chapter_15_-_expectations_and_economic_fluctuations

chapter_15_-_expectations_and_economic_fluctuations - Test...

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Test Bank Macroeconomics: Theory and Policy Chapter 15: Expectations & Economic Fluctuations B. Modjtahedi Question 1 Conducting an expansionary demand-management policy in a recession and a contractionary policy during an expansion is specifically called: A. The policy of leaning against the wind. B. A supply-side policy. C. Inflationary policy. D. Demand management policy. E. None of the above. Question 2 What type of a policy is called leaning against the wind? A. Conducting an expansionary policy in a situation of stagflation. B. Conducting a contractionary policy in a situation of stagflation. C. Conducting a supply-side policy when GDP goes down. D. Conducting an expansionary demand-management policy in a recession and a contractionary policy during an expansion E. None of the above. Question 3 What events called into question the Keynesian hypothesis about how recessions begin? A. The stagflations of 1970s. B. The recession of 1990-91. C. The disinflation and recession that started in 1980. D. The Great Depression. E. None of the above. Question 4 What was one of the reasons that caused economists to lose faith in the original version of the Keynesian model? A. The recessions of 1970s were mostly due to demand shocks while according to Keynes recessions are due to supply shocks. B. The recessions of 1970s were mostly due to supply shocks while Keynes posited that recessions are due to demand shocks. C. The Volcker disinflation showed that a recession could start because of a contractionary monetary policy. D. Economists did not find any empirical support for wage and price stickiness. E. None of the above. Question 5 What is “classical” about the new classical models? A. They assume that fiscal and monetary policies are totally ineffective in changing the real GDP, even in the short run. B. They assume that economic policy is effective in the short run due to wage and price stickiness. C. They assume self-interest and wage price flexibility.
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D. They assume money is neutral, even in the short run. E. None of the above. Question 6 Who was the main architect of the rational-expectations model? A. Milton Friedman. B. John Maynard Keynes C. Robert Lucas, Jr. D. Edward Prescott E. None of the above. Question 7 Which of the following is true about the rational expectations hypothesis? A. It assumes that wages and prices are sticky. B. It assumes that wages and prices are flexible. C. It assumes that workers and firms have perfect knowledge of all the prices in the economy. D. It assumes that changes in the labor demand cause business cycles. E. None of the above. Question 8 Which of the following is true about the rational expectations hypothesis?
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This note was uploaded on 03/24/2010 for the course ECON Econ1B taught by Professor Baghermodjtahedi during the Spring '09 term at UC Davis.

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chapter_15_-_expectations_and_economic_fluctuations - Test...

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