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The new classical macroeconomic model assumes that expectations are formed and that wages and prices are with respect to the expected price level

The new classical macroeconomic model assumes that expectations are ________ formed and that wages and prices are ________ with respect to the expected price level.

A) adaptively; completely flexible

B) adaptively; sticky

C) rationally; completely flexible

D) rationally; sticky

 

2) In the new classical macroeconomic model developed by Lucas and Sargent, an anticipated monetary expansion will

A) increase aggregate output.

B) reduce aggregate output.

C) have no effect on aggregate output.

D) increase aggregate output and the aggregate price level.

 

3) In the new classical macroeconomic model developed by Lucas and Sargent, expansionary macropolicies affect aggregate output

A) only when the macropolicy change is anticipated.

B) only when the macropolicy change is unanticipated.

C) only after a long and variable lag, provided the policy is anticipated.

D) relatively quickly, provided the policy is anticipated.

 

4) An expansionary monetary policy will cause aggregate output to expand in the new classical macroeconomic model

A) if the policy is unanticipated.

B) if the policy is anticipated.

C) only after a long and variable lag, provided the policy is anticipated.

D) never; output will never expand in the new classical model when monetary policy is changed.

 

5) According to the new classical model,

A) unanticipated policy has no effect on the business cycle.

B) only anticipated policy can influence the business cycle.

C) anticipated policy has no effect on the business cycle.

D) unanticipated policy may or may not have an effect on the business cycle.

6) Steve the economist tells his students that one anticipated policy is just like any other?none has any effect on aggregate output. You can probably infer that he is a

A) Keynesian economist.

B) monetarist.

C) proponent of activist policies.

D) new classical economist.

 

7) In the view of the new classical economists, an increase in the money supply will affect aggregate output and employment only if the increase in money supply is

A) anticipated.

B) expected.

C) unanticipated.

D) the result of an announced open market operation.

 

8) In the new classical model, an anticipated increase in the money stock will cause

A) the price level and aggregate output to increase.

B) aggregate output to increase.

C) the price level to increase.

D) no effect on either the price level or aggregate output.

 

9) In the new classical model,

A) wages and prices are sticky with respect to expected changes in the price level.

B) a rise in the expected price level results in an immediate and equal rise in wages and prices.

C) an anticipated increase in the money supply will increase aggregate output temporarily.

D) unanticipated policy has no effect on aggregate output and unemployment.

Mar 14 2020 View more View Less

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