Question 1

With respect to the demand side,the Keynesian model

Accepted Answer

The Keynesian model includes all of the factors listed - monetary factors, government spending and taxes, and autonomous investment.

Question 2

In which model does there not exist a tradeoff between higher inflation and lower unemployment?

Accepted Answer

The real business cycle model posits that fluctuations in economic activity are primarily driven by real (in contrast to nominal) shocks, such as changes in technology or productivity, rather than by monetary or fiscal policy. Therefore, it does not incorporate a tradeoff between inflation and unemployment as traditional models like the Phillips curve do.

Question 3

According to the new classical view,changes in aggregate demand

Accepted Answer

The new classical view posits that changes in aggregate demand can temporarily influence output, especially in the short run due to price and wage stickiness. However, in the long run, adjustments will lead to changes in the price level rather than output, often accompanied by higher inflation if the demand increase is persistent. This view combines elements of both temporary output influence and the inflation-output trade-off.

Question 4

Both Keynesians and real business cycle proponents believe that tax cuts increase output

Accepted Answer

Keynesians believe that tax cuts increase output by increasing aggregate demand through boosting consumption and investment, while real business cycle proponents believe that tax cuts increase output by increasing aggregate supply through incentivizing work and investment. Both believe that tax cuts have a positive impact on output, but differ in their underlying mechanisms.

Question 5

The assumption of constant velocity is a critical component of the

Accepted Answer

The assumption of constant velocity is a critical component of all of the models listed.

Question 6

Discuss the slope of the aggregate supply curve in the majors models discussed in the previous chapters.Why are they shaped as they are? What shifts aggregate supply in these models?

Accepted Answer

The answer of Discuss the slope of the aggregate supply...

Question 7

The classically-based models (classical,new classical,monetarist,real business cycle)all agree that

Accepted Answer

The answer of The classically-based models (classical,new classical,monetarist,real business cycle)all...

Question 8

Which of the following models argue that active stabilization policy can be beneficial?

Accepted Answer

The classicists, new classicists, monetarists, and real business cycle theorists generally argue against active stabilization policies, favoring market mechanisms and criticizing the effectiveness of government intervention in correcting economic fluctuations.

Question 9

During the 1990s,investment expanded quite rapidly and stock prices rose dramatically.How do you think a classical/real business cycle proponent would explain this boom? How would a Keynesian/new Keynesian explain this boom?

Accepted Answer

The answer of During the 1990s,investment expanded quite rapidly and...

Question 10

Why are disagreements among the various schools of macroeconomic thought long-lasting and difficult to resolve?

Accepted Answer

The answer of Why are disagreements among the various schools...

Question 11

Which of the following statements is correct?

Accepted Answer

In classical and monetarist models, money supply is considered a primary factor influencing aggregate demand, whereas Keynesian models emphasize other factors like government spending and investment.

Question 12

Compare theories of money demand across classically-based (classical,monetarist,new classical,real business cycle)models and Keynesian-based (Keynesian,IS-LM,new Keynesian)models.

Accepted Answer

The answer of Compare theories of money demand across classically-based...

Question 13

What do each of the major modern macroeconomic theories predict will happen to the real wages during recessions? Explain your answer for each model.

Accepted Answer

The answer of What do each of the major modern...

Question 14

Which macroeconomic model dominated macroeconomic analysis from the early post-World War II era until the late 1960s?

Accepted Answer

The Keynesian model dominated macroeconomic analysis from the early post-World War II era until the late 1960s.

Question 15

Will systematic and,therefore,predictable changes in aggregate demand affect the level of real output in the new classical and monetarist models? How about in the Keynesian model.Explain why or why not.

Accepted Answer

The answer of Will systematic and,therefore,predictable changes in aggregate demand...

Question 16

What theories argue that fluctuations in output are determined by aggregate demand? Discuss the role of monetary policy in each of these models.

Accepted Answer

The answer of What theories argue that fluctuations in output...

Question 17

According to the monetarists and new classical economists,

Accepted Answer

The answer of According to the monetarists and new classical...

Question 18

What do each of the major modern macroeconomic theories predict will happen to the price level during recessions? What do they predict will happen to real wages during recessions? Explain your answer for each model.

Accepted Answer