explain changes in expectations. 
B) of the contracting market characterization of the labor market. 
C) the rational expectations assumption ascribes an extreme and unrealistic availability of information to market participants. 
D) All of the above

Question 4

According to the new classical model,the output cost of reducing inflation

Accepted Answer

A) is the costs of the revenue lost by printing less money. 
B) is the lost income from the large recession that will occur as aggregate demand falls. 
C) may be small if the policy to reduce inflation is seen as credible by the public. 
D) will be zero if it is unanticipated. 
A) is the costs of the revenue lost by printing less money. 
B) is the lost income from the large recession that will occur as aggregate demand falls. 
C) may be small if the policy to reduce inflation is seen as credible by the public. 
D) will be zero if it is unanticipated.

Question 5

According to new classical economists,

Accepted Answer

A) deficits should have a large and negative impact on output. 
B) deficits should have no discernable impact on output. 
C) deficits will have no impact on private consumption. 
D) growth in the 1990s was driven by falls in the deficit. 
E) None of the above 
A) deficits should have a large and negative impact on output. 
B) deficits should have no discernable impact on output. 
C) deficits will have no impact on private consumption. 
D) growth in the 1990s was driven by falls in the deficit. 
E) None of the above

Question 6

An unanticipated decline in investment demand within the new classical model will cause

Accepted Answer

A) the price level to fall with no effect on output. 
B) output to fall with no effect on the price level. 
C) both the price level and output to fall. 
D) no change in either the level of price or output. 
A) the price level to fall with no effect on output. 
B) output to fall with no effect on the price level. 
C) both the price level and output to fall. 
D) no change in either the level of price or output.

Question 7

According to Thomas Sargent and other new classical economists,

Accepted Answer

A) a credible policy to provide low stable money growth can exist with a fiscal policy that generates large deficits. 
B) a credible policy to provide low stable money growth cannot coexist with a fiscal policy that generates large deficits. 
C) there is no need for a credible,noninflationary monetary policy to control the government budgetary deficit. 
D) None of the above 
A) a credible policy to provide low stable money growth can exist with a fiscal policy that generates large deficits. 
B) a credible policy to provide low stable money growth cannot coexist with a fiscal policy that generates large deficits. 
C) there is no need for a credible,noninflationary monetary policy to control the government budgetary deficit. 
D) None of the above

Question 8

The Federal Reserve has increasingly become more open in their sharing of information about monetary policy.According to new classical theory,what impact should this openness have on their ability to stabilize output? Explain.

Accepted Answer

If the public has better information,it

Question 9

Which of the following statements is (are)correct? The new classical economics

Accepted Answer

A) questions the soundness of the Keynesian model,arguing that many of its relationships are not firmly based on individual optimizing behavior. 
B) criticizes what it considers arbitrary assumptions of Keynesians concerning wage stickiness and consequent involuntary unemployment. 
C) favors the rational expectations assumptions over formulations that assume that individuals form price expectations on the basis of past history of prices because the rational expectations hypothesis is consistent with individual optimizing behavior. 
D) All of the above 
E) None of the above 
A) questions the soundness of the Keynesian model,arguing that many of its relationships are not firmly based on individual optimizing behavior. 
B) criticizes what it considers arbitrary assumptions of Keynesians concerning wage stickiness and consequent involuntary unemployment. 
C) favors the rational expectations assumptions over formulations that assume that individuals form price expectations on the basis of past history of prices because the rational expectations hypothesis is consistent with individual optimizing behavior. 
D) All of the above 
E) None of the above

Question 10

In the new classical model,an anticipated increase in the money stock would cause

Accepted Answer

A) the price level and level of real output to rise. 
B) the price level to rise with no effect on real output. 
C) real output to rise with no effect on the price level. 
D) no change in the price level or level of real output. 
A) the price level and level of real output to rise. 
B) the price level to rise with no effect on real output. 
C) real output to rise with no effect on the price level. 
D) no change in the price level or level of real output.

Question 11

Discuss the new classical critique of Keynesian stabilization policy.

Accepted Answer

The new classical economics is that stab

Question 12

When expectations are rational,

Accepted Answer

A) a foreseen expansionary policy action does not alter output. 
B) there cannot be any inflation. 
C) a foreseen expansionary policy action changes output. 
D) there is zero unemployment. 
A) a foreseen expansionary policy action does not alter output. 
B) there cannot be any inflation. 
C) a foreseen expansionary policy action changes output. 
D) there is zero unemployment.

Question 13

In a move to increase its openness,the Fed has consistently increased the amount of information available to the public.According to the new classical model,the Phillips curve the Fed faces should become more:

Accepted Answer

A) horizontal. 
B) very steep. 
C) vertical. 
D) unstable. 
A) horizontal. 
B) very steep. 
C) vertical. 
D) unstable.

Question 14

According the Lucas' misperception model,when prices unexpectedly rise,suppliers infer that their relative prices have _____,which induces them to _____ output.

Accepted Answer

A) decreased; increase. 
B) increased; decrese. 
C) decreased; decrease. 
D) increased; increase. 
A) decreased; increase. 
B) increased; decrese. 
C) decreased; decrease. 
D) increased; increase.

