Question 1

In the new Keynesian model,if an aggregate demand increase is unanticipated,then ________.

Accepted Answer

A)  aggregate demand will not change
B)  short-run aggregate supply will shift up immediately
C)  short-run aggregate supply will shift down immediately
D)  there is no immediate effect on expectations about future inflationE) None of the above
F) B) and C)

Question 2

The standard IS curve is adjusted in new Keynesian theory to account for ________.

Accepted Answer

A)  the forward-looking behavior of households and firms
B)  the difference between real and nominal variables
C)  changes in GDP,or Gross Domestic Product
D)  the impact of a rising national debtE) A) and B)
F) C) and D)

Question 3

Reductions in inflation have no cost in terms of lower output in ________.

Accepted Answer

A)  traditional Keynesian theory
B)  new Keynesian theory
C)  real business cycle theory
D)  traditional and new Keynesian theoryE) All of the above
F) A) and B)

Question 4

Anti-inflationary policy is less costly when that policy is anticipated in ________.

Accepted Answer

A)  traditional Keynesian theory
B)  new Keynesian theory
C)  real business cycle theory
D)  institutionalist theoryE) B) and D)
F) None of the above

Question 5

Discretionary economic policy is not beneficial in the ________.

Accepted Answer

A)  traditional Keynesian theory
B)  new Keynesian theory
C)  Luka Brazzi model
D)  real business cycle theoryE) All of the above
F) C) and D)

Question 6

Which of the following would be considered a negative real supply shock?

Accepted Answer

A)  an increase in expected inflation
B)  a disruption of financial markets
C)  a decrease in government spending
D)  a decrease in guaranteed pension benefitsE) B) and D)
F) A) and D)

Question 7

In macroeconomic modelling,as price flexibility increases ________.

Accepted Answer

A)  the short-run aggregate supply schedule will get flatter
B)  the short-run aggregate supply schedule will get steeper
C)  the short-run aggregate supply schedule will shift to the right
D)  the short-run aggregate supply schedule will shift to the leftE) All of the above
F) C) and D)

Question 8

Expansionary policy only leads to inflation,but does not raise output in ________.

Accepted Answer

A)  traditional Keynesian theory
B)  new Keynesian theory
C)  real business cycle theory
D)  traditional Keynesian,new Keynesian and real business cycle theoryE) B) and C)
F) None of the above

Question 9

According to the real business cycle model,a rightward shift in the long-run aggregate supply schedule would be caused by ________.

Accepted Answer

A)  a negative supply shock
B)  an increase in aggregate demand
C)  a positive supply shock
D)  a decrease in aggregate demandE) A) and B)
F) A) and C)

Question 10

If workers sit idly by for a portion of their workday,but are still employed,________.

Accepted Answer

A)  the negative productivity shock has no effect on output
B)  it is unlikely that a decrease in aggregate demand is the cause
C)  aggregate data may create a false illusion of a negative productivity shock
D)  a negative productivity shock is the most plausible explanationE) A) and B)
F) All of the above

Question 11

Credibility is not important in ________.

Accepted Answer

A)  new Keynesian and traditional Keynesian theory
B)  real business cycle and traditional Keynesian theory
C)  real business cycle and new Keynesian theory
D)  traditional Keynesian,new Keynesian and real business cycle theoryE) C) and D)
F) All of the above

Question 12

The New Keynesian model,is Keynesian in that ________.

Accepted Answer

A)  it assumes wages and prices are sticky
B)  changes in the money supply are taken to be the single most important influence on business movements
C)  the velocity of money is a constant
D)  expectations are assumed to be rationalE) None of the above
F) A) and B)

Question 13

The possibility that unanticipated policy changes are an important source of output fluctuations is most consistent with ________.

Accepted Answer

A)  traditional Keynesian theory
B)  new Keynesian theory
C)  real business cycle theory
D)  institutionalist theoryE) A) and D)
F) C) and D)

Question 14

No distinction is made between the effects of anticipated and unanticipated policy in ________.

Accepted Answer

A)  traditional Keynesian theory
B)  new Keynesian theory
C)  real business cycle theory
D)  traditional Keynesian and real business cycle theoryE) B) and C)
F) A) and D)

Question 15

In the new Keynesian model,an increase in productivity will cause ________.

