ECON
Refer to the diagram. Rational expectations theory says that a fully anticipated decrease in aggregate demand from AD2 to AD1 will
A.
move the economy from a to b to c.
B.
shift the AS curve to the left.
C. move the economyfrom c to a new equilibrium at b.
D. move the economy directly from c to a.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
56.
Refer to the diagram. Suppose that, as expected, aggregate demand declines from AD2 to AD1. A direct move of the economy from c to a would bestreflect
A. new classical economics.
mainstream economics.
the real-business-cycle theory.
a coordination failure.
AACSB: Knowledge Application
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
Rational expectations theory assumesthat
people behave rationally and thatallproduct and resource prices are flexible both upward and downward.
firms pay above-market wages to elicit work effort.
markets fail to coordinate the actions of householdsand businesses.
markets are dominatedby monopolistic firms.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
According to new classical economists, the
short-run demand for labor curve is vertical.
short-run aggregatedemand curve is vertical.
long-run aggregatesupply curve is horizontal.
D. long-run aggregate supplycurve is vertical.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
New classicaleconomists say that an unanticipated increase in aggregate demand first
increases the price level and real output, and then reduces short-run aggregate supply such that the economy returns to the full-employment level of output.
increases the price level and real output,and then increaseslong-run aggregate supply.
increases long-run aggregate supply, and then increases the price level and real output.
reduces short-runaggregate supply, and then reduceslong-run aggregate supply.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
New classicaleconomists say that an unanticipated decrease in aggregate demand first
decreases the price level and real output, and then decreaseslong-run aggregate supply.
decreases long-run aggregate supply, and then decreasesthe price level and real output.
reduces short-runaggregate supply, and then reduceslong-run aggregate supply.
D. decreases the price level and real output, and then increases short-run aggregate supply such that the economy returns to the full-employment level of output.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
New classicaleconomists say that a fully anticipated increase in aggregate demand
shifts the long-run aggregate supply curve to the right.
shifts the long-run aggregate supply curve to the left.
C. moves the economy up along its verticallong-run aggregatesupply curve.
D. eventuallyresults in a self-correcting decrease in aggregate demand.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
New classicaleconomists say that a fully anticipated decreasein aggregate demand
shifts the long-run aggregate supply curve to the right.
shifts the long-run aggregate supply curve to the left.
C. moves the economy down along its verticallong-run aggregate supply curve.
D. eventually results in a self-correcting increase in aggregate demand.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
63.
Refer to the figure and assume the economy initiallyis in equilibrium atpoint a. In the new classical theory, an unanticipated increase in aggregate demand from AD2 to AD1 would move the economy
directly from a to d.
from a to b to d.
C. from a to e to d.
D. directly from a to f.
AACSB: Knowledge Application
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
64.
Refer to the figure and assume the economy initially is in equilibrium at point a. In the new classical theory, a fully anticipated increase in aggregate demand from AD2 to AD1 would move the economy
A. directly from a to d.
from a to b to d.
from a to e to d.
directly from a to f.
AACSB: Knowledge Application
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
65.
Refer to the figure and assume the economy initiallyis in equilibrium atpoint a. In the new classicaltheory, an unanticipated decreasein aggregate demand from AD2 to AD3 would move the economy
directly from a to h.
from a to g to h.
directly from a to d.
D. from a to c to h.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
66.
Refer to the figure and assume the economy initially is in equilibrium at point a.In the new classical theory, a fully anticipated decrease in aggregate demand from AD2 to AD3 would move the economy
A. directly from a to h.
from a to g to h.
directly from a to d.
from a to c to h.
AACSB: Knowledge Application
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
In new classical economics, a "price-level surprise"
has no effect on the economy.
B. causes a temporary change in real output.
causes a permanent change in real output.
can never occur since people correctlyanticipate the future.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
In new classical economics, the change in outputcaused by a "price-level surprise"
is shown as a shift ofthe long-run aggregatesupply curve.
does not alter the rate of unemployment, even in the shortrun.
C. is soon reversed through a shift of the short-run aggregate supply curve.
D. permanently changes the rate of unemployment.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Suppose that, as expected, aggregate demand in the economy sharply declines. New classicaleconomists say that the price level will and real output will _.
fall; remain constant
fall; fall
remain constant;fall
remain constant; rise
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Mainstream economists question the new classicalassumption that
excessive growth of the money supply is a cause of inflation.
the price level is determined by aggregate demand and aggregatesupply.
demand creates its own supply.
D. wages and prices are equallyflexible upward and downward.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Suppose aggregate demand in the economy sharply declines. Mainstream economists say that the price level (at leastfor a time) will and real output will .
decrease; remain constant
increase; remainconstant
C. remain constant; decrease
D. remain constant; increase
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
72.
