Question 1

Most economists today would agree with the view that "money doesn't matter" in macroeconomic
theory.

Accepted Answer

A) True 
 B)False

Question 2

The view that inappropriate monetary policy was the main reason for the depth of the Great Depression in the United States is most closely associated with

Accepted Answer

A)   monetarism.
B)   the mainstream view.
C)   the rational expectations theory.
D)   the real-business-cycle theory.E) All of the above
F) C) and D)

Question 3

Monetarists say

Accepted Answer

A)   that, because P is stable, a change in M will change Q proportionately in the opposite direction.
B)   a change in the money supply will change aggregate demand and therefore nominal GDP.
C)   a change in the money supply will change velocity, which in turn will change nominal GDP.
D)   a change in the money supply will change the interest rate, which will change investment spending and nominal GDP.E) None of the above
F) A) and B)

Question 4

Accepted Answer

A)    P4 and Q2P _ { 4 } 	ext { and } Q _ { 2 }P4​ and Q2​ 
B)    P3 and Q2P _ { 3 } 	ext { and } Q _ { 2 }P3​ and Q2​ 
C)    P2 and Q2. P _ { 2 } 	ext { and } Q _ { 2 } 	ext {. }P2​ and Q2​.  
D)    P1 and Q2. P _ { 1 } 	ext { and } Q _ { 2 } 	ext {. }P1​ and Q2​. E) A) and D)
F) None of the above

Question 5

An eﬃciency wage is

Accepted Answer

A)   a wage payment necessary to compensate workers for risk of injury on the job.
B)   a "wage" that contains a proﬁt-sharing component as well as traditional hourly pay.
C)   an above-market wage that minimizes a ﬁrm's labor cost per unit of output.
D)   a wage that automatically rises with the national index of labor productivity.E) A) and B)
F) C) and D)

Question 6

New classical economists say that a fully anticipated increase in aggregate demand

Accepted Answer

A)   shifts the long-run aggregate supply curve to the right.
B)   shifts the long-run aggregate supply curve to the left.
C)   moves the economy up along its vertical long-run aggregate supply curve.
D)   eventually results in a self-correcting decrease in aggregate demand.E) All of the above
F) A) and B)

Question 7

In the mainstream view, the economic instability brought about by "oil shocks" works through changes in

Accepted Answer

A)   aggregate demand.
B)   wage and price inﬂexibility.
C)   money supply.
D)   aggregate supply.E) A) and C)
F) B) and C)

Question 8

Dividing nominal gross domestic product (GDP)  by the money supply (M)  is a way to obtain the

Accepted Answer

A)   velocity of money.
B)   monetary multiplier.
C)   equation of exchange.
D)   monetary rule.E) None of the above
F) A) and B)

Question 9

If the velocity of money remains unchanged and the economy is at full employment, then the equation of exchange predicts that a rise in the money supply will

Accepted Answer

A)   increase prices.
B)   increase interest rates.
C)   increase real output.
D)   decrease nominal GDP.E) None of the above
F) A) and D)

Question 10

Refer to the graph. Assume that the economy is in initial equilibrium where AD  AD1A D _ { 1 }AD1​  intersects A
 AS1A S _ {1 }AS1​  . If
There is a decrease in aggregate demand to AD
 AD2A D _ { 2 }AD2​  , then, according to mainstream economists, if
Prices are ?exible and wages are not, this will result in an equilibrium at point

Accepted Answer

A)   B.
B)   C.
C)   D.
D)   E. E) A) and D)
F) A) and C)

Question 11

The crowding-out effect refers to the possibility that

Accepted Answer

A)   when used simultaneously, expansionary ﬁscal and monetary policies are counterproductive.
B)   the asset demand for money varies inversely with the interest rate.
C)   deﬁcit ﬁnancing will increase the interest rate and reduce investment.
D)   an increase in the supply of money will result in a decline in velocity.E) B) and C)
F) None of the above

Question 12

Accepted Answer

A)   expansionary ﬁscal policy and a tight money policy.
B)   contractionary ﬁscal policy and a tight money policy.
C)   expansionary ﬁscal policy and an easy money policy.
D)   contractionary ﬁscal policy and an easy money policy.E) B) and D)
F) None of the above

Question 13

The "eﬃciency wage" is one possible explanation for rigidities in the economy that lead to
economic instability.

Accepted Answer

A) True 
 B)False

Question 14

Which economic perspective typically views the market system as less than fully competitive, and therefore subject to macroeconomic instability?

Accepted Answer

A)   monetarism
B)   mainstream economics
C)   real-business-cycle theory
D)   rational expectations theoryE) A) and D)
F) All of the above

Question 15

Accepted Answer

A)   increase and cause the aggregate demand curve to shift from AD  AD1 to AD4A D _ { 1 } 	ext { to } A D _ { 4 }AD1​ to AD4​ 
B)   decrease and cause the investment demand curve to shift from AD  AD1 to AD4. A D _ { 1 } 	ext { to } A D _ { 4 } 	ext {. }AD1​ to AD4​.  
C)   increase and cause the aggregate demand curve to shift from AD  AD1 to AD2A D _ { 1 } 	ext { to } A D _ { 2 }AD1​ to AD2​ 
D)   decrease and cause the investment demand curve to shift from AD  AD1 to AD2. A D _ { 1 } 	ext { to } A D _ { 2 } 	ext {. }AD1​ to AD2​. E) A) and B)
F) B) and C)

Question 16

In the equation of exchange, the nominal GDP is designated by

Accepted Answer

A)   PQ/M.
B)   MV/P.
C)   PQ.
D)   MV.E) A) and C)
F) B) and D)

Question 17

Monetarists and rational expectations theorists believe that cost-push inﬂation is impossible in the
long run in the absence of excessive money supply growth.

