Deck 18: Conclusion: Where We Stand

Question 1

In the late 1960s,the Friedman-Phelps "natural rate hypothesis" predicted from the microeconomic structure of the labor market that the long-run Phillips Curve is ________,while macroeconomic events caused a very ________ acceptance of this change in aggregate supply theory.

A)horizontal,rapid
B)horizontal,gradual
C)vertical,rapid
D)vertical,gradual

Answer 1

vertical,rapid

Question 2

The "stagflation" of the 1970s ________ Keynesian macroeconomics until the Keynesians started to build the consequences of changing inflationary expectations and ________ shocks into their models.

A)reinforced the dominance,supply
B)reinforced the dominance,demand
C)deepened the eclipse,supply
D)deepened the eclipse,demand

Answer 2

deepened the eclipse,supply

Question 3

The U.S.economy in the 1960s was dominated by a massively expansionary ________ policy that ended up ________.

A)monetary,overstimulating the economy
B)monetary,being impotent in ending the long stagnation of that decade
C)fiscal,overstimulating the economy
D)fiscal,being impotent in ending the long stagnation of that decade

Answer 3

fiscal,overstimulating the economy

Question 4

The Keynesian revolution was based on the assumption of price and wage ________ and thus the need for an activist ________ policy.

A)flexibility,monetary
B)flexibility,fiscal
C)stickiness,monetary
D)stickiness,fiscal

Question 5

The tax cuts and entitlement program expansions of the 1980s led to such ________ federal deficits in the 1990s that fiscal policy ________ for smoothing-out business cycle fluctuations.

A)small,again became the preferred tool
B)small,was all but abandoned
C)large,again became the preferred tool
D)large,was all but abandoned

Question 6

Most Keynesian macroeconomists today ________ the natural rate hypothesis,which has helped lead to the ________ of Keynesian macroeconomics in the 1990s.

A)reject,near-total extinction
B)reject,revival
C)accept,near-total extinction
D)accept,revival

Question 7

An important failure of the "new economics" of the 1960s was its ________ monetary policy and its ability if made ________ to offset a tighter fiscal policy.

A)denigration of,tighter
B)denigration of,easier
C)overemphasis on,tighter
D)overemphasis on,easier

Question 8

The work of Robert Lucas and Thomas Sargent ________ the existence of a downward-sloping Phillips Curve in the ________.

A)first proposed,short run
B)first proposed,short and long runs
C)cast further doubt on,long but not short run
D)cast further doubt on,short and long runs

Question 9

The Great Depression of the 1930s opened the door to the ________ revolution in macroeconomic theory.

A)Keynesian
B)old classical
C)New Keynesian
D)New classical

Question 10

The evolution of macroeconomic theory

A)usually precedes and causes major macroeconomic events.
B)usually is in reaction to major macroeconomic events.
C)is evenly divided between causing and reacting to major macroeconomic events.
D)proceeds rather independently of major macroeconomic events.

Question 11

The great failure of activist fiscal policy in the 1960s was its

A)timidity in the face of persistent stagnation.
B)over-reliance on tax cuts to the exclusion of government spending programs.
C)delay in reversing course as the economy became overstimulated.
D)limited role as an accommodator of an activist monetary policy.

Question 12

The U.S.inflation of the 1960s was spread overseas via the ________ exchange rates of the time and led to the ________ of the Bretton Woods system.

A)fixed,collapse
B)fixed,establishment
C)flexible,collapse
D)flexible,establishment

Question 13

The ________ of the U.S.economy during World War II,with its vast defense spending,________ of Keynesian macroeconomics.

A)continued stagnation,established the supremacy
B)continued stagnation,was the demise
C)rapid recovery,established the supremacy
D)rapid recovery,was the demise

Question 14

The ________ of the 1968 tax surcharge led to the prominence of the developer of the permanent-income hypothesis that predicted it,________.

A)success,Walter Heller
B)success,Milton Friedman
C)failure,Walter Heller
D)failure,Milton Friedman

Question 15

In the late 1950s and early 1960s,postwar U.S.economic performance led to the formulation of and belief in a

A)vertical Phillips Curve in the short and long runs.
B)vertical Phillips Curve in the long run.
C)horizontal Phillips Curve in the short and long runs.
D)downward-sloping Phillips Curve in the short and long runs.

