ECON 110 - In new classical economics, the change
- In new classical economics, the change in output caused by a "price-level surprise"
Multiple Choice
a.is shown as a shift of the long-run aggregate supply curve.
b.does not alter the rate of unemployment, even in the short run
c. is soon reversed through a shift of the short-run aggregate supply curve.
d.permanently changes the rate of unemployment.
2. According to monetarists, an expansionary fiscal policy
Multiple Choice
a.should be used only when unemployment exceeds 6 percent of the labor force.
b.should not be permitted so long as a public debt exists.
c.will be ineffective because the interest rate will rise and crowd out private investment spending.
d. will be effective, provided the money supply is held constant.
3. "Targeting the forecast" is the policy that best describes which of the following views?
Multiple Choice
a. real-business-cycle theory
b. rational expectations theory
c. market monetarism
d. the Keynesian view
4.According to monetarists,
Multiple Choice
a. changes in the money supply are the primary cause of changes in the price level.
b. the supply of money changes in response to changes in the levels of real output and prices.
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. an expansionary fiscal policy will lower interest rates and overstimulate the economy.
5.In the mainstream view, the economic instability brought about by "oil shocks" works through changes in
Multiple Choice
a.aggregate demand.
b.money supply.
c.aggregate supply.
d.wage and price inflexibility.
6.(Last Word) Market monetarists advocate that the Fed "target the forecast" (of the predicted nominal GDP growth rate), claiming primarily that it will
Multiple Choice
a. keep the economy at its natural rate of unemployment.
b.prevent real GDP from growing too much.
c.promote economic stability by ensuring that total spending will grow at a predictable rate each year.
d. prevent high rates of inflation.
7In 2012, the Fed adopted a flexible version of
Multiple Choice
a.a balanced-budget policy.
b.a monetary-growth rule.
c.a do-nothing approach.
d. inflation targeting.
8Economist Milton Friedman compared the economy to a car needing
Multiple Choice
a.a monetary rule to prevent a "backseat driver" from making it go off course.
b.regular price-level surprises, like oil changes, to make it run smoothly.
c. an efficiency wage to make the labor markets work like an efficient engine.
d. a "steering wheel" that the government can use to guide it forward.
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Rating:
5/
Solution: ECON 110 - In new classical economics, the change