New Keynesian economists have examined whether real-world prices are, in fact, sticky. In one study of 38 magazines, Stephen Cecchetti found
a. that price rigidity was nonexistent with respect to magazines at newsstands.
b. considerable rigidity with respect to the newsstand prices of magazines.
c. that most of the 38 magazines in the study had price changes at least once a year.
d. that the Readers Digest price was changed 15 times between 1950 and 1980.
Question 2Shortly after World War II (194145) and the price controls ended,
(a) unemployment levels returned to those levels experienced during the
Great Depression.
(b) unemployment levels returned to their full employment levels.
(c) unemployment dipped sharply and inflation surged.
(d) unemployment rates increased and deflation emerged.
Question 3From 1865 to 1910, the U.S. share of world trade was
(a) nonexistent.
(b) miniscule.
(c) disproportionately small compared to the British.
(d) disproportionately high compared to the U.S. population.
Question 4According to the classical model shown in Figure 4.1, an autonomous decline in investment shifts the investment schedule to the left. Furthermore, the equilibrium interest rate declines. Distance B describes an interest rate induced
a. decline in saving, which is an equal increase in consumption.
b. increase in investment.
c. decrease in investment.
d. decline in saving, which exceeds the increase in consumption.
Question 5Seignorage is also known as an inflation tax since ________.
A) money balances lose value in real terms
B) inflation can be caused by rising energy costs
C) higher interest rates can crowd-out investment spending
D) budget deficits entail an increase in the size of the national debt
Question 6Suppose that the government wants to increase income without changing the interest rate. How can they accomplish this?
a. Increase government spending and reduce the money supply.
b. Increase government spending and the money supply.
c. Increase taxes and the money supply.
d. Reduce government spending and increase the money supply.
Question 7During World War II (194145), Golden (1990) argues, the opportunity cost of women staying at home
(a) decreased.
(b) stayed the same.
(c) increased.
(d) cannot be measured.
Question 8A trade deficit can produce inflation when a country and its trading partners are on the gold standard or a bi-metallic system.
Indicate whether the statement is true or false
Question 9Private profits provided colonial producers with incentive to direct the use of their regional resources in those fashions that produced the highest yield in world markets.
Indicate whether the statement is true or false
Question 10Monetizing the debt is undesirable given its impact on ________.
A) investment
B) nominal income
C) tariff rates
D) prices
Question 11New Keynesians and new classical economists both believe that
a. people form their expectations rationally.
b. aggregate demand movements primarily drive business cycles.
c. individual agents engage in optimizing behavior.
d. The key source of disagreement centered around how people form their expectations.
e. all but d are correct.
Question 12The difference between savings and investment is that
a. investment is purchasing stock, while savings is putting money in a bank.
b. investment is purchasing capital, savings is postponing consumption.
c. investment is purchasing assets, while consumption is purchasing goods.
d. investment increases output, while savings decreases output.
Figure 4.1
Question 13What does international voluntary trade do?
(a) Exploits small countries
(b) Benefits all trading partners
(c) Places labor unions at an unfair disadvantage
(d) Forces productive domestic firms to close their doors
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