According to the new classical school, if macroeconomic policy is perfectly predictable, then the ...

According to the new classical school, if macroeconomic policy is perfectly predictable, then the aggregate supply curve and the Phillips curve must be vertical in both the short run and the long run.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 2

Which of the following pairs of goods would most likely exhibit a cross price elasticity of -1.8?
 a. orange juice and grapefruit juice
  b. coffee and tea
 c. a bagel and cream cheese
 d. a van and a sport utility vehicle

Question 3

In an open economy, when the Fed increases the supply of money, it will increase net exports and aggregate demand.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 4

According to new classical economics, fiscal policy can change equilibrium real GDP only if it changes the price level or one of the determinants of aggregate supply, and people expect this change.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 5

Which of the following pairs of goods would most likely exhibit a cross price elasticity of 2.2?
 a. hamburgers and fries
 b. peanut butter and jelly
 c. butter and margarine
 d. tennis balls and tennis rackets

Question 6

When the Fed is pursuing contractionary monetary policy it will tend to depreciate the value of the dollar and hence increase net exports, other things equal.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 7

New classical economists contend that both the short-run and long-run aggregate supply curves are vertical.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 8

Hot dogs and hot dog buns are complementary goods. The cross price elasticity between hot dogs and hot dog buns:
 a. is positive.
 b. is equal to zero.
 c. is negative.
 d. could be any of the above.

Question 9

When the Fed is pursuing expansionary monetary policy it will tend to reduce the demand for the dollar and increase net exports, other things equal.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 10

The new classical school of thought is usually associated with the theory of rational expectations.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 11

If the cross elasticity of demand coefficient for potato chips and pretzels equals 1.5:
 a. potato chips and pretzels must both be inferior goods.
  b. potato chips and pretzels must both be normal goods.
  c. potato chips and pretzels must be substitutes.
 d. potato chips and pretzels must be complements.

Question 12

When Fed policy is addressing either a contractionary or inflationary gap, interest rates will be changed in the same direction as the intended change in real GDP.
 a. True
  b. False
  Indicate whether the statement is true or false