Research supporting the new Keynesian model finds that prices are ________.
A) slow to adjust to aggregate demand shocks
B) changed very frequently
C) changed only infrequently
D) not as flexible as wages
Question 2Macroeconomic forecasting is made more difficult due to the fact that
A) deviations from trend in real GDP are persistent.
B) turning points are hard to predict.
C) there is no regularity in comovements.
D) consumption is smooth.
Question 3Government-backed deposit insurance increases the ________.
A) Willamette torsion effect
B) adverse selection problem
C) moral hazard problem
D) the prudential contagion problem
Question 4Based on the Saving-Investment Diagram, if the world real interest rate is indicated by A, then ________.
A) the difference between values G and E measures the trade surplus
B) the difference between values G and F measures the trade surplus
C) the domestic real interest rate is indicated by B
D) desired saving has decreased
E) none of the above
Question 5Macroeconomic forecasting is made easier due to the fact that
A) real GDP is variable about trend.
B) the business cycle has a regular frequency.
C) deviations from trend in real GDP are persistent.
D) turning points are easy to predict.
Question 6Consider the two graphs above. Suppose that firms are able to use inventories as collateral for low-interest loans. This would ________ the desired level of inventories, as depicted in graph ________.
A) increase; B
B) increase; A
C) decrease; B
D) decrease; A
Question 7In a two-period model with production, a shock that shifts the output demand curve to the right, and does not shift the output supply curve
A) causes an increase in the current account surplus and an increase in real output.
B) causes no change in the current account surplus and an increase in real output.
C) causes a decrease in the current account surplus and no change in real output.
D) causes a decrease in the current account surplus and an increase in real output.
Question 8Do you think that information technologies will someday eliminate asymmetric information problems?
What will be an ideal response?
Question 9In the new Keynesian model, the ultimate effect on output of an anticipated aggregate demand shock is ________.
A) less than if that event was unanticipated
B) greater than if that event was unanticipated
C) the same as would develop if that event had never occurred
D) dependent on whether or not that event is temporary or permanent
Question 10The AD Curve ________.
A) demonstrates how central banks respond to changes in interest rates by changing the inflation rate
B) shows how changes in equilibrium output affect the inflation rate
C) explains long run fluctuations in output and inflation
D) all of the above
E) none of the above
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