Exam 15: Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

A) the aggregate supply curve is a vertical line at a fixed level of prices.
B) an increase in aggregate demand would cause a change in the price level.
C) the government should take an active role in the economy to restore equilibrium.
D) changes in aggregate demand does not determine equilibrium real GDP.
E) the private sector is not an important source for shifts in aggregate demand.

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A) will stabilize the economy if the money supply is increased during recessions and decreased during expansions.
B) will effectively reduce the unemployment rate below its natural rate.
C) will stabilize the economy if the money supply is reduced during recessions and increased during expansions.
D) will destabilize the economy only if the government uses fiscal policy to change equilibrium income.
E) will destabilize the economy and cause a business cycle of its own, regardless of whether fiscal or monetary policy is used.

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A) The new classical school
B) The new Keynesian school
C) The traditional Keynesian school
D) The monetarist school
E) The classical school

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A) Rationalist economics
B) Monetarist economics
C) Classical economics
D) Keynesian economics
E) Marxist economics

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A) wages and prices are flexible in the short run.
B) wages and real GDP are not flexible in the long run.
C) wages and real GDP are flexible in the short run.
D) wages and prices are not flexible in the short run.
E) wages and prices are not flexible in the long run.

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A) Traditional Keynesians
B) New Keynesians
C) Monetarists
D) Classical economists
E) New classical economists

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A) Price level increases with increase in aggregate demand
B) The aggregate supply curve is assumed to be perfectly inelastic
C) The aggregate demand curve is assumed to perfectly elastic
D) Price level is solely determined by the aggregate demand curve
E) Changes in aggregate demand determine equilibrium real GDP

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A) Fluctuations in private spending does not affect aggregate demand in an economy.
B) Investment spending remains relatively constant irrespective of the supply shocks.
C) Fluctuations in aggregate demand are not the primary source of problems for policymakers.
D) The government should limit its role to administrative functions.
E) Monetary and fiscal policies often fail to restore macroeconomic equilibrium.

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A) A change in the fiscal policy affects the equilibrium level of real GDP but has no impact on the equilibrium price level.
B) A government-induced shift in aggregate demand affects the real GDP only if they are expected by the economic agents.
C) A change in aggregate demand affects the aggregate price level only if the aggregate supply curve is perfectly elastic.
D) A change in monetary policy affects the equilibrium level of real GDP only if those changes are unexpected.
E) An expected change in a monetary or fiscal policy leads to a proportional shift of the long run supply curve.

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A) Keynesians and new Keynesians
B) Only monetarists
C) Only new classical economists
D) Monetarists and new classical economists
E) Monetarists and Keynesians

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A) wage rates are perfectly flexible.
B) people do not have perfect information about the economy.
C) prices are fixed for long periods of time.
D) the price of resources, technology, and expectations cannot influence the equilibrium level of real GDP.
E) changes in aggregate demand change only the real GDP.

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A) the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.
B) the aggregate supply curve is negatively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output.
C) the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes positively sloped, as more and more industries reach their full capacity level of output.
D) the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output.
E) the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.

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