978-1259723223 Test Bank TBChap039 Part 4

subject Type Homework Help
subject Pages 14
subject Words 4971
subject Authors Campbell McConnell, Sean Flynn, Stanley Brue

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39-61
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 39-01 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:
What Causes Macro Instability?
134. Efficiency wage theory says that an above-market wage can reduce labor costs per unit of
output by eliciting greater work effort, lowering supervision costs, and reducing job turnover.
135. In the insider-outsider theory, insiders are agents and outsiders are principals.
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136. Nearly all modern economists support the idea of a monetary rule.
137. Monetarists say that fiscal policy, such as a tax cut, will only affect the level of real GDP
if it entails a change in the supply of money.
138. From the mainstream perspective, instability in the economy is due to
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
What Causes Macro Instability?
139. In the mainstream view, one major source of instability in the macroeconomy is the
volatility of
140. In the mainstream view, the economic instability brought about by "oil shocks" works
through changes in
141. Which of the following is the basic equation underlying aggregate expenditures?
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142. According to mainstream economists, the basic determinant of real output, employment,
and the price level is
143. In the monetarist view,
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
What Causes Macro Instability?
144. The view that changes in the money supply are the primary cause of change in real output
and the price level is most closely associated with
145. From a monetarist perspective, instability in the macroeconomy arises from
146. The equation of exchange is
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39-66
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 39-01 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: II
Topic:
What Causes Macro Instability?
147. Dividing nominal gross domestic product (GDP) by the money supply (M) is a way to
obtain the
148. The average number of times per year that a dollar bill is used to pay for final goods and
services is the
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39-67
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
What Causes Macro Instability?
149. Given the equation of exchange, if V is stable, an increase in M will necessarily increase
150. The equation of exchange indicates that
151. In the monetarist equation of exchange, MV is the monetarist counterpart of
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39-68
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 39-01 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: II
Topic:
What Causes Macro Instability?
152. Monetarists argue that the amount of money the public will want to hold depends
primarily on the level of
153. The equation of exchange suggests that if the velocity of money and the quantity of goods
and services are held constant, a(n)
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154. In the strict monetarist view, a large increase in the money supply will have
155. Monetarists argue that the relationship between
156. If the velocity of money remains unchanged and the economy is at full employment, then
the equation of exchange predicts that a rise in the money supply will
page-pfa
39-70
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 39-01 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: II
Topic:
What Causes Macro Instability?
157. Mainstream economics views monetary policy as a
158. If the amount of money in circulation is $8 billion and the value of total output is $40
billion in an economy, then the
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159. Assume monetary equilibrium exists; that is, the desired and actual supply of money are
equal. Also assume that nominal GDP equals $960 billion and the money supply is $160
billion. From a strict monetarist view,
an increase in the money supply by $12 billion will
increase nominal GDP by
160. If nominal GDP is $848 billion and the velocity of money is 4, then the
161. If M is $800, P is $2, and Q is 1,200, then
page-pfc
39-72
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 39-01 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: II
Topic:
What Causes Macro Instability?
162. If the money supply rises from $600 billion to $800 billion and nominal GDP stays
unchanged at $4,800 billion, then the income velocity of money
163. If money supply is $800 billion and nominal GDP is $2 trillion, then the average number
of times that money is spent and changes hands is
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
What Causes Macro Instability?
164. Assume that M is $200 billion and V is 6. If V increases by 15 percent, then, according to
the monetarist equation, nominal GDP will have increased by
165. In the mainstream view, the severe recession of 20072009 was caused by
166. Monetarists would argue that the severe recession of 20072009 was primarily caused by
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written consent of McGraw-Hill Education.
C. excessive money supply creating a bubble in some sectors of the economy.
D. too much deregulation of the financial sector in previous years.
167. Real-business-cycle theory focuses on factors affecting
168. Real-business-cycle theory suggests that changes in
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
macroeconomic instability, including the views of mainstream economists, monetarists,
real-business-cycle advocates, and proponents of coordination failures.
Test Bank: II
Topic:
What Causes Macro Instability?
169. According to real-business-cycle theory, recessions are caused by
170. The idea that business fluctuations are primarily caused by factors affecting aggregate
supply rather than aggregate demand is a central tenet of
171. In the view of real-business-cycle theory, an increase in the long-run aggregate supply
would lead to a(n)
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
price level would be unchanged.
B. increase in aggregate demand by an equal amount, so real output and the price level would
increase.
C. decrease in aggregate demand, so real output would increase and the price level would
decrease.
D. decrease in aggregate demand, so real output and the price level would increase.
172. In real-business-cycle theory, changes in the
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173.
Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the
mainstream economic view, the effect of a significant increase in productivity on the economy
can best be represented by a shift from
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174.
Refer to the graph. Assume that the economy is in initial equilibrium where AD1 intersects
ASLR1. If the economy experiences a change in technology that increases productivity and
resources, then real-business-cycle theory would suggest that this macroeconomic instability
would eventually produce a new equilibrium at point
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175.
Refer to the graph. Assume that the economy was initially in equilibrium at point A. If there is a
significant technological innovation in the economy, then according to real-business-cycle
theory, aggregate
176.
Coordination failures occur when people lack some way to jointly coordinate their actions
to reach a(n)
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39-80
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Difficulty:
02 Medium
Learning Objective: 39-01 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: II
Topic:
What Causes Macro Instability?
177.
If households and firms cut back on spending because they expect other households and
firms to do so, and this self-fulfilling prophecy causes a recession, then this would be an
example of
178.
If the economy diverges from its full-employment output, new classical economics would
suggest that

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