Accepted Answer

A) True 
 B)False

Question 18

Eﬃciency wage theory says that an above-market wage can reduce labor costs per unit of output by
eliciting greater work effort, lowering supervision costs, and reducing job turnover.

Accepted Answer

A) True 
 B)False

Question 19

In the rational expectations view,

Accepted Answer

A)   wages are ﬂexible downward but prices are inﬂexible downward.
B)   prices are ﬂexible downward but wages are inﬂexible downward.
C)   discretionary policy tends to be countercyclical.
D)   discretionary policy tends to be ineffective.E) B) and C)
F) A) and D)

Question 20

Hourly Wage  Rate  Output per Hour of  Work $10696847261\begin{array} { | c | c | } \hline \begin{array} { c } 	ext { Hourly Wage } \	ext { Rate }\end{array} & \begin{array} { c } 	ext { Output per Hour of } \	ext { Work }\end{array} \\hline \$ 10 & 6 \\hline 9 & 6 \\hline 8 & 4 \\hline 7 & 2 \\hline 6 & 1 \\hline\end{array} Hourly Wage  Rate ​$109876​ Output per Hour of  Work ​66421​​  Refer to the table. The e?ciency wage is

Accepted Answer

A)   $10.
B)   $9.
C)   $8
D)   $6. E) C) and D)
F) A) and C)

Exam 19: Current Issues in Macro Theory and Policy

Eﬃciency wage theory says that an above-market wage can reduce labor costs per unit of output by eliciting greater work effort, lowering supervision costs, and reducing job turnover.

Correct Answer
verified

Monetarists and rational expectations theorists believe that cost-push inﬂation is impossible in the long run in the absence of excessive money supply growth.

Correct Answer
verified

Which economic perspective typically views the market system as less than fully competitive, and therefore subject to macroeconomic instability?

Correct Answer
verified

In the equation of exchange, the nominal GDP is designated by

Correct Answer
verified

Monetarists say

Correct Answer
verified

In the rational expectations view,

Correct Answer
verified

Correct Answer
verified

Dividing nominal gross domestic product (GDP) by the money supply (M) is a way to obtain the

Correct Answer
verified

In the mainstream view, the economic instability brought about by "oil shocks" works through changes in

Correct Answer
verified

The "eﬃciency wage" is one possible explanation for rigidities in the economy that lead to economic instability.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The view that inappropriate monetary policy was the main reason for the depth of the Great Depression in the United States is most closely associated with

Correct Answer
verified

New classical economists say that a fully anticipated increase in aggregate demand

Correct Answer
verified

If the velocity of money remains unchanged and the economy is at full employment, then the equation of exchange predicts that a rise in the money supply will

Correct Answer
verified

$A) P _ { 4 } \text { and } Q _ { 2 } B) P _ { 3 } \text { and } Q _ { 2 } C) P _ { 2 } \text { and } Q _ { 2 } \text {. } D) P _ { 1 } \text { and } Q _ { 2 } \text {. }$

Correct Answer
verified

The crowding-out effect refers to the possibility that

Correct Answer
verified

Correct Answer
verified

An eﬃciency wage is

Correct Answer
verified

Most economists today would agree with the view that "money doesn't matter" in macroeconomic theory.

Correct Answer
verified

Exam 19: Current Issues in Macro Theory and Policy

Eﬃciency wage theory says that an above-market wage can reduce labor costs per unit of output by eliciting greater work effort, lowering supervision costs, and reducing job turnover.

Correct AnswerverifiedShow Answer

Monetarists and rational expectations theorists believe that cost-push inﬂation is impossible in the long run in the absence of excessive money supply growth.

Correct AnswerverifiedShow Answer

Which economic perspective typically views the market system as less than fully competitive, and therefore subject to macroeconomic instability?

Correct AnswerverifiedShow Answer

In the equation of exchange, the nominal GDP is designated by

Correct AnswerverifiedShow Answer

Monetarists say

Correct AnswerverifiedShow Answer

In the rational expectations view,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Dividing nominal gross domestic product (GDP) by the money supply (M) is a way to obtain the

Correct AnswerverifiedShow Answer

In the mainstream view, the economic instability brought about by "oil shocks" works through changes in

Correct AnswerverifiedShow Answer

The "eﬃciency wage" is one possible explanation for rigidities in the economy that lead to economic instability.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The view that inappropriate monetary policy was the main reason for the depth of the Great Depression in the United States is most closely associated with

Correct AnswerverifiedShow Answer

New classical economists say that a fully anticipated increase in aggregate demand

Correct AnswerverifiedShow Answer

If the velocity of money remains unchanged and the economy is at full employment, then the equation of exchange predicts that a rise in the money supply will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The crowding-out effect refers to the possibility that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An eﬃciency wage is

Correct AnswerverifiedShow Answer

Most economists today would agree with the view that "money doesn't matter" in macroeconomic theory.

Correct AnswerverifiedShow Answer

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