Question 1

In the classical model,people hold money because

Accepted Answer

A) it is a way to save. 
B) it makes trade easier. 
C) it is the way to measure the value of goods and services. 
D) it is an asset. 
A) it is a way to save. 
B) it makes trade easier. 
C) it is the way to measure the value of goods and services. 
D) it is an asset.

Question 2

Explain the intuition behind why the aggregate demand curve is downward sloping.Why does an increase in the money supply shift the aggregate demand curve to the right?

Accepted Answer

According to the quantity theory,holding

Question 3

According to classical economists,

Accepted Answer

A) money was a "veil" that determined the nominal values in which such variables as the level of economic activity were measured. 
B) money can have a temporary impact on output. 
C) it is the nominal interest rates that matters in decisions to save and invest. 
D) Both a and b 
E) Both a and c 
A) money was a "veil" that determined the nominal values in which such variables as the level of economic activity were measured. 
B) money can have a temporary impact on output. 
C) it is the nominal interest rates that matters in decisions to save and invest. 
D) Both a and b 
E) Both a and c

Question 4

The Fisherian version of the quantity theory equation is

Accepted Answer

A) MV = Py. 
B) by = c + i + g. 
C) M = kPy. 
D) s = i + (g – t). 
A) MV = Py. 
B) by = c + i + g. 
C) M = kPy. 
D) s = i + (g – t).

Question 5

Figure 4.1
 
-According to the classical model shown in Figure 4.1,an autonomous decline in investment shifts the investment schedule to the left.Furthermore,the equilibrium interest rate declines.Distance B describes an interest rate induced

Accepted Answer

A) decline in saving,which is an equal increase in consumption. 
B) increase in investment. 
C) decrease in investment. 
D) decline in saving,which exceeds the increase in consumption. 
A) decline in saving,which is an equal increase in consumption. 
B) increase in investment. 
C) decrease in investment. 
D) decline in saving,which exceeds the increase in consumption.

Question 6

Let M = 36,k = 3,Ls = W/P,MPN = L-1/2 and Y = 2L1/2.Calculate the labor demand curve,the aggregate demand curve,and the equilibrium values of the real wage,labor,output,and the price level.

Accepted Answer

Setting the real wage equal to the margi

Question 7

If the money supply increases 10-percent,velocity decreases 5-percent,and the price level increases 6-percent,then the change in real GDP is

Accepted Answer

A) 1. 
B) 4. 
C) -1. 
D) 5. 
A) 1. 
B) 4. 
C) -1. 
D) 5.

Question 8

Which of the following is (are)correct? In the classical system,the suppliers of bonds were the

Accepted Answer

A) government which always sold bonds to finance a new project. 
B) firms which financed all investment expenditures by selling bonds. 
C) government which might sell bonds to finance spending in excess of tax revenues. 
D) Both b and C 
A) government which always sold bonds to finance a new project. 
B) firms which financed all investment expenditures by selling bonds. 
C) government which might sell bonds to finance spending in excess of tax revenues. 
D) Both b and C

Question 9

According to the classical model,money influences

Accepted Answer

A) only prices. 
B) nominal and real variables in both the long and short-run. 
C) both nominal and real variables but only in the short-run. 
D) only nominal variables. 
A) only prices. 
B) nominal and real variables in both the long and short-run. 
C) both nominal and real variables but only in the short-run. 
D) only nominal variables.

Question 10

If the propensity to hold money is 6 and the money supply is 12,then the classical aggregate demand curve is

Accepted Answer

A) P = 2Y 
B) P/Y = 48 
C) P = 1/(2Y) 
D) P = 2/Y 
A) P = 2Y 
B) P/Y = 48 
C) P = 1/(2Y) 
D) P = 2/Y

Question 11

Discuss the meaning of the phrase of supply-side economics,discussing how it is similar and different from the traditional classical model.Make sure to discuss the role of the Laffer curve in supply-side theory.

