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| 1 | |
Economists disagree over the following except __________. |
| | A) | the speed at which the labour market clears |
| | B) | how expectations are formed |
| | C) | the composition of aggregate demand |
| | D) | the possibility of hysteresis |
| | E) | the relative importance of the short run and long run |
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| 2 | |
___________ expectations are not explained within the model. |
| | A) | Endogenous |
| | B) | Exogenous |
| | C) | Rational |
| | D) | Adaptive |
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| 3 | |
Extrapolative expectations assume that the future is ____________________________. |
| | A) | an extension of the recent past |
| | B) | a random walk |
| | C) | guided by optimising behaviour |
| | D) | never changes |
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| 4 | |
Classical economics assumes that _______________________ restore the economy to its position of full employment and potential output. |
| | A) | monetary expansion |
| | B) | fiscal stimulus |
| | C) | wage and price flexibility |
| | D) | incomes policies |
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| 5 | |
New Classical economists believe that whatever level of unemployment is observed is the natural rate of unemployment. |
| | A) | True |
| | B) | False |
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| 6 | |
Demand management through monetary and fiscal policy is completely impotent when we assume _________ expectations and _____ clearing. |
| | A) | autoregressive, market |
| | B) | rational, market |
| | C) | adaptive, price |
| | D) | rational, price |
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| 7 | |
Low government spending will prevent large government __________ from bidding up interest rates and _______________ private investment. |
| | A) | borrowing, crowding out |
| | B) | lending, encouraging |
| | C) | borrowing, encouraging |
| | D) | lending, crowding out |
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| 8 | |
New Classical economists believe that long-term trends and short-run fluctuations are caused by changes in aggregate demand. |
| | A) | True |
| | B) | False |
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| 9 | |
Identify which issue is not considered to be important in various schools of macroeconomic thought: |
| | A) | the speed with which the labour market clears |
| | B) | population growth |
| | C) | expectation formation |
| | D) | the relative importance of short run and long run |
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| 10 | |
Of the goods, labour, money and foreign exchange markets the one to adjust most slowly is _______. |
| | A) | foreign exchange |
| | B) | money |
| | C) | labour |
| | D) | goods |
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| 11 | |
An economist who believed that markets clear almost instantaneously would be regarded as ______________. |
| | A) | a Keynesian |
| | B) | a gradual monetarist |
| | C) | a new Keynesian |
| | D) | a new classical macroeconomist |
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| 12 | |
New classical macroeconomists believe that government should fine-tune aggregate demand. |
| | A) | True |
| | B) | False |
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| 13 | |
New classical macroeconomist advocate that policy should __________ and __________. |
| | A) | pursue price stability, supply-side policies |
| | B) | dampen the business cycle, use fiscal stimulus |
| | C) | reduce interest rates, expansionary monetary policy |
| | D) | reduce inequality, erect trade barriers |
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| 14 | |
Real business cycle theorists argue that ____________ can explain short and long term fluctuations in output. |
| | A) | imperfect labour markets |
| | B) | rational expectations |
| | C) | intertemporal decisions of households firms and government |
| | D) | sun spot cycles |
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| 15 | |
Gradualist monetarists advocate demand management by fiscal fine tuning. |
| | A) | True |
| | B) | False |
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| 16 | |
If an economist suggested that government should concentrate on long-run policies to keep inflation down and supply-side policies to raise potential output, this economist could be described as __________. |
| | A) | moderate Keynesian |
| | B) | gradualist monetarist |
| | C) | new Keynesian |
| | D) | extreme Keynesian |
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| 17 | |
A moderate Keynesian would not advocate ____________. |
| | A) | stabilization policies |
| | B) | supply-side policies |
| | C) | government intervention |
| | D) | non-intervention |
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| 18 | |
New Keynesians provide macroeconomic foundations for Keynesian macroeconomics. |
| | A) | True |
| | B) | False |
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| 19 | |
New Keynesians claim that market failure results from _________ and ___________. |
| | A) | information problems, externalities |
| | B) | barriers to entry, public goods |
| | C) | the free rider problem, merit goods |
| | D) | public goods, merit goods |
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| 20 | |
Extreme Keynesians believe that when the economy is in recession _______. |
| | A) | unemployment will not last long |
| | B) | unemployment will cause the real wage to fall |
| | C) | aggregate demand will always respond to lower interest rates |
| | D) | the government should use expansionary fiscal and monetary policy to raise output and employment |
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