Pre-Test Chap 36 e18 - Pre-Test Chap 36 e18 Student: _ 1....

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Pre-Test Chap 36 e18 Student: ___________________________________________________________________________ 1. Rational expectations theory suggests that: A. Individuals anticipate changes in monetary policy and make changes in their actions which tend to reinforce the policy B. Individuals anticipate changes in monetary policy and make changes in their actions which tend to offset the policy C. The aggregate demand curve is vertical D. The aggregate supply curve is horizontal 2. Rational expectations theory considers the aggregate: A. Demand curve to be vertical B. Supply curve to be vertical C. Supply curve to be horizontal D. Demand curve to be horizontal 3. Dividing nominal gross domestic product (GDP) by the money supply ( M ) is a way to obtain: A. Velocity of money B. Monetary multiplier C. Equation of exchange D. Monetary rule 4. Monetarists take the position that monetary policy: A. Is limited by the crowding-out of investment B. Is enhanced by the crowding-out of investment C. Should be based on rules rather than discretion D. Should be based on discretion rather than rules 5. The theory of rational expectations calls for monetary policy rules because: A. Of past policy errors B. Policy tends to be countercyclical C. Of the inability to time policy decisions D. Of the reaction of the public to the expected effects of policy
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6. 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: A. Demand will shift from AD 1 to AD 2 , and then aggregate supply will shift from AS LR1 to AS LR2 B. Demand will not shift from AD 1 , but aggregate supply will shift from AS LR1 to AS LR2 C. Supply will shift from AS LR1 to AS LR2 , and then aggregate demand will shift from AD 1 to AD 2 D. Supply will not shift from AS LR1 , but aggregate demand will shift from AD 1 to AD 2 7. Refer to the above graph. In this economy, macroeconomic instability arises from a shift from AS LR1 to AS LR2 and is then followed by a shift from AD 1 to and AD 2 . This would best describe which view of the macro economy? A. Mainstream economics
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This note was uploaded on 05/23/2010 for the course ECON 101 taught by Professor Keep during the Spring '10 term at Glendale Community College.

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Pre-Test Chap 36 e18 - Pre-Test Chap 36 e18 Student: _ 1....

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