Accepted Answer

Classical economists did not pay much at

Question 12

According to the quantity theory of money,the quantity of money determines the

Accepted Answer

A) interest rate. 
B) level of real output. 
C) price level. 
D) level of employment. 
A) interest rate. 
B) level of real output. 
C) price level. 
D) level of employment.

Question 13

In the classical system,output and employment are primarily dependent on

Accepted Answer

A) population,productivity,and technology. 
B) technology,capital formation,and thrift. 
C) population,technology,and capital formation. 
D) productivity,thrift,and population. 
A) population,productivity,and technology. 
B) technology,capital formation,and thrift. 
C) population,technology,and capital formation. 
D) productivity,thrift,and population.

Question 14

What does the Classical model predict about the relationship between a country's budget balance (total revenue minus total spending)and a country's level of real interest rates and investment in a closed economy? Use a graph of the capital market to illustrate.

Accepted Answer

A higher budget deficit shifts

Question 15

In the classical model,a tax on labor supply will

Accepted Answer

A) decrease the demand for labor,increase the real wage,decrease output,and reduce the price level. 
B) decrease the supply of labor,increase real wages,decrease output,and increase the price level. 
C) decrease the demand for labor,the real wage,decrease output,and increase the price level. 
D) have no effect on the labor market,but reduce output and increase the price level. 
E) increase both labor demand and supply,which will increase output and the price level. 
A) decrease the demand for labor,increase the real wage,decrease output,and reduce the price level. 
B) decrease the supply of labor,increase real wages,decrease output,and increase the price level. 
C) decrease the demand for labor,the real wage,decrease output,and increase the price level. 
D) have no effect on the labor market,but reduce output and increase the price level. 
E) increase both labor demand and supply,which will increase output and the price level.

Question 16

The quantity theory of money implies that if the money stock were to double,the price level would

Accepted Answer

A) fall by one half. 
B) rise,but only slightly. 
C) also double. 
D) be unchanged. 
E) all of the above. 
A) fall by one half. 
B) rise,but only slightly. 
C) also double. 
D) be unchanged. 
E) all of the above.

Question 17

According to the quantity theory of money,a 10-percent increase in the money stock would lead to a 10-percent rise in the

Accepted Answer

A) the money wage and the price level. 
B) level of real GNP. 
C) level of nominal GNP. 
D) the money wage and the price level,but the price level rises by more 
E) Both a and c 
A) the money wage and the price level. 
B) level of real GNP. 
C) level of nominal GNP. 
D) the money wage and the price level,but the price level rises by more 
E) Both a and c

Question 18

Contrast the Cambridge and Fisher versions of the quantity theory.Explain why the Cambridge version of the quantity theory represents a more modern monetary theory when compared to Fisher's version.

Accepted Answer

In the Fischer version,money circulated

Question 19

The difference between savings and investment is that

Accepted Answer

A) investment is purchasing stock,while savings is putting money in a bank. 
B) investment is purchasing capital,savings is postponing consumption. 
C) investment is purchasing assets,while consumption is purchasing goods. 
D) investment increases output,while savings decreases output. 
A) investment is purchasing stock,while savings is putting money in a bank. 
B) investment is purchasing capital,savings is postponing consumption. 
C) investment is purchasing assets,while consumption is purchasing goods. 
D) investment increases output,while savings decreases output.

Question 20

In the classical model,an increase in saving is assumed to increase

Accepted Answer

A) the demand for loanable funds,which decreases interest rates. 
B) the supply of loanable funds,which decreases interest rates. 
C) both the demand for money and loanable funds,which reduces interest rates. 
D) neither the demand for money nor bonds,leaving interest rates unchanged. 
A) the demand for loanable funds,which decreases interest rates. 
B) the supply of loanable funds,which decreases interest rates. 
C) both the demand for money and loanable funds,which reduces interest rates. 
D) neither the demand for money nor bonds,leaving interest rates unchanged.

In the classical model,people hold money because

Explain the intuition behind why the aggregate demand curve is downward sloping.Why does an increase in the money supply shift the aggregate demand curve to the right?