Question 15

Keynesians would argue that:

Accepted Answer

A) information is inherently limited. 
B) individuals have limited ability to process information when making decisions. 
C) people often make mistakes even with appropriate information. 
D) all of the above. 
E) none of the above. 
A) information is inherently limited. 
B) individuals have limited ability to process information when making decisions. 
C) people often make mistakes even with appropriate information. 
D) all of the above. 
E) none of the above.

Question 16

"Policy ineffectiveness" refers to the hypothesis that monetary and fiscal policy actions that change aggregate demand will

Accepted Answer

A) neither affect output nor employment even in the short run. 
B) affect output and employment in both the short run and long run. 
C) affect output but not employment in the short run. 
D) not affect output but will affect employment in the long run. 
A) neither affect output nor employment even in the short run. 
B) affect output and employment in both the short run and long run. 
C) affect output but not employment in the short run. 
D) not affect output but will affect employment in the long run.

Question 17

"All available information" in the definition of rational expectations means that

Accepted Answer

A) agents use all possible information that could be out there. 
B) agents use all possible public information that could be out there. 
C) agents use all information that is relevant. 
D) agents use all information that is available in which the marginal benefits of the information are greater than the marginal costs of gathering the information. 
A) agents use all possible information that could be out there. 
B) agents use all possible public information that could be out there. 
C) agents use all information that is relevant. 
D) agents use all information that is available in which the marginal benefits of the information are greater than the marginal costs of gathering the information.

Question 18

According to new classical model,real wages

Accepted Answer

A) rise when income rises. 
B) falls when income rises. 
C) do not move within income. 
D) fall if the expected price level is too high and rise if the expected price level is too low. 
E) none of the above. 
A) rise when income rises. 
B) falls when income rises. 
C) do not move within income. 
D) fall if the expected price level is too high and rise if the expected price level is too low. 
E) none of the above.

Question 19

According to Lucas' misperception theory,countries with higher rates of inflation should have a _____new classical AS curve.

Accepted Answer

A) flatter. 
B) steeper. 
C) downward sloping 
D) vertical. 
E) none of the above. 
A) flatter. 
B) steeper. 
C) downward sloping 
D) vertical. 
E) none of the above.

Question 20

The concept of "rational expectations" is consistent with the notion of

Accepted Answer

A) utility maximization. 
B) profit maximization. 
C) strong mechanisms towards equilibrium in markets 
D) auction markets. 
E) all of the above. 
A) utility maximization. 
B) profit maximization. 
C) strong mechanisms towards equilibrium in markets 
D) auction markets. 
E) all of the above.

In the view of the new classical economists,an increase in the money stock will affect real output and employment only if the increase in the money stock

Aggregate supply in the new classical aggregate supply

Which of the following statements is (are)correct? Keynesians criticize the new classical theory because

According to the new classical model,the output cost of reducing inflation

According to new classical economists,

An unanticipated decline in investment demand within the new classical model will cause

According to Thomas Sargent and other new classical economists,

The Federal Reserve has increasingly become more open in their sharing of information about monetary policy.According to new classical theory,what impact should this openness have on their ability to stabilize output? Explain.

Which of the following statements is (are)correct? The new classical economics

In the new classical model,an anticipated increase in the money stock would cause

Discuss the new classical critique of Keynesian stabilization policy.

When expectations are rational,

In a move to increase its openness,the Fed has consistently increased the amount of information available to the public.According to the new classical model,the Phillips curve the Fed faces should become more:

According the Lucas' misperception model,when prices unexpectedly rise,suppliers infer that their relative prices have _,which induces them to _ output.

Keynesians would argue that:

"Policy ineffectiveness" refers to the hypothesis that monetary and fiscal policy actions that change aggregate demand will

"All available information" in the definition of rational expectations means that

According to new classical model,real wages

According to Lucas' misperception theory,countries with higher rates of inflation should have a _____new classical AS curve.

The concept of "rational expectations" is consistent with the notion of

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

Exam 11: New Classical Economics

In the view of the new classical economists,an increase in the money stock will affect real output and employment only if the increase in the money stock

Aggregate supply in the new classical aggregate supply

Which of the following statements is (are)correct? Keynesians criticize the new classical theory because

According to the new classical model,the output cost of reducing inflation

According to new classical economists,

An unanticipated decline in investment demand within the new classical model will cause

According to Thomas Sargent and other new classical economists,

The Federal Reserve has increasingly become more open in their sharing of information about monetary policy.According to new classical theory,what impact should this openness have on their ability to stabilize output? Explain.

Which of the following statements is (are)correct? The new classical economics

In the new classical model,an anticipated increase in the money stock would cause

Discuss the new classical critique of Keynesian stabilization policy.

When expectations are rational,

In a move to increase its openness,the Fed has consistently increased the amount of information available to the public.According to the new classical model,the Phillips curve the Fed faces should become more:

According the Lucas' misperception model,when prices unexpectedly rise,suppliers infer that their relative prices have _____,which induces them to _____ output.

Keynesians would argue that:

"Policy ineffectiveness" refers to the hypothesis that monetary and fiscal policy actions that change aggregate demand will

"All available information" in the definition of rational expectations means that

According to new classical model,real wages

According to Lucas' misperception theory,countries with higher rates of inflation should have a _____new classical AS curve.

The concept of "rational expectations" is consistent with the notion of

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

According the Lucas' misperception model,when prices unexpectedly rise,suppliers infer that their relative prices have _,which induces them to _ output.