Question 1

An unanticipated decrease in aggregate demand will cause an upward shift in the short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 2

One of the arguments supporting new classical theory is the policy ineffectiveness proposition (PIP).

Accepted Answer

A) True 
 B)False

Question 3

The Samuelson and Solow Phillips curve suggested a(n) __________ relationship between the rate of change in __________ and the unemployment rate.

Accepted Answer

A)   direct; real wage rates
B)   inverse; money wage rates
C)   inverse; prices
D)   direct; prices
E)   none of the aboveF) All of the above
G) C) and E)

Question 4

-Refer to Exhibit 16-5.If the economy is at point 6,and the natural unemployment rate exists at points 1,4,and 5,it follows that

Accepted Answer

A)   Real GDP is greater than Natural Real GDP.
B)   Real GDP is less than Natural Real GDP.
C)   Real GDP is the same as Natural Real GDP.
D)   the economy is in a recessionary gap.
E)   b and dF) A) and B)
G) A) and C)

Question 5

The economy is initially in long-run equilibrium.Expectations are adaptive,prices and wages are flexible,and there is an unanticipated increase in aggregate demand.In the short run,the price level will be __________ than it was in long-run equilibrium and Real GDP will be __________ than it was in long-run equilibrium.

Accepted Answer

A)   higher; lower
B)   lower; higher
C)   lower; lower
D)   higher; higherE) None of the above
F) All of the above

Question 6

The Friedman natural rate theory is based on rational expectations and is also called the new classical theory.

Accepted Answer

A) True 
 B)False

Question 7

The terms rational expectations and adaptive expectations are two different names for the same concept.

Accepted Answer

A) True 
 B)False

Question 8

1 to AD2 and the public perfectly anticipates this.Under new Keynesian macroeconomic assumptions,the most likely short-run equilibrium point will be A)  point B. B)  point E. C)  somewhere on the line between point D and point B. D)  somewhere on the line between point E and point B." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 16-2.Suppose the economy starts at point A.The AD curve shifts from AD1 to AD2 and the public perfectly anticipates this.Under new Keynesian macroeconomic assumptions,the most likely short-run equilibrium point will be

Accepted Answer

A)   point B.
B)   point E.
C)   somewhere on the line between point D and point B.
D)   somewhere on the line between point E and point B.E) None of the above
F) A) and D)

Question 9

-Refer to Exhibit 16-1.Milton Friedman would most likely have called the vertical line on which points A and C are located the

Accepted Answer

A)   long-run aggregate supply curve.
B)   Friedman curve.
C)   long-run Phillips curve.
D)   short-run aggregate supply curve.
E)   short-run Phillips curve.F) A) and E)
G) B) and D)

Question 10

An increase in the actual inflation rate is represented by a

Accepted Answer

A)   movement up and along a given Phillips curve.
B)   movement down and along a given Phillips curve.
C)   leftward shift in the Phillips curve.
D)   rightward shift in the Phillips curve.E) C) and D)
F) B) and D)

Question 11

1.What could get the economy to move to point C on SRPC2? A)  The realization on the part of workers that their currently held expected inflation rate is too high; they revise it upward,thus shifting the short-run aggregate supply curve rightward. B)  The realization on the part of workers that their currently held expected inflation rate is too high; they revise it downward,thus shifting the short-run aggregate supply curve rightward. C)  The realization on the part of workers that their currently held expected inflation rate is too low; they revise it upward,thus shifting the short-run aggregate supply curve leftward. D)  The realization on the part of workers that their currently held expected inflation rate is too low; they revise it downward,thus shifting the short-run aggregate supply curve rightward." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 16-1.Suppose the economy is currently at point B on the short-run Phillips curve,SRPC1.What could get the economy to move to point C on SRPC2?

Accepted Answer

A)   The realization on the part of workers that their currently held expected inflation rate is too high; they revise it upward,thus shifting the short-run aggregate supply curve rightward.
B)   The realization on the part of workers that their currently held expected inflation rate is too high; they revise it downward,thus shifting the short-run aggregate supply curve rightward.
C)   The realization on the part of workers that their currently held expected inflation rate is too low; they revise it upward,thus shifting the short-run aggregate supply curve leftward.
D)   The realization on the part of workers that their currently held expected inflation rate is too low; they revise it downward,thus shifting the short-run aggregate supply curve rightward.E) A) and C)
F) C) and D)

Question 12

-Refer to Exhibit 16-5.If the economy is at point 3,and the natural unemployment rate exists at points 1,4,and 5,it follows that

Accepted Answer

A)   Real GDP is greater than Natural Real GDP.
B)   Real GDP is less than Natural Real GDP.
C)   Real GDP is the same as Natural Real GDP.
D)   the economy is in a recessionary gap.
E)   b and dF) A) and B)
G) A) and D)

Question 13

Explain why there is an inverse relationship between wage inflation and unemployment as aggregate demand changes.

