Question 1

Mainstream economists contend that, as stabilization tools,

Accepted Answer

A)   discretionary ﬁscal policy is effective, but discretionary monetary policy is not.
B)   discretionary monetary policy is effective, but discretionary ﬁscal policy is not.
C)   both discretionary ﬁscal policy and discretionary monetary policy can be effective if appropriately used.
D)   discretionary ﬁscal policy and discretionary monetary policy cause more instability than they cure.E) C) and D)
F) B) and D)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Deﬁne real-business-cycle theory.

Accepted Answer

Real-business cycle theory is a theory t...

Question 4

2 to AD3 would move the economy A)  directly from a to h. B)  from a to g to h. C)  directly from a to d. D)  from a to c to h." class="answers-bank-image d-inline" rel="preload" >
Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD2 to AD3 would move the economy

Accepted Answer

A)   directly from a to h.
B)   from a to g to h.
C)   directly from a to d.
D)   from a to c to h.E) B) and C)
F) A) and D)

Question 5

According to mainstream economists, the basic determinant of real output, employment, and the price level is

Accepted Answer

A)   information and people's expectations.
B)   the level of aggregate expenditures.
C)   the incentive to work, save, and invest.
D)   the supply of money.E) B) and C)
F) A) and D)

Question 6

The key implication for macroeconomic instability is that eﬃciency wages

Accepted Answer

A)   contribute to the downward inﬂexibility of wages.
B)   help reduce the downward inﬂexibility of wages.
C)   increase the velocity of money.
D)   reduce the velocity of money.E) B) and D)
F) C) and D)

Question 7

Mainstream economists believe that economic instability is primarily due to unexpected changes in
consumer spending.

Accepted Answer

A) True 
 B)False

Question 8

The policy position that the supply of money should be increased at a constant rate each year is most closely associated with the views of

Accepted Answer

A)   monetarism.
B)   real-business-cycle theory.
C)   mainstream economics.
D)   supply-side economics.E) None of the above
F) A) and C)

Question 9

If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is

Accepted Answer

A)   6.
B)    1/6.1 / 6 .1/6. 
C)   4.
D)    1/41 / 41/4E) A) and B)
F) A) and C)

Question 10

What are "coordination failures," and why are they important for interpreting the macro economy?

Accepted Answer

A coordination failure is a situation in...

Question 11

Adherents of the traditional monetary rule say that the supply of money should be

Accepted Answer

A)   increased at a constant rate each year.
B)   decreased during recession and increased during inﬂation.
C)   held constant over time.
D)   increased during recession and decreased during inﬂation.E) All of the above
F) A) and B)

Question 12

(Consider This)  Monetarists would argue that the severe recession of 2007-2009 was primarily caused by

Accepted Answer

A)   adverse aggregate-supply shocks causing tremendous unemployment.
B)   wide swings in investment expenditures driving erratic ﬂuctuations in aggregate demand.
C)   excessive money supply creating a bubble in some sectors of the economy.
D)   too much deregulation of the ﬁnancial sector in previous years.E) None of the above
F) A) and B)

Question 13

If prices and wages are inﬂexible downward, a decrease in aggregate demand will

Accepted Answer

A)   reduce the price level but not real output.
B)   increase short-run aggregate supply.
C)   decrease short-run aggregate supply.
D)   reduce real output but not the price level.E) A) and C)
F) A) and D)

Question 14

2 to AD1 would move the economy A)  directly from a to d. B)  from a to b to d. C)  from a to e to d. D)  directly from a to f." class="answers-bank-image d-inline" rel="preload" >
Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD2 to AD1 would move the economy

Accepted Answer

A)   directly from a to d.
B)   from a to b to d.
C)   from a to e to d.
D)   directly from a to f.E) All of the above
F) C) and D)

Question 15

Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the mainstream economic view, the effect of a signi?cant increase in productivity on the economy can
Best be represented by a shift from

Accepted Answer

A)    ASLR2 to ASLR1\mathrm { AS } _ { \mathrm { LR } 2 } 	ext { to } \mathrm { AS } _ { \mathrm { LR1 } }ASLR2​ to ASLR1​ 
B)    AD1 to AD2A D _ { 1 } 	ext { to } A D _ { 2 }AD1​ to AD2​ 
C)    ASLR1 to ASLR2. AS _ {  } { } _ { \mathrm { LR } 1 } 	ext { to } A S _ { \mathrm { LR } 2 } 	ext {. }AS​LR1​ to ASLR2​.  
D)    AD2 to AD1A D _ { 2 } 	ext { to } A D _ { 1 }AD2​ to AD1​E) All of the above
F) C) and D)

Question 16

From a monetarist perspective, instability in the macroeconomy arises from

Accepted Answer

A)   secular trends in the economy.
B)   the instability of velocity as a policy tool.
C)   discretionary changes in monetary policy.
D)   the use of a monetary rule for monetary policy.E) C) and D)
F) A) and B)

