Exam 19: Current Issues in Macro Theory and Policy

A) 1.33.
B) 3.
C) 5.33.
D) 100.

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A) held constant.
B) decreased by 1 percent a year.
C) increased by 2.5 percent a year.
D) increased by 7.5 percent a year.

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A) value or purchasing power of the dollar.
B) number of times per year the average dollar is spent.
C) quantity of real output.
D) reciprocal of the price level.

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A) new classical economics.
B) the real-business-cycle theory.
C) monetarism.
D) the idea of coordination failures.

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A) changes in the money supply are the primary cause of changes in the price level.
B) an expansionary fiscal policy will lower interest rates and overstimulate the economy.
C) changes in the velocity of money are more important than changes in the money supply in causing the level of economic activity to change.
D) the supply of money changes in response to changes in the levels of real output and prices.

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A) $M V = P Q$
B) $S _ { a } + T + M = I _ { g } + G + X _ { n }$
C) $V = M / \mathrm { PQ }$
D) $C _ { a } + I _ { g } + X _ { n } + G = \mathrm { GDP }$

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A) the MV = PQ equation provides a better understanding of the macroeconomy than does the
$C _ { a } + I _ { g } + X _ { n } + G = \mathrm { GDP }$ = GDP equation.
B) most changes in the price level are explainable by changes in the level of real output.
C) the velocity of money is quite unstable.
D) all of these are true.

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A) affects GDP and the price level through changes in aggregate supply.
B) changes aggregate demand and GDP through the multiplier process.
C) has no effect unless the fiscal policy is accompanied by changes in the money supply.
D) is relatively ineffective because the outcomes are anticipated and offset.

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A) successes of macroeconomic policymakers
B) inability of policymakers to time decisions properly.
C) reaction of the public to the expected effects of policy changes.
D) slow impact of policy to stimulate changes in real output and employment.

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A) a decrease of aggregate demand from $A D _ { 1 }$ to $A D _ { 2 }$ , followed by a decrease in aggregate supply from $\mathrm { AS } _\mathrm { LR 1}$ to $\mathrm { AS } _\mathrm { LR 2}$ .
B) an increase in aggregate demand from $A D _ { 1 }$ to $A D _ { 2 }$ , which in turn causes a decrease in aggregate supply from $A S _ { \mathrm { LR } 1 }$ to $A S _ { \mathrm { LR } 2 }$ .
C) a decrease in aggregate supply from $\mathrm { AS } _ { \mathrm { LR } 1 }$ to $\mathrm { AS } _\mathrm { LR2 }$ , followed by a decrease in aggregate demand from $A D _ { 1 }$ to $A D _ { 2 }$ .
D) a decrease in aggregate supply from $\mathrm { AS } _ { \mathrm { LR } 1 }$ to $\mathrm { AS } _ { \mathrm { LR } 2 }$ , followed by an increase in aggregate demand from $A D _ { 2 }$ to $A D _ { 1 }$ .

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A) anticipated price-level changes.
B) a price-level surprise.
C) a coordination failure.
D) insider-outsider relationships.

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Mainstream macroeconomics view of moneta...

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A) MV = PQ
B) AS = AD
C) Saving = Income ?Consumption
D) $C _ { a } + I _ { g } + X _ { n } + G = G D P$

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A) decrease; remain constant
B) increase; remain constant
C) remain constant; decrease
D) remain constant; increase

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A) may be reluctant to increase nominal wages when aggregate demand increases.
B) are highly vulnerable to import competition.
C) may be targeted for takeover by firms paying market wages.
D) may be reluctant to cut wages when aggregate demand declines.

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