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| 1 | |
Real business cycle theory suggests that: |
| | A) | real GDP rarely diverges from its long-term potential |
| | B) | coordination failures are the primary cause of recessions |
| | C) | macro instability is caused by shocks to long-run aggregate supply |
| | D) | aggregate demand shocks are primarily caused by inappropriate monetary policy |
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| 2 | |
Use the following diagram to answer the next question.
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According to the real business cycle theory of recessions, a leftward shift in aggregate supply as illustrated in the diagram: |
| | A) | would be caused by the decrease in aggregate demand from AD1 to AD2 |
| | B) | would lead to a subsequent decrease in aggregate demand from AD1 to AD2 |
| | C) | would cause a drop in resource prices and lead to a subsequent return to the original aggregate supply curve |
| | D) | could never happen |
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| 3 | |
According to the new classical view, shifts in aggregate demand: |
| | A) | are always anticipated, and as such, have no effect on real output |
| | B) | are never anticipated, and as such, have no effect on real output |
| | C) | have no effect on real output if they are fully anticipated |
| | D) | have no effect on real output if they are unanticipated |
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| 4 | |
Which school of thought holds that most macro instability is caused by inappropriate government policy? |
| | A) | Real business cycle theory |
| | B) | Coordination failure theory |
| | C) | Keynesianism |
| | D) | Monetarism |
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| 5 | |
Mainstream macroeconomists believe the two main sources of macroeconomic instability are poorly timed changes in the money supply and highly volatile consumption spending. |
| | A) | True |
| | B) | False |
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| 6 | |
According to the "coordination failure" theory, a recession: |
| | A) | cannot occur if demand shocks are fully anticipated |
| | B) | is a direct outcome of failed macro policies |
| | C) | can occur if everyone expects everyone else to curtail their spending |
| | D) | typically is caused by adverse aggregate supply shocks |
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| 7 | |
All of the following are components of the equation of exchange except: |
| | A) | taxes |
| | B) | real GDP |
| | C) | the velocity of money |
| | D) | the price level |
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| 8 | |
Use the following diagrams to answer the next question.
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Refer to the diagrams. Real business cycle theory is best portrayed by: |
| | A) | figure A |
| | B) | figure B |
| | C) | figure C |
| | D) | none of the above |
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| 9 | |
Monetarists say the velocity of money is stable and predictable. |
| | A) | True |
| | B) | False |
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| 10 | |
Use the following information to answer the next question.
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Refer to the table. The efficiency wage is: |
| | A) | $16 |
| | B) | $14 |
| | C) | $12 |
| | D) | $10 |
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