According to classical economists,

The Fisherian version of the quantity theory equation is

Figure 4.1 -According to the classical model shown in Figure 4.1,an autonomous decline in investment shifts the investment schedule to the left.Furthermore,the equilibrium interest rate declines.Distance B describes an interest rate induced

Let M = 36,k = 3,L^s= W/P,MPN = L^-1/2 and Y = 2L^1/2.Calculate the labor demand curve,the aggregate demand curve,and the equilibrium values of the real wage,labor,output,and the price level.

If the money supply increases 10-percent,velocity decreases 5-percent,and the price level increases 6-percent,then the change in real GDP is

Which of the following is (are)correct? In the classical system,the suppliers of bonds were the

According to the classical model,money influences

If the propensity to hold money is 6 and the money supply is 12,then the classical aggregate demand curve is

Discuss the meaning of the phrase of supply-side economics,discussing how it is similar and different from the traditional classical model.Make sure to discuss the role of the Laffer curve in supply-side theory.

According to the quantity theory of money,the quantity of money determines the

In the classical system,output and employment are primarily dependent on

What does the Classical model predict about the relationship between a country's budget balance (total revenue minus total spending)and a country's level of real interest rates and investment in a closed economy? Use a graph of the capital market to illustrate.

In the classical model,a tax on labor supply will

The quantity theory of money implies that if the money stock were to double,the price level would

According to the quantity theory of money,a 10-percent increase in the money stock would lead to a 10-percent rise in the

Contrast the Cambridge and Fisher versions of the quantity theory.Explain why the Cambridge version of the quantity theory represents a more modern monetary theory when compared to Fisher's version.

The difference between savings and investment is that

In the classical model,an increase in saving is assumed to increase

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

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

New Classical Economics

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 4: Classical Macroeconomics II: Money,prices,and Interest

In the classical model,people hold money because

Explain the intuition behind why the aggregate demand curve is downward sloping.Why does an increase in the money supply shift the aggregate demand curve to the right?

According to classical economists,

The Fisherian version of the quantity theory equation is

Figure 4.1 -According to the classical model shown in Figure 4.1,an autonomous decline in investment shifts the investment schedule to the left.Furthermore,the equilibrium interest rate declines.Distance B describes an interest rate induced

Let M = 36,k = 3,Ls = W/P,MPN = L-1/2 and Y = 2L1/2.Calculate the labor demand curve,the aggregate demand curve,and the equilibrium values of the real wage,labor,output,and the price level.

If the money supply increases 10-percent,velocity decreases 5-percent,and the price level increases 6-percent,then the change in real GDP is

Which of the following is (are)correct? In the classical system,the suppliers of bonds were the

According to the classical model,money influences

If the propensity to hold money is 6 and the money supply is 12,then the classical aggregate demand curve is

Discuss the meaning of the phrase of supply-side economics,discussing how it is similar and different from the traditional classical model.Make sure to discuss the role of the Laffer curve in supply-side theory.

According to the quantity theory of money,the quantity of money determines the

In the classical system,output and employment are primarily dependent on

What does the Classical model predict about the relationship between a country's budget balance (total revenue minus total spending)and a country's level of real interest rates and investment in a closed economy? Use a graph of the capital market to illustrate.

In the classical model,a tax on labor supply will

The quantity theory of money implies that if the money stock were to double,the price level would

According to the quantity theory of money,a 10-percent increase in the money stock would lead to a 10-percent rise in the

Contrast the Cambridge and Fisher versions of the quantity theory.Explain why the Cambridge version of the quantity theory represents a more modern monetary theory when compared to Fisher's version.

The difference between savings and investment is that

In the classical model,an increase in saving is assumed to increase

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

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

New Classical Economics

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

Let M = 36,k = 3,L^s= W/P,MPN = L^-1/2 and Y = 2L^1/2.Calculate the labor demand curve,the aggregate demand curve,and the equilibrium values of the real wage,labor,output,and the price level.