Ch25 Questions 2154.docx

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Department
Economics
Course
Economics 2154A/B
Professor
Desmond Mc Keon
Semester
Fall

Description
Chapter 25 Monetary Policy Theory251 Response of Monetary Policy to Shocks1 Nonactivists believe that that expectations areformed and that wages and prices arewith respect to the expected price levelA adaptively completely flexibleB adaptively stickyC rationally completely flexible D rationally sticky2 An expansionary monetary policy will cause aggregate output to expand in the nonactivist macroeconomic model A if the policy is unanticipatedB if the policy is anticipatedC only after a long and variable lag provided the policy is anticipatedD never output will never expand in the nonactivist model when monetary policy is changed3 According to the new classical model A unanticipated policy has no effectB only anticipated policy can influence the business cycleC anticipated policy has no effect on the business cycleD both A and B of the above are true4 Steve the economist tells his students that one anticipated policy is just like any othernone has any effect on aggregate output You can probably infer that he is a A Keynesian economist B monetaristC proponent of activist policies D new classical economist5 In the view of the new classical economists an increase in the money supply will affect aggregate output and employment A only if the increase in money supply is anticipatedB only if the increase in money supply is expectedC only if the increase in money supply is unanticipatedD only if the increase in money supply is the result of an announced open market operation6 In the new classical model an anticipated increase in the money stock will cause A the price level and aggregate output to increase B aggregate output to increaseC the price level to increaseD no effect on either the price level or aggregate output7 In the new classical model A all wages and prices are perfectly flexible with respect to expected changes in the price levelB a fall in the expected price level results in an immediate and equal rise in wages and pricesC only unanticipated policy can affect aggregate output and unemploymentD Both A and C of the above8 In the new classical model A wages and prices are sticky with respect to expected changes in the price levelB unanticipated policy has no effect on aggregate output and unemploymentC an anticipated increase in the money supply will increase aggregate output temporarilyD only unanticipated policy can affect aggregate output and unemployment9 In the new classical model 1 2014 Pearson Canada IncA wages and prices are sticky with respect to expected changes in the price levelB a rise in the expected price level results in an immediate and equal rise in wages and pricesC an anticipated increase in the money supply will increase aggregate output temporarilyD unanticipated policy has no effect on aggregate output and unemployment10 In the new classical model A a rise in the expected price level results in an immediate and equal rise in wages and pricesB anticipated policy has no effect on aggregate output and unemploymentC unanticipated policy has no effect on aggregate output and unemploymentD Only A and B of the above11 In the new classical model an expansionary monetary policy causes A the aggregate demand curve to shift to the right and output to increase only if the policy is anticipatedB the aggregate demand curve to shift to the right and output to increase only if the policy is unanticipatedC a decline in the price level D both B and C of the above12 If all wages and prices are perfectly flexible with respect to expected changes in the price level then an expansionary monetary policy will cause A the aggregate demand curve to shift to the right and output to increase only if the policy is anticipatedB the aggregate demand curve to shift to the right and output to increase only if the policy is unanticipatedC an increase in the price level D both B and C of the above13 The new classical model has the word classical associated with it because when an increase in the money supply is anticipated A aggregate output drops below the natural rate levelB aggregate output rises above the natural rate levelC aggregate output remains at the natural rate levelD aggregate output increases in the short run but not in the long run14 If a rise in the expected price level results in an immediate and equal rise in wages and prices then an expansionary monetary policy will cause A the aggregate demand curve to shift to the right and output to increase only if the policy is anticipatedB the aggregate demand curve to shift to the right and output to increase only if the policy is unanticipatedC a decline in the price levelD both B and C of the above15 In the new classical model an unanticipated increase in the money supply will cause A output to increase in the short run but not in the long runB an increase in the price levelC government budget deficits to increase D only A and B of the above2 2014 Pearson Canada Inc
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