Exam 17: Alternative Views in Macroeconomics

The rational expectations hypothesis assumes that people know the "true model" of the economy and form their expectations of the future based on this model.

Monetarists and Keynesians ________ on the impact of fiscal policy on the economy.

Related to the Economics in Practice on p. 325: Surveys by the bank of England suggest that consumers are

According to the new classical theory, anticipated policies do not affect the economy.

According to the Laffer curve, as tax rates increase, tax revenues

According to the Laffer curve, a decrease in the tax rate will increase tax revenue

Related to the Economics in Practice on p. 325: Surveys by the bank of England suggest that two important factors in influencing ________ are gas prices and media attention to price increases.

Which of the following is not one of the reasons why it is difficult to empirically test alternative macroeconomic models against one another?

Macroeconomic models differ in ways that are hard to standardize.

The state of the economy during the 1970s and 1980s reinforced the ideas of Keynesian economic policies and their ability to successfully manage the macroeconomy.

If the stock of money is $20 billion, velocity is 4, and real output is $40 billion, what is the price level?

Any test of the rational expectations hypothesis must show that expectations are formed rationally and

Expectations are hard to test even though economists know the model the public uses when forming expectations.

Monetarists argue that the money supply should

In the quantity theory of money, velocity is assumed

The key variable in monetarism is the velocity of money.

The ________ is the number of times a dollar bill exchanges hands in a year.

If the stock of money is $250 billion, velocity is 5, and the price level is 10, what is real output?

The Economic Recovery Tax Act of 1981 allowed firms to depreciate their capital at a very rapid rate for tax purposes. This

Supporters of supply-side economics claim that Reagan's tax policies were quite successful in stimulating the economy because