Long-run aggregate supply shocks are not a source of business cycle fluctuations in the ________, because ________.
A) traditional Keynesian model; long-run supply shocks are incompatible with adaptive expectations
B) traditional Keynesian model; demand fluctuations are considered of dominant importance
C) real business cycle model; shocks cannot persist in the long run, when prices and wages are flexible
D) new Keynesian model; such shocks are anticipated by forward-looking consumers and firms
Question 2A decrease in the real interest rate occurs when ________.
A) there is an autonomous tightening of monetary policy
B) expected inflation increases, relative to the nominal interest rate
C) a decrease in autonomous spending causes a decrease in equilibrium output
D) all of the above
E) none of the above
Question 3According to the endogenous growth model with human capital, what can we say about countries with more efficient schools?
A) They are richer.
B) They are richer and grow faster.
C) They are richer and grow more slowly.
D) They grow faster.
Question 4Figure 19.1 displays changes in the size of private inventories. Based on the figure, in which month is the size of private inventories likely to have been lowest?
A) September 2010
B) September 2011
C) September 2009
D) March 2010
Question 5If purchasing power parity holds, the exchange rate (e) can be expressed as a function of the domestic price (P) and the foreign price (P) as
A) e = P - P.
B) e = P - P.
C) e = P + P.
D) e = P/P.
Question 6Long-run aggregate supply shocks are a source of business cycle fluctuations in ________.
A) traditional Keynesian and new Keynesian theory
B) new Keynesian and real business cycle theory
C) real business cycle and traditional Keynesian theory
D) traditional Keynesian, new Keynesian and real business cycle theory
Question 7An increase in the real interest rate occurs when ________.
A) monetary policy responds automatically to an increase in inflation
B) expected inflation increases, relative to the nominal interest rate
C) an increase in autonomous spending causes an increase in equilibrium output
D) all of the above
E) none of the above
Question 8Based on the Saving-Investment Diagram, if the world real interest rate declines from A to C, then the change in net exports is measured by the difference between values ________.
A) G and E
B) H and G plus E and D
C) H and G minus E and D
D) G and F plus F and E
E) none of the above
Question 9Between September 2009 and September 2010, the recovery of private inventories, as shown in Figure 19.1, was far stronger than the overall economy's recovery from the Great Recession. Which is the most reasonable inference?
A) Persistently weak aggregate demand gave producers no alternative but to place current output into storage.
B) Businesses overestimated the strength of the recovery, which lead to overstocking of inventories.
C) Financial constraints had forced businesses to contract inventories by more than they otherwise would have chosen. The period beginning in September 2009 reflects the attempt by businesses to correct this.
D) Generally poor weather conditions in the final months of the year in the northern hemisphere make it less costly to store goods than to transport them to consumers.
Question 10Robert Lucas has popularized the notion that with respect to
A) severity, business cycles are all alike.
B) causation, business cycles are all alike.
C) quantitative behavior of co-movements among series, business cycles are all alike.
D) qualitative behavior of co-movements among series, business cycles are all alike.
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