Refer to the graph above. Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. Suppose that there is economic growth which shifts AS1 to AS2. If the application of a monetary rule is designed to shift AD1 to AD3, but because of pessimistic business expectations AD1 only shifts to AD2, then mainstream economists would suggest that the actions to be taken to avoid deflation would be to implement a(n):

A) Expansionary fiscal policy and a tight money policy B) Contractionary fiscal policy and a tight money policy C) Expansionary fiscal policy and an easy money policy D) Contractionary fiscal policy and an easy money policy A) Expansionary fiscal policy and a tight money policy B) Contractionary fiscal policy and a tight money policy C) Expansionary fiscal policy and an easy money policy D) Contractionary fiscal policy and an easy money policy

Refer to the graph above. Assume that the economy is in initial equilibrium where AD1 intersects AS1. If there is a decrease in aggregate demand to AD2, then according to mainstream economists, if prices are flexible and wages are not, this will result in an equilibrium at point:

A) B B) C C) D D) E A) B B) C C) D D) E

Exam 19: Current Issues in Macro Theory and Policy

Mainstream economists have adopted some ideas from RET and some rational expectations assumptions are being incorporated into current macroeconomic models.

(True/False)

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Question 41

According to rational expectations theory, discretionary monetary and fiscal policy will be ineffective primarily because of the:

(Multiple Choice)

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Question 42

Mainstream economics views monetary policy as a:

(Multiple Choice)

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Question 43

Within the aggregate demand-aggregate supply framework, monetarists argue that a change in aggregate:

(Multiple Choice)

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Question 44

In recent years, calls for monetary rules by the Federal Reserve have been replaced with calls for:

(Multiple Choice)

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Question 45

According to the Taylor rule, if inflation rises by 1 percent above its target of 2 percent, the Fed should:

(Multiple Choice)

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Question 46

Monetarists argue that the amount of money the public will want to hold depends primarily on the level of:

(Multiple Choice)

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Question 47

In the mainstream view, one major source of instability in the macro economy is the volatility of:

(Multiple Choice)

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Question 48

The equation of exchange indicates that an increase in money supply will always lead only to inflation.

(True/False)

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Question 49

In the mainstream view, the crowding-out effect from the use of fiscal policy is:

(Multiple Choice)

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Question 50

Monetarists argue that government policy interference in the economy is the primary cause of macroeconomic instability.

(True/False)

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Question 51

If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with a(n):

(Multiple Choice)

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Question 52

If the economy diverges from its full-employment output, new classical economics would suggest that:

(Multiple Choice)

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Question 53

According to real-business-cycle theory, recessions are caused by:

(Multiple Choice)

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Question 54

Crowding-out results from:

(Multiple Choice)

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Question 55

Refer to the graph above. Assume that the economy is initially in equilibrium at the intersection of AD₁ and AS₁. Suppose that there is economic growth which shifts AS₁ to AS₂. If the application of a monetary rule is designed to shift AD₁ to AD₃, but because of pessimistic business expectations AD₁ only shifts to AD₂, then mainstream economists would suggest that the actions to be taken to avoid deflation would be to implement a(n):

(Multiple Choice)

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Question 56

Most economists today would agree with the view that "money doesn't matter" in macroeconomic theory.

(True/False)

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Question 57

Which view of the macro economy suggests that the speed of adjustment for self-correction would be very quick?

(Multiple Choice)

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Question 58

If households and firms cut back on spending because they expect other households and firms to do so, and this self-fulfilling prophecy causes a recession, then this would be an example of:

(Multiple Choice)

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Question 59

Refer to the graph above. Assume that the economy is in initial equilibrium where AD₁ intersects AS₁. If there is a decrease in aggregate demand to AD₂, then according to mainstream economists, if prices are flexible and wages are not, this will result in an equilibrium at point:

(Multiple Choice)

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Question 60

Showing 41 - 60 of 134

Exam 19: Current Issues in Macro Theory and Policy

Mainstream economists have adopted some ideas from RET and some rational expectations assumptions are being incorporated into current macroeconomic models.

According to rational expectations theory, discretionary monetary and fiscal policy will be ineffective primarily because of the:

Mainstream economics views monetary policy as a:

Within the aggregate demand-aggregate supply framework, monetarists argue that a change in aggregate:

In recent years, calls for monetary rules by the Federal Reserve have been replaced with calls for:

According to the Taylor rule, if inflation rises by 1 percent above its target of 2 percent, the Fed should:

Monetarists argue that the amount of money the public will want to hold depends primarily on the level of:

In the mainstream view, one major source of instability in the macro economy is the volatility of:

The equation of exchange indicates that an increase in money supply will always lead only to inflation.

In the mainstream view, the crowding-out effect from the use of fiscal policy is:

Monetarists argue that government policy interference in the economy is the primary cause of macroeconomic instability.

If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with a(n):

If the economy diverges from its full-employment output, new classical economics would suggest that:

According to real-business-cycle theory, recessions are caused by:

Crowding-out results from:

Most economists today would agree with the view that "money doesn't matter" in macroeconomic theory.

Which view of the macro economy suggests that the speed of adjustment for self-correction would be very quick?

If households and firms cut back on spending because they expect other households and firms to do so, and this self-fulfilling prophecy causes a recession, then this would be an example of:

Refer to the graph above. Assume that the economy is in initial equilibrium where AD1 intersects AS1. If there is a decrease in aggregate demand to AD2, then according to mainstream economists, if prices are flexible and wages are not, this will result in an equilibrium at point:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Refer to the graph above. Assume that the economy is in initial equilibrium where AD₁ intersects AS₁. If there is a decrease in aggregate demand to AD₂, then according to mainstream economists, if prices are flexible and wages are not, this will result in an equilibrium at point: