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Chapter 19 - Current Issues in Macro Theory and Policy
1. From the mainstream perspective, instability in the economy is due to:
2. From the mainstream perspective, one major source of instability in the macro economy is
the volatility of:
Chapter 19 - Current Issues in Macro Theory and Policy
3. From the mainstream perspective, the economic instability brought about by "oil shocks"
work through changes in:
4. Which of the following is the basic equation underlying aggregate expenditures?
5. According to mainstream economists the basic determinant of real output, employment, and
the price level is:
Chapter 19 - Current Issues in Macro Theory and Policy
6. From the monetarist perspective:
7. The view that changes in the money supply is the primary cause of change in real output
and the price level is most closely associated with:
8. From a monetarist perspective, instability in the macro economy arises from:
Chapter 19 - Current Issues in Macro Theory and Policy
9. The equation of exchange is:
10. Dividing nominal gross domestic product (GDP) by the money supply (M) is a way to
obtain:
11. The number of times per year the average dollar is spent on final goods and services is
the:
Chapter 19 - Current Issues in Macro Theory and Policy
12. Given the equation of exchange, if V is stable, an increase in M will necessarily increase:
13. The equation of exchange indicates that:
14. In the monetarist equation of exchange, MV is the monetarist counterpart of:
Chapter 19 - Current Issues in Macro Theory and Policy
15. Monetarists argue that the amount of money the public will want to hold depends
primarily on the level of:
16. The equation of exchange suggests that if the velocity of money and the quantity of goods
and services are held constant, a(n):
17. From the strict monetarist perspective, a large increase in the money supply will have:
Chapter 19 - Current Issues in Macro Theory and Policy
18. Monetarists argue that the relationship between:
19. If the velocity of money remains unchanged and with full employment in the economy,
the equation of exchange predicts that a rise in the money supply will:
20. Mainstream economics views monetary policy as a:
Chapter 19 - Current Issues in Macro Theory and Policy
21. If the amount of money in circulation is $8 billion and the value of total output is $40
billion in an economy, the:
22. Assume monetary equilibrium exists — that is, the desired and actual supply of money are
equal — when 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 GDP by:
23. If nominal GDP is $848 billion and the velocity of money is 4, the:
Chapter 19 - Current Issues in Macro Theory and Policy
24. If M is $800, P is $2, and Q is 1,200, then:
25. 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
26. 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:
Chapter 19 - Current Issues in Macro Theory and Policy
27. 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:
28. Monetarists would argue that the severe recession of 2007-2009 was primarily caused by:
29. Real-business-cycle theory focuses on factors affecting:
Chapter 19 - Current Issues in Macro Theory and Policy
30. Real-business-cycle theory suggests that changes in:
31. According to real-business-cycle theory, recessions are caused by:
32. The idea that business fluctuations are primarily caused by factors affecting aggregate
supply rather than aggregate demand is a central tenet of:
Chapter 19 - Current Issues in Macro Theory and Policy
33. In the view of real-business-cycle theory, an increase in the long-run aggregate supply
would lead to a(n):
34. In real-business-cycle theory, changes in the:
Chapter 19 - Current Issues in Macro Theory and Policy
35. Refer to the above graph. It is given that the economy is at an initial equilibrium at point
A. In mainstream economic view, the effect of a significant increase in productivity on the
economy can best be represented by a shift from:
Chapter 19 - Current Issues in Macro Theory and Policy
36. Refer to the above 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:
37. Refer to the above 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:
Chapter 19 - Current Issues in Macro Theory and Policy
38. Coordination failures occur when people lack some way to jointly coordinate their actions
to reach a(n):
39. If households and firms cut back on spending because they expect other household and
firms to do so, and this self-fulfilling prophecy causes a recession, then this would be an
example of:
Chapter 19 - Current Issues in Macro Theory and Policy
40. If the economy diverges from its full-employment output, new classical economics would
suggest that:
41. New classical economics suggests that in the long-run changes in aggregate demand will
produce:
Chapter 19 - Current Issues in Macro Theory and Policy
42. If there is an unanticipated increase in aggregate demand, then according to new classical
economics, the economy will self-correct with a(n):
43. Within the aggregate demand-aggregate supply framework, monetarists argue that a
change in aggregate:
Chapter 19 - Current Issues in Macro Theory and Policy
44. Refer to the above graph. Assume that the economy is in initial equilibrium where AD1
intersects AS1. If there is an unanticipated increase in aggregate demand, then according to
new classical economics the economy will self-correct with a:
Chapter 19 - Current Issues in Macro Theory and Policy
45. Refer to the above graph. Assume that the economy is in initial equilibrium where AD1
intersects AS1. If there is an unanticipated increase in aggregate demand and the economy
self-corrects, then the adaptive-expectations adjustment path would go from point:
46. Refer to the above graph. Assume that the economy is in initial equilibrium where AD1
intersects AS1. If there is an anticipated increase in aggregate demand to AD2, then according
to the rational expectations economists, the path for adjustment runs from point:
Chapter 19 - Current Issues in Macro Theory and Policy
47. Refer to the above graph. Assume that the economy is in initial equilibrium where AD1
intersects AS1. If there is an unanticipated decrease in aggregate demand to AD2, then in the
view of new classical economics the economy will:
