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31 Cards in this Set
- Front
- Back
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What is not part of the basic Keynesian model? |
A functioning price system in labor, commodity, and capital markets. |
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Which of the following is not true with respect to the classical macro model? |
The interest rate is purely a nominal monetary variable |
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Which economic policy model is not true for the various schools of macro thought? |
Monetarist - policy - economy--short run effect on nominals, long run effect on reals |
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Robert Lucas would disagree with which aspect of business cycle? |
Inflexible prices |
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Which of the following does not describe why Say's law is important? |
To prove that supply equals demand in all markets simultaneously (general equilibrium) |
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Suppose the natural rate of unemployment is 5% and the overall economy-wide unemployment rate is 2%. This would not indicate: |
An unexpected inflation "shock" |
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Which of the following is not true? |
When a country runs a large merchandise trade deficit the country will enter a rescission |
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Suppose the money supply decreases by 6%, velocity increases by 3%, and real output decreases by 5%. What is the rate of inflation or deflation? |
2% inflation |
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What is true with supply-side economics? |
Incentives are important for production side of the economy |
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What occurred during neoclassical synthesis? |
The Keynesians agreed Milton Friedman that increased aggregate demand policies influence the real economy in a short run recession, but nominals in the long run after full employment is reached |
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The economy is operating at $150 Billion GNP and full-employment GNP is $200 Billion. Assume the slope of the consumption function is .9. How much new spending is required to restore full employment equilibrium? 50 Billion 45 Billion 350 Billion 10 Billion None of the above |
None of the above |
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Suppose the total money supply equals $1.8 trillion, and the currency to deposit ration is .2 and thank bank reserves plus cash in circulation equal $600 billion dollars. What is the reserve deposit requirement? |
20% |
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Suppose the economy is in a recession. The Federal Reserve buys new securities to stimulate the economy. The reason this will expand (multiply) total bank deposits arise from: |
The fractional reserve banking system |
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The new classical macro school would disagree with which of the following? |
A horizontal aggregate supply curve |
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What is true with respect to the macro models of J. M. Keynes and Milton Friedman? |
Friedman believes that divergences between nominal market and "natural or real rates" of interest are not permanently sustainable |
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What is true with respect the variables in the Lucas "surprise supply equation?" |
E = Random Error Term |
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What school of thought believed, "Prices are determined by their objective historical cost of production?" |
Classical |
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What is not true with respect to the efficient capital market hypothesis and macroeconomic theory? |
The weak-form of the efficient capital market hypothesis has little empirical evidence to support it |
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What is not a reason money velocity begins to accelerate during the a period of hyperinflation is because |
The demand to hold cash-balances accelerates with inflationary risk |
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Which of the following would decrease the price level ceteris paribus? |
An increase in the demand to hold currency relative to bank deposits |
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Which of the following is possible? An increase in the relative price of shoes causes a change in the aggregate supply curve. An increase in the relative price of shoes causes a change in the demand for shoes An increase in the nominal price of shoes causes a change in the supply of shoes An increase in the nominal price level causes a change in the aggregate demand |
This is a trick question |
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Which of the following is not true? |
The extreme supply-side case has tax cuts shifting the aggregate supply curve leftward |
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Which of the following is true concerning the money supply? The real money supply is the nominal GNP deflated by a price index The nominal money supply is the total GNP not indexed for inflation The real money supply is the nominal GNP adjusted for inflation The nominal money supply is the real GNP adjusted by real interest rates |
None of the above is true |
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Which of the following is true concerning the monetary dynamics of inflation? |
Increased supply of nominal cash-balances is the same as increased real cash-balances before the price level adjusts |
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What is found in Arthur Laffer's model of the macro economy |
The trade-off between leisure and all other goods |
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Suppose golf ball workers in Japan earn $12 per hour, while gold ball workers in the Philippines earn $4 per hour on average. Assume these workers in Japan are 4 times more productive then workers in the Philippines. What happens given free trade and zero transaction costs? |
Workers in the Philippines wages decrease to $3 per hour |
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What is true? |
The difference between frictional unemployment is that frictional unemployment exists even in a general equilibrium whereas cyclical unemployment exists in a recession |
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Which of the following would supply-side economist Arthur Laffer agree with? |
Depending on how people respond to incentives determines the shape of the Laffer curve |
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Suppose we have the following information. The Federal Reserve buys an additional $15 billion of government securities using the is open market operations. Also, assume that the reserve to deposit requirement is .2. If banks hold no excess-reserves (they lend out every dollar possible), which of the following is true concerning bank deposits? |
Total deposits expand by $75 Billion |
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The distinction between normative and positive economic theory is |
Normative theory deals with ethics, positive theory deals with current economic conditions |
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Suppose there are two countries, the United Kingdom and France. The UK inflation rate is 4% while France's inflation rate is 2%. Before the exchange rate adjusts, which of the following will occur? |
There will be a surplus of pounds in France |