Accepted Answer

In an economy with increasing aggregate ...

Question 14

1 to AD2.What happens,instead,is that the Fed does not raise aggregate demand as much as the public expects (bias upward) .Instead the Fed pushes the AD curve from AD1 to AD3.As a result,according to new classical theory in the long run point _____________ best represents the new state of the economy. A)  A B)  B C)  C D)  D E)  E" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 16-2.Suppose the economy starts out at point A.Next,the public anticipates that the Fed will use expansionary monetary policy to shift the AD curve from AD1 to AD2.What happens,instead,is that the Fed does not raise aggregate demand as much as the public expects (bias upward) .Instead the Fed pushes the AD curve from AD1 to AD3.As a result,according to new classical theory in the long run point _____________ best represents the new state of the economy.

Accepted Answer

A)   A
B)   B
C)   C
D)   D
E)   EF) C) and E)
G) B) and E)

Question 15

New classical economists believe that monetary and fiscal policies are never effective.

Accepted Answer

A) True 
 B)False

Question 16

The original Phillips curve suggests a(n) __________ relationship between the rate of change in __________ and the __________.

Accepted Answer

A)   direct; prices; unemployment rate
B)   inverse; money wage rates; unemployment rate
C)   inverse; prices; unemployment
D)   direct; money wage rates; money supply
E)   inverse; money wage rates; money supplyF) None of the above
G) C) and D)

Question 17

The policy ineffectiveness proposition (PIP)argument states that under certain circumstances,neither expansionary demand-side fiscal policy nor expansionary monetary policy is effective at achieving macroeconomic goals.

Accepted Answer

A) True 
 B)False

Question 18

Milton Friedman argued that there is a

Accepted Answer

A)   permanent downward-sloping Phillips curve.
B)   temporary downward-sloping Phillips curve.
C)   temporary upward-sloping Phillips curve.
D)   permanent upward-sloping Phillips curve.E) C) and D)
F) B) and D)

Question 19

Stagflation implies that

Accepted Answer

A)   a tradeoff between inflation and unemployment may not always exist.
B)   policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation.
C)   the short-run Phillips curve is stable.
D)   the short-run Phillips curve is vertical.E) A) and B)
F) None of the above

Question 20

Real business cycle theory emphasizes that an adverse supply shock will shift the LRAS curve leftward and cause a decline in Real GDP.

Accepted Answer

A) True 
 B)False

Exam 16: Interest,rent,and Profit

-Refer to Exhibit 16-2.Suppose the economy starts at point A.The AD curve shifts from AD₁ to AD₂ and the public perfectly anticipates this.Under new Keynesian macroeconomic assumptions,the most likely short-run equilibrium point will be

Correct Answer
verified

The original Phillips curve suggests a(n) relationship between the rate of change in and the __.

Correct Answer
verified

Correct Answer
verified

-Refer to Exhibit 16-1.Suppose the economy is currently at point B on the short-run Phillips curve,SRPC₁.What could get the economy to move to point C on SRPC₂?

Correct Answer
verified

Explain why there is an inverse relationship between wage inflation and unemployment as aggregate demand changes.

Correct Answer
verified
In an economy with increasing aggregate ...
View Answer

The Friedman natural rate theory is based on rational expectations and is also called the new classical theory.

Correct Answer
verified

-Refer to Exhibit 16-5.If the economy is at point 3,and the natural unemployment rate exists at points 1,4,and 5,it follows that

Correct Answer
verified

One of the arguments supporting new classical theory is the policy ineffectiveness proposition (PIP).

Correct Answer
verified

The policy ineffectiveness proposition (PIP)argument states that under certain circumstances,neither expansionary demand-side fiscal policy nor expansionary monetary policy is effective at achieving macroeconomic goals.

Correct Answer
verified

The terms rational expectations and adaptive expectations are two different names for the same concept.

Correct Answer
verified

Real business cycle theory emphasizes that an adverse supply shock will shift the LRAS curve leftward and cause a decline in Real GDP.

