Roots of Modern Macroeconomics

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1.What is the key assumption in new classical macroeconomics that is often questioned for its realism?

That monetary policy has a direct impact on aggregate demandThat markets adjust slowly and do not clear immediatelyThat fiscal policy influences overall demand in the economyThat economic agents form expectations rationallyThat prices are completely rigid in the short run

2.Why is it challenging to assess if the velocity of money remains steady over time?

Because tracking nominal GDP values consistently over time is complicated.Since the money supply has shown minimal variation throughout the years.Due to difficulties in accurately gauging the demand for money over different periods.Because the constancy of velocity can vary depending on the method used to measure the money supply.

3.According to the quantity theory of money, what effect does a specific percentage change in the money supply have?

An identical percentage change in nominal GDP.An identical percentage change in real GDP.A greater percentage change in nominal GDP.A lesser percentage change in nominal GDP.No change in nominal GDP.

4.What does it mean when individuals are described as having rational expectations?

They predict this year’s inflation will match last year’s rate.They make random guesses about the inflation rate.They expect this year’s inflation to be the average of the past decade.They incorporate all relevant information when forecasting inflation.

5.What is the theory called that assumes individuals have full knowledge of the actual economic model and utilize it to predict future outcomes?

Rational-expectations hypothesisPassive-expectations hypothesisAdaptive expectations hypothesisLagged-expectations hypothesis

6.What term describes the government's ability to influence the overall economy through policy adjustments?

fine tuningmonetarismmicroeconomic basis of macroeconomicsclassical economic model

7.According to Keynesian theory, what primarily determines the level of employment in an economy?

The influence of labor unions.The amount of money circulating in the economy.The prevailing prices and wage rates.The total demand for goods and services across the economy.

8.In traditional economic theories, what is the main factor that determines the level of employment?

The overall demand for products and servicesThe prevailing prices and wage ratesThe current interest rate levelsThe total money supplyGovernment fiscal policies

9.Which group of economists highlighted wage flexibility as a key approach to addressing unemployment?

10.Which group of contemporary economists argues that institutional elements and confidence significantly affect business actions, and that boosting demand typically raises output instead of prices?

Monetarist economistsKeynesian economistsPost-Keynesian economistsNew classical economists