Accepted Answer

A)  a leftward shift in short-run and long-run aggregate supply
B)  a rightward shift in short-run and long-run aggregate supply
C)  a leftward shift in short-run aggregate supply and rightward shift in long-run aggregate supply
D)  a rightward shift in short-run aggregate supply and a leftward shift in long-run aggregate supplyE) A) and D)
F) B) and C)

Question 16

Research supporting the new Keynesian model finds that prices are ________.

Accepted Answer

A)  slow to adjust to aggregate demand shocks
B)  changed very frequently
C)  changed only infrequently
D)  not as flexible as wagesE) A) and B)
F) B) and C)

Question 17

In the aggregate production function Y = A

,real business cycle theory treats ________ as the key independent variable.

Accepted Answer

A)  potential output
B)  productivity
C)  the capital stock
D)  the labor inputE) C) and D)
F) B) and D)

Question 18

In the new Keynesian model,sticky prices may be due to ________.

Accepted Answer

A)  involuntary unemployment
B)  negative productivity shocks
C)  positive productivity shocks
D)  staggered pricesE) A) and B)
F) A) and C)

Question 19

Suppose the U.S.government announces that it will bring the federal budget deficit to zero,over the next ten years,with no change in tax rates.Describe the effects of such a policy according to the three business cycle models,assuming that the policy is fully credible.

Accepted Answer

In the traditional Keynesian model,antic...

Question 20

In real business cycle models,shifts of the aggregate demand curve ________.

Accepted Answer

A)  cause changes in inflation,but have no effect on output
B)  cannot occur
C)  result from changes in the willingness to work
D)  result from Solow residualsE) C) and D)
F) A) and B)

Exam 22: Modern Business Cycle Theory

If workers sit idly by for a portion of their workday,but are still employed,________.

Correct AnswerverifiedShow Answer

Which of the following would be considered a negative real supply shock?

Correct AnswerverifiedShow Answer

Credibility is not important in ________.

Correct AnswerverifiedShow Answer

No distinction is made between the effects of anticipated and unanticipated policy in ________.

Correct AnswerverifiedShow Answer

The possibility that unanticipated policy changes are an important source of output fluctuations is most consistent with ________.

Correct AnswerverifiedShow Answer

Anti-inflationary policy is less costly when that policy is anticipated in ________.

Correct AnswerverifiedShow Answer

Suppose the U.S.government announces that it will bring the federal budget deficit to zero,over the next ten years,with no change in tax rates.Describe the effects of such a policy according to the three business cycle models,assuming that the policy is fully credible.

Correct AnswerverifiedIn the traditional Keynesian model,antic...View AnswerShow Answer

In the aggregate production function Y = A ,real business cycle theory treats ________ as the key independent variable.

Correct AnswerverifiedShow Answer

The standard IS curve is adjusted in new Keynesian theory to account for ________.

Correct AnswerverifiedShow Answer

In the new Keynesian model,if an aggregate demand increase is unanticipated,then ________.

Correct AnswerverifiedShow Answer

In the new Keynesian model,sticky prices may be due to ________.

Correct AnswerverifiedShow Answer

Reductions in inflation have no cost in terms of lower output in ________.

Correct AnswerverifiedShow Answer

According to the real business cycle model,a rightward shift in the long-run aggregate supply schedule would be caused by ________.

Correct AnswerverifiedShow Answer

Research supporting the new Keynesian model finds that prices are ________.

Correct AnswerverifiedShow Answer

In real business cycle models,shifts of the aggregate demand curve ________.

Correct AnswerverifiedShow Answer

Discretionary economic policy is not beneficial in the ________.

Correct AnswerverifiedShow Answer

In macroeconomic modelling,as price flexibility increases ________.

Correct AnswerverifiedShow Answer

Expansionary policy only leads to inflation,but does not raise output in ________.

Correct AnswerverifiedShow Answer

In the new Keynesian model,an increase in productivity will cause ________.

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The New Keynesian model,is Keynesian in that ________.

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In the traditional Keynesian model,antic...
View Answer

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