Question 17

To determine the velocity of money, you would need to know

Accepted Answer

A)   nominal GDP and real GDP.
B)   the money supply and the price level.
C)   nominal GDP and the money supply.
D)   nominal GDP and the interest rate.E) A) and D)
F) All of the above

Question 18

Accepted Answer

A)   new classical economics.
B)   mainstream economics.
C)   the real-business-cycle theory.
D)   a coordination failure.E) B) and C)
F) A) and D)

Question 19

Given the equation of exchange, if V is stable, an increase in M will necessarily increase

Accepted Answer

A)   the demand for money.
B)   the price level.
C)   nominal GDP.
D)   real GDP.E) All of the above
F) A) and B)

Question 20

The idea that business ﬂuctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

Accepted Answer

A)   eﬃciency wage theory.
B)   real-business-cycle theory.
C)   mainstream economics.
D)   monetarism.E) All of the above
F) B) and D)

Exam 19: Current Issues in Macro Theory and Policy

Mainstream economists believe that economic instability is primarily due to unexpected changes in consumer spending.

Correct Answer
verified

To determine the velocity of money, you would need to know

Correct Answer
verified

Correct Answer
verified

Adherents of the traditional monetary rule say that the supply of money should be

Correct Answer
verified

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD₂ to AD₁ would move the economy

Correct Answer
verified

The key implication for macroeconomic instability is that eﬃciency wages

Correct Answer
verified

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

Correct Answer
verified

What are "coordination failures," and why are they important for interpreting the macro economy?

Correct Answer
verified
A coordination failure is a situation in...
View Answer

If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is

Correct Answer
verified

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD₂ to AD₃ would move the economy

Correct Answer
verified

(Consider This) Monetarists would argue that the severe recession of 2007-2009 was primarily caused by

Correct Answer
verified

If prices and wages are inﬂexible downward, a decrease in aggregate demand will

Correct Answer
verified

The policy position that the supply of money should be increased at a constant rate each year is most closely associated with the views of

Correct Answer
verified

Correct Answer
verified

According to mainstream economists, the basic determinant of real output, employment, and the price level is

Correct Answer
verified

From a monetarist perspective, instability in the macroeconomy arises from

Correct Answer
verified

Deﬁne real-business-cycle theory.

Correct Answer
verified
Real-business cycle theory is a theory t...
View Answer

Given the equation of exchange, if V is stable, an increase in M will necessarily increase

Correct Answer
verified

The idea that business ﬂuctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

Correct Answer
verified

Mainstream economists contend that, as stabilization tools,

Correct Answer
verified

Exam 19: Current Issues in Macro Theory and Policy

Mainstream economists believe that economic instability is primarily due to unexpected changes in consumer spending.

Correct AnswerverifiedShow Answer

To determine the velocity of money, you would need to know

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Adherents of the traditional monetary rule say that the supply of money should be

Correct AnswerverifiedShow Answer

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD2 to AD1 would move the economy

Correct AnswerverifiedShow Answer

The key implication for macroeconomic instability is that eﬃciency wages

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What are "coordination failures," and why are they important for interpreting the macro economy?

Correct AnswerverifiedA coordination failure is a situation in...View AnswerShow Answer

If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is

Correct AnswerverifiedShow Answer

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD2 to AD3 would move the economy

Correct AnswerverifiedShow Answer

(Consider This) Monetarists would argue that the severe recession of 2007-2009 was primarily caused by

Correct AnswerverifiedShow Answer

If prices and wages are inﬂexible downward, a decrease in aggregate demand will

Correct AnswerverifiedShow Answer

The policy position that the supply of money should be increased at a constant rate each year is most closely associated with the views of

Correct AnswerverifiedShow Answer

Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the mainstream economic view, the effect of a signi?cant increase in productivity on the economy can Best be represented by a shift from

Correct AnswerverifiedShow Answer

According to mainstream economists, the basic determinant of real output, employment, and the price level is

Correct AnswerverifiedShow Answer

From a monetarist perspective, instability in the macroeconomy arises from

Correct AnswerverifiedShow Answer

Deﬁne real-business-cycle theory.

Correct AnswerverifiedReal-business cycle theory is a theory t...View AnswerShow Answer

Given the equation of exchange, if V is stable, an increase in M will necessarily increase

Correct AnswerverifiedShow Answer

The idea that business ﬂuctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

Correct AnswerverifiedShow Answer

Mainstream economists contend that, as stabilization tools,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD₂ to AD₁ would move the economy

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A coordination failure is a situation in...
View Answer

Correct Answer
verified

Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, an unanticipated decrease in aggregate demand from AD₂ to AD₃ would move the economy

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Real-business cycle theory is a theory t...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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