Refer to the diagram and assume the economy initially is in equilibrium at point a. In the mainstream view, a decline in aggregatedemand from AD1 to AD2 would likely move the economy
A. directly from a to d.
B. directly from a to b.
from a to c, then quickly from c to d.
from a to c, then eventuallyfrom c to b.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
73.
Refer to the diagram and assume the economy initiallyis in equilibrium at point a. Suppose the aggregatedemand declines from AD1 to AD2 and the economy moves from a to c. In the mainstreamview, the resulting declinein the price level need not shifttheshort-run aggregate supply curve from AS1 to AS2 because
A. supply createsits own demand.
B. nominalwages are (at leastfor a time) inflexible downward.
firms misperceive the price-level decline as being permanent.
deflation reduces the purchasing power of the dollar.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
Type: Graph
If prices and wages are inflexible downward, a decrease in aggregate demand will
reduce the price level but not real output.
increase short-runaggregate supply.
decrease short-runaggregate supply.
D. reduce real output but nottheprice level.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct?
An efficiency wage is
a below-market wage.
B. an above-marketwage.
a "wage" that contains a profit-sharing component.
a wage that is free to rise or fall from day to day, dependingon labor supply and demand.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 19-01 Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
An efficiency wage is
a wage payment necessary to compensate workers for risk of injury on the job.
a "wage" that contains a profit-sharing component as well as traditional hourly pay.
C. an above-marketwagethat minimizes a firm's labor cost per unit ofoutput.
D. a wage thatautomatically rises with the national index of labor productivity.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01 Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
Hourly Wage RateOutput Per Hour Of Work$10696847261 77.
Refer to the table. Atthe$8 wage, labor cost perunit of output is
A. $1.25.
B. $1.50.
C. $2.00.
D. $1.67.
AACSB: Knowledge Application
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
Type: Table
Hourly WageRateOutput Per HourOf Work$10696847261 78.
Refer to the table. The efficiency wage is
A. $10.
B. $9.
C. $8 D. $6.
AACSB: Knowledge Application
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
Type: Table
A higher wage could result in a lower labor cost per unit ofoutput than a lower wage if the higher wage
brings forthgreater work effort.
increases supervision costs.
increases job turnover.
increases worker absenteeism.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
A higher wage could result in a lower labor cost per unit ofoutput than a lower wage if the higher wage
is accompanied by an offsetting declinein fringe benefits.
increases supervision costs.
C. reduces job turnover.
D. increasesworker absenteeism.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01 Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
If firms are paying efficiency wages, they
may be reluctantto increase nominal wages when aggregate demand increases.
are highly vulnerable to import competition.
may be targeted for takeover by firms paying market wages.
D. may be reluctant to cut wages when aggregate demand declines.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01 Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
In the insider-outsider theory,
insiders are workers who retain employment during recession.
insiders are managers who have more information about their firms' performance than outsiders.
insiders are "principals" and outsiders are "agents."
outsiders are foreigners.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01 Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
In the insider-outsider theory,
outsiders are workers who retain employment during recession.
insiders are managers who have more information about their firms' performance than outsiders.
insiders are "principals" and outsiders are "agents."
D. outsidersare laid-off workers and other qualified unemployed workers.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
Suppose laid-offworkers and other qualified unemployed workers offer to work for less than the wages being paid existing employed workers,but employers do not hire these workersfor fear that existing workers will refuse to cooperatewith them. This situationbest describes the
efficiency wage theory.
theory of compensating wage differentials.
C. insider-outsider theory.
D. rationalexpectations theory.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classicaleconomists believe the economy will " self-correct" from aggregate demand and aggregatesupply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
The insider-outsider theory implies that
wages are flexibleboth upward and downward.
unemployment quicklyreduces market wages.
agents pursue their own agendas, sometimesat the expense of principals.
D. wages may be inflexible downward.
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-02 Discuss why new classical economists believe the economy will "self-correct"from aggregate demand and aggregate supply shocks.
Test Bank: I Topic: Does the Economy Self-Correct? Topic: What Causes Macro Instability?
Which of the followingpairs helps explain why self-correction from a declinein aggregate demand in the economymay be slow rather than rapid?
theory of compensation wage differentials; theory of derived demand for labor
B. efficiency wage theory;insider-outsider theory
insider-outsider theory; principle-agent problem
externalities; efficiencywage theory
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Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01 Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Test Bank: I Topic: Does the Economy Self-Correct?
The traditional monetary rule is the idea that
the annual rate of increase in the money supply should be equal to the potentialannual growth rate of real GDP.
the annual rate of increase in the money supply should be equal to the long-term increase in the price level.
an expansionary fiscal policy should always be accompanied by an easy monetarypolicy.
monetary policy only affectsthe economy 6 to 9 months after the money supplyis changed.
