Exam 16: Interest,rent,and Profit

-Refer to Exhibit 16-3.The economy is at point A.As the result of an unexpected increase in aggregate demand,in the short run,the Friedman natural rate theory would predict

A person's real wage will fall if the

When everyone correctly anticipates that the Fed will buy government securities,then they know that prices will increase.Which of the following adjustments is not likely to occur?

The simultaneous occurrence of high inflation and high unemployment is called

Under new Keynesian theory,a correctly anticipated decrease in aggregate demand will lead to __________ in Real GDP and __________ in the price level.

According to the new classical theory,if the public correctly anticipates a government policy to increase aggregate demand,then

Milton Friedman argued that as long as

Milton Friedman argued that the economy is not in long-run equilibrium if the expected inflation rate __________ the actual inflation rate.

A rise in the expected price level leads to an expectation that real wages will ____________,which will cause people to work __________,shifting the SRAS curve _______________.

New Keynesian theory differs from new classical theory in that New Keynesian theory assumes that wages and prices are not completely flexible in the short-run,while fully flexible wages and prices are an assumption of new classical theory.

Real business cycle theory would emphasize the ability of a beneficial supply shock to shift the __________ curve rightward and __________ Real GDP.

Suppose that the Fed expects to increase the money supply by $54 billion,but economic agents expect that the increase will be closer to $81 billion.Using rational expectations theory,the result will be ______________ Real GDP and a ________________ price level.

Suppose that the Fed implements expansionary monetary policy that raises aggregate demand,but individuals incorrectly anticipate the policy measure (bias downward).According to new classical theory,in the short run the price level would ____________ and Real GDP would ______________.In the long run,new classical theory would predict that the price level would ___________compared to its original long-run equilibrium level and that Real GDP would ____________.

In which of the following economic theories is it possible for an increase in the money supply to lead to a decrease in Real GDP in the short run?

As the price level falls,real wage ____________and people choose to work ___________.

-Refer to Exhibit 16-8.Assume that the starting point is point 1.Suppose that the Fed implements expansionary monetary policy that raises aggregate demand.Which of the following best goes with the diagram shown?

The economy was in long-run equilibrium when aggregate demand increased.At this point in time,the expected inflation has started to adjust to the new higher actual inflation rate.According to the (Friedman)natural rate theory,this means the unemployment rate in the economy must currently be

If expectations are formed rationally,wages and prices are not completely flexible in the short run,and policy is correctly anticipated,increases in aggregate demand will stimulate the economy to higher levels of Real GDP and lower levels of unemployment in

-Refer to Exhibit 16-1.According to new classical macroeconomists,if increases in aggregate demand are correctly anticipated,then the economy will move from point A to

-Refer to Exhibit 16-2.Suppose the economy starts out at point A and the public correctly anticipates that the AD curve will shift from AD₁ to AD₂.If wages are temporarily fixed,SRAS₁ will __________ and the economy will end up at point __________.