Question :
41) The Lucas supply model, in combination with the assumption : 1381263
41) The Lucas supply model, in combination with the assumption that expectations are rational, leads to the conclusion that
A) expansionary policies, but not contractionary policies, can have an impact on real output.
B) contractionary policies, but not expansionary policies, can have an impact on real output.
C) only unanticipated policy changes can have an impact on output.
D) neither anticipated nor unanticipated policy changes can have an impact on output.
42) The argument in favor of rational expectations is that
A) people will continue to acquire information as long as the marginal benefit of that information is positive.
B) individuals have a very good idea of what to expect from the government in terms of monetary policy but not fiscal policy.
C) it is costless for individuals and firms to form rational expectations.
D) if expectations were not rational, there would be unexploited profit opportunities available.
43) The primary argument against the rational-expectations assumption is that
A) the costs of formulating rational expectations are very low.
B) it requires households and firms to know too much.
C) it assumes that unexploited opportunities for profit persist in the economy.
D) people expect certain outcomes from the government’s policy actions.
44) According to the new classical theory, economic policies are
A) effective only if anticipated.
B) ineffective if unanticipated.
C) ineffective if anticipated.
D) ineffective, whether anticipated or unanticipated.
45) According to new classical economists, if the Fed increases the money supply after it announces it, output ________ and the price level ________.
A) increases; remains constant
B) remains constant; increases
C) remains constant; remains constant
D) increases; increase
46) According to the real business cycle theory, ________ are responsible for economic growth.
A) expansionary fiscal and monetary policies
B) positive shifts in the AD curve
C) trade and income policies
D) positive shifts in the AS curve
47) According to the real business cycle theory, technological advances
A) increase the marginal product of labor, which causes real wages and output to decline.
B) decrease the marginal product of labor, which causes real wages and output to increase.
C) increase the marginal product of labor, which causes real wages to increase and output to decline.
D) increase the marginal product of labor, which causes real wages and output to increase.
48) Supporters of supply-side economics claim that Reagan’s tax policies were quite successful in stimulating the economy because
A) almost immediately after the tax cuts, the economy expanded and the recession of 1980-1982 came to an end.
B) inflation rates fell sharply from the high rates of 1980 and 1981.
C) throughout most of the 1980s, federal receipts continued to rise even though tax rates had been cut.
D) all of the above
49) Critics of supply-side economics agree that shortly after the Reagan tax cuts were put into place, the economy began to expand. These critics, though, argue that the expansion did not result from the supply-side policies, but rather from
A) the fact that the Federal Reserve dramatically increased the money supply at the same time that the tax cuts became effective.
B) the self-correcting nature of the economy.
C) the increases in government spending that occurred at the same time the tax cuts became effective.
D) a very large increase in the demand for U.S. exports at the same time that U.S. imports fell dramatically.
50) The economic view that retains the assumption of rational expectations but drops the assumption of completely flexible prices and wages is called
A) new Keynesian economics.
B) supply-side economics.
C) monetarism.
D) real business-cycle economics
51) Related to the Economics in Practice on p. 656: Surveys by the bank of England suggest that consumers tend to expect future inflation to be
A) what they perceive past inflation to have been.
B) equal to the actual estimates of past inflation made by the government.
C) directly related to the interest rate.
D) relatively unpredictable.
52) Related to the Economics in Practice on p. 656: Surveys by the bank of England suggest that two important factors in influencing consumer perceptions of inflation are ________ and ________.
A) the value of the British pound; the value of the euro
B) food prices; the stock of money
C) interest rates; the unemployment rate
D) gas prices; media attention to price increases