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Blooms: Remember Difficulty:01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
Adherents of the traditional monetary rule advocatethat the
functional finance approach to fiscal policybe adopted.
B. money supply should be increased by a constant rate year after year.
money supply should be reduced during inflation and increasedduring recession.
money supply should be increased duringinflation and reducedduring recession.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
Adherents of the traditional monetary rule say that the supply of money should be
increased at a constant rate each year.
decreased during recession and increasedduring inflation.
held constant over time.（错误的）
increased during recession and decreased during inflation.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
90.
Answer this question on the basis of the diagram and the equation of exchange.Assume that the velocity of money is constant at4.Suppose that the increase of aggregatesupply from AS1 to AS2 indicates the economy's average increasein real output per year. Accordingto monetarists, the proper monetary rule for price stability would be to increasethe money supply by
zero percent per year.
4 percent per year.
10 percent per year.
D. 30 percent per year.
AACSB: Knowledge Application
Blooms: UnderstandDifficulty: 02 Medium
Learning Objective: 19-01Describe alternative perspectives on the causes of macroeconomic instability, including the views of mainstream economists, monetarists, real-business-cycle advocates, and proponents of coordination failures.
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
Topic: What Causes Macro Instability?
Type: Graph
Monetarists and rational expectations theorists generallyagree that
the Federal Reserve should adhere to a monetaryrule.
the rate of interest and the price of bonds are positively or directlyrelated.
the moneysupply cannotbe measured and therefore cannot be controlled by the Federal Reserve.（错误的）
prices and wages are inflexible downward.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
According to monetarists, an expansionary fiscal policy
will be ineffective because the interest rate will rise and crowd out private investment spending.
should not be permittedso long as a public debt exists.
should be used only when unemployment exceeds 6 percent of the labor force.
will be effective, providedthe money supply is held constant.
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Blooms: Remember Difficulty:01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
The crowding-out effect refers to the possibility that
when used simultaneously, expansionary fiscal and monetarypolicies are counterproductive.
the asset demand for money varies inversely with the interest rate.
C. deficit financing will increase the interestrate and reduce investment.
D. an increase in the supply of money will result in a declinein velocity.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
According to monetarists, an expansionary fiscal policy is a weak stabilization tool because
the asset demand for money varies inverselywith the rate of interest.
B. government borrowing to finance a deficit willraise the interest rate and reduce private investment.
government borrowing will reduce the supply of money in circulation and depress the GDP.
government borrowing to financea deficit will lower interestrates, increase money balances, and lower velocity.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
Assume there is an increasein government spending and a reduction in net taxes. With a specific money supply,the consequent
contractionary impact might be lessenedby the resultingincrease in the interest rate.
B. expansionary impact might be lessened by the resultingincrease in the interest rate.
contractionary impact might be enhancedby the resulting decline in the interest rate.
expansionary impact might be enhanced by the resulting decline in the interest rate.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
According to monetarists, a fiscal deficit will be associated with an increase in real output
regardless ofthecharacter of accompanying changes in M or V.
only if itis accompanied by an increasein the demand for money.
C. only if it is accompanied by an increase in the supplyof money.
D. only if it is financed by selling government bonds to the public.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
The rational expectations perspective suggests that
fiscal policy is more powerful than monetary policy.
monetary policyis more powerful than fiscal policy.
C. fiscal and monetary policy are not likelyto achieve their stated aims.
D. fiscal policy works only to the extent that it is accompanied by fully anticipated changes in the money supply.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
The theory of rational expectations concludes that
the public's expectations can influence the outcome of monetary policy but not of fiscal policy.
the public's expectations can influence the outcome of fiscal policy but not of monetary policy.
the public's expectations as to the effects of economic policies tends to reinforcethe effectiveness ofthose policies.
D. by reactingin its self-interest to the expected effects of stabilization policy, the public tends to negate the impactof those policies.
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Blooms: Remember Difficulty:01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
In comparingmonetarism and rational expectations theory, we find that
both favor policy rules and for the same reasons.
B. both favor policy rules, butfordifferent reasons.
both favor discretionary policies.
the former favors discretionary policy, while the latter favors policy rules.
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Blooms: Remember Difficulty:01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
In recent years, economists holdingmonetarist views have replacedtheir call for a monetary rule with a call for
A. artful Fed managementof interest rates.
B. inflationtargeting.
nominal GDP targeting.
inflationary and recessionary gap analysis.
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Blooms: Remember Difficulty: 01 Easy
Learning Objective: 19-03 Identify and describe the variations of the debate over " rules" versus " discretion" in conducting stabilization policy.
Test Bank: I Topic: Rules or Discretion?
Proponents of inflationtargeting generally think that
<