Question 16

Before the Great Depression,macroeconomic theory was dominated by the ________ approach that presumed the essential ________ of the private economy.

A)Keynesian,stability
B)Keynesian,instability
C)old classical,stability
D)old classical,instability

Question 17

The quantity theory of money idea that velocity is ________ link between money growth and nominal GDP growth was ________ in the 1930s.

A)a stable,confirmed
B)a stable,disproved
C)an unstable,confirmed
D)an unstable,disproved

Question 18

By the end of the 1960s,fiscal activism was falling out of favor due to its long ________ lag and,as predicted by the permanent-income hypothesis,the ________ of the 1968 tax surcharge.

A)legislative,ineffectiveness
B)legislative,overstimulation
C)effectiveness,ineffectiveness
D)effectiveness,overstimulation

Question 19

The "new classical" economics took advantage of the disarray and partial eclipse of Keynesian economics to reestablish macro model-building based on the assumption of price ________ and market ________.

A)flexibility,clearing
B)flexibility,non-clearing
C)stickiness,clearing
D)stickiness,non-clearing

Question 20

The old classical macroeconomic was based on an assumption of price and wage ________,and thus an economy that ________.

A)flexibility,promptly self-corrected
B)flexibility,failed to self-correct promptly
C)stickiness,promptly self-corrected
D)stickiness,failed to self-correct promptly

Question 21

From the four asset bubbles discussed in this chapter,the one that has the smallest impact on the economy is

A)the 1927-29 U.S.stock market bubble.
B)the 1987-89 Japanese stock market bubble.
C)the 1996-2000 U.S.stock market bubble.
D)the 2001-2006 U.S.housing bubble.

Question 22

The depth of the 1981-1982 recession caused the Fed to abandon its experiment in targeting ________ and move to what now appears to be ________ growth rule.

A)money growth,an interest rate
B)money growth,a real GDP growth
C)money growth,an unemployment rate
D)interest rates,a high-powered money growth
E)interest rates,a nominal GDP growth

Question 23

When did the Fed fail to engage in a pre-emptive strike to keep the economy at or near the natural rate of unemployment?

A)1994
B)1998
C)2001
D)None of the above.The Fed acted in each of these years.

Question 24

Two emerging trends in 1990s macroeconomic thinking are that fiscal policy should be designed according to its ________ consequences and that monetary aggregates ________ useful in the conduct of monetary policy.

A)short-run stabilization,are no longer
B)short-run stabilization,continue to be
C)long-run growth,are no longer
D)long-run growth,continue to be

Question 25

In the 1990s

A)growth of M1 was more stable than growth of nominal GDP,and velocity soared through most of the period.
B)growth of nominal GDP was more stable than growth of M1,and velocity soared through most of the period.
C)growth of M1 was more stable than growth of nominal GDP,and velocity plummeted through most of the period.
D)growth of nominal GDP was more stable than growth of M1,and velocity plummeted through most of the period.

Question 26

Memory of the supply shocks of the 1970s ________ the growth of real-business-cycle theory,while it was being ________ by new classical work on model-building methods.

A)assisted,assisted as well
B)assisted,hindered
C)hindered,assisted
D)hindered,hindered as well

Question 27

There is currently a resurgence in Keynesian macroeconomics,based on the assumptions of market ________ and ________ expectations.

A)non-clearing,adaptive
B)non-clearing,rational
C)clearing,adaptive
D)clearing,rational

Question 28

The economic expansion which began in March 1991 was unusual in that

A)the first year and a half of the expansion was very weak and unemployment did not peak until 16 months after the trough.
B)the inflation rate decelerated from 1993 to 1997 rather than accelerating.
C)monetary policy was tightened substantially in 1994 even though there was no evidence of accelerating inflation.
D)all of the above.

Question 29

Flexible exchange rates,proving to be much ________ volatile than economists predicted,have led to ________ calls for a return to fixed exchange rates.

A)less,few
B)less,many
C)more,few
D)more,many

Question 30

There are no questions for this section.

Question 31

There are no questions for this section.