The real business cycle theory and the new classical theory agree that
a. business cycles are driven by changes in aggregate demand.
b. expectations are formed rationally.
c. imperfect information plays a big role in business cycles.
d. none of the above.
Question 2Residential construction did not return to its 1926 high levels until 1949.
Indicate whether the statement is true or false
Question 3On the graph above, suppose the economy is at point 1. Which sequence of points best illustrates the short-run and then long-run impacts if taxes are reduced for one year, then returned to the original level? Assume that potential output remains
constant at . A) 7, 2, 5
B) 2, 4, 1
C) 2, 7, 6
D) 7, 8, 1
Question 4The classical model predicts that, in the short-run, a tax cut financed by an increase in the money supply would
a. leave output and the price level unchanged.
b. increase the price level but leave output unchanged.
c. increase output but and reduce the price level.
d. increase output and the price level by increasing aggregate demand.
e. None of the above.
Question 5Tariff rates remained high after the Civil War because government revenue needs were pressing and there were protectionist sentiments.
Indicate whether the statement is true or false
Question 6When an economy experiences a one-time increase in productivity, there is an immediate increase in ________.
A) the saving rate
B) the capital-labor ratio
C) the depreciation rate
D) consumption per worker
Question 7In the case where the LM schedule is relatively steep and the IS schedule is relatively flat, the most effective policy would be a change in
a. money supply.
b. government expenditures.
c. government spending financed by a change in taxes.
d. taxes.
Question 8Inflation targeting is one policy that attempts to deal with the problem of:
a. dollarization.
b. time inconsistency.
c. the tradeoff between inflation and unemployment.
d. the liquidity trap.
e. none of the above.
Question 9Slaves were only used in Southern agriculture.
Indicate whether the statement is true or false
Question 10An example of negative productivity shocks that could cause recessions is
a. a hurricane, which destroys capital.
b. a decrease in the price of oil.
c. reductions in defense spending.
d. all of the above.
e. both a and b.
Question 11Consumers of most goods usually experience diminished satisfaction in each additional unit consumed. However, when variety appears endless, this may not be the case. Consider manufactured goods between 1890 and 1910.
Indicate whether the statement is true or false
Question 12The Fisherian version of the quantity theory equation is
a. MV = Py. b y = c + i + g.
c. M = kPy.
d. s = i + (g t).
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