Correct Answer
verified

The economy is initially in long-run equilibrium.Expectations are adaptive,prices and wages are flexible,and there is an unanticipated increase in aggregate demand.In the short run,the price level will be than it was in long-run equilibrium and Real GDP will be than it was in long-run equilibrium.

Correct Answer
verified

New classical economists believe that monetary and fiscal policies are never effective.

Correct Answer
verified

The Samuelson and Solow Phillips curve suggested a(n) relationship between the rate of change in and the unemployment rate.

Correct Answer
verified

-Refer to Exhibit 16-5.If the economy is at point 6,and the natural unemployment rate exists at points 1,4,and 5,it follows that

Correct Answer
verified

An unanticipated decrease in aggregate demand will cause an upward shift in the short-run Phillips curve.

Correct Answer
verified

-Refer to Exhibit 16-1.Milton Friedman would most likely have called the vertical line on which points A and C are located the

Correct Answer
verified

An increase in the actual inflation rate is represented by a

Correct Answer
verified

Milton Friedman argued that there is a

Correct Answer
verified

Stagflation implies that

Correct Answer
verified

Exam 16: Interest,rent,and Profit

-Refer to Exhibit 16-2.Suppose the economy starts at point A.The AD curve shifts from AD1 to AD2 and the public perfectly anticipates this.Under new Keynesian macroeconomic assumptions,the most likely short-run equilibrium point will be

Correct AnswerverifiedShow Answer

The original Phillips curve suggests a(n) __________ relationship between the rate of change in __________ and the __________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-Refer to Exhibit 16-1.Suppose the economy is currently at point B on the short-run Phillips curve,SRPC1.What could get the economy to move to point C on SRPC2?

Correct AnswerverifiedShow Answer

Explain why there is an inverse relationship between wage inflation and unemployment as aggregate demand changes.

Correct AnswerverifiedIn an economy with increasing aggregate ...View AnswerShow Answer

The Friedman natural rate theory is based on rational expectations and is also called the new classical theory.

Correct AnswerverifiedShow Answer

-Refer to Exhibit 16-5.If the economy is at point 3,and the natural unemployment rate exists at points 1,4,and 5,it follows that

Correct AnswerverifiedShow Answer

One of the arguments supporting new classical theory is the policy ineffectiveness proposition (PIP).

Correct AnswerverifiedShow Answer

The policy ineffectiveness proposition (PIP)argument states that under certain circumstances,neither expansionary demand-side fiscal policy nor expansionary monetary policy is effective at achieving macroeconomic goals.

Correct AnswerverifiedShow Answer

The terms rational expectations and adaptive expectations are two different names for the same concept.

Correct AnswerverifiedShow Answer

Real business cycle theory emphasizes that an adverse supply shock will shift the LRAS curve leftward and cause a decline in Real GDP.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

New classical economists believe that monetary and fiscal policies are never effective.

Correct AnswerverifiedShow Answer

The Samuelson and Solow Phillips curve suggested a(n) __________ relationship between the rate of change in __________ and the unemployment rate.

Correct AnswerverifiedShow Answer

-Refer to Exhibit 16-5.If the economy is at point 6,and the natural unemployment rate exists at points 1,4,and 5,it follows that

Correct AnswerverifiedShow Answer

An unanticipated decrease in aggregate demand will cause an upward shift in the short-run Phillips curve.

Correct AnswerverifiedShow Answer

-Refer to Exhibit 16-1.Milton Friedman would most likely have called the vertical line on which points A and C are located the

Correct AnswerverifiedShow Answer

An increase in the actual inflation rate is represented by a

Correct AnswerverifiedShow Answer

Milton Friedman argued that there is a

Correct AnswerverifiedShow Answer

Stagflation implies that

Correct AnswerverifiedShow Answer

-Refer to Exhibit 16-2.Suppose the economy starts at point A.The AD curve shifts from AD₁ to AD₂ and the public perfectly anticipates this.Under new Keynesian macroeconomic assumptions,the most likely short-run equilibrium point will be

Correct Answer
verified

The original Phillips curve suggests a(n) relationship between the rate of change in and the __.

Correct Answer
verified

Correct Answer
verified

-Refer to Exhibit 16-1.Suppose the economy is currently at point B on the short-run Phillips curve,SRPC₁.What could get the economy to move to point C on SRPC₂?

Correct Answer
verified

Correct Answer
verified
In an economy with increasing aggregate ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The Samuelson and Solow Phillips curve suggested a(n) relationship between the rate of change in and the unemployment rate.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified