Question : 43) Which of the following an argument against the rational-expectations : 1381549

43) Which of the following is an argument against the rational-expectations assumption?

A) People expect certain outcomes from the government’s policy actions.

B) It requires households and firms to know too much.

C) It assumes that unexploited opportunities for profit persist in the economy.

D) The costs of formulating rational expectations are very low.

44) According to the new classical theory, if economic policies are anticipated, they will be

A) free of opportunity cost.

B) successful.

C) ineffective.

D) none of the above

45) According to new classical economists, if the Fed ________ the money supply after it announces it will do so, output remains constant and the price level ________.

A) increases; decreases

B) increases; increases

C) increases; remains constant

D) decreases; increases

46) Real business cycle theory is an attempt to explain business cycle fluctuations under the assumptions of

A) government intervention and trade regulation.

B) wage and price controls.

C) closed economies and fiscal spending.

D) market clearing and rational expectations.

47) According to the real business cycle theory, technological advances ________ the marginal product of labor, which causes real wages and output to ________.

A) increase; increase

B) increase; decrease

C) decrease; increase

D) decrease; decrease

48) Supporters of supply-side economics claim that ________ tax policies were quite successful in stimulating the economy because throughout most of the 1980s, federal receipts continued to rise even though tax rates had been cut.

A) Jimmy Carter’s

B) Gerald Ford’s

C) Ronald Reagan’s

D) Richard Nixon’s

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 the fact that the Federal Reserve dramatically ________ the money supply at the same time that the tax ________ became effective.

A) increased; cuts

B) increased; hikes

C) decreased; cuts

D) decreased; hikes

50) New Keynesian economics assumes rational expectations and

A) sticky prices and wages.

B) flexible prices and wages.

C) flexible prices, but sticky wages.

D) flexible wages, but sticky prices.

51) Related to the Economics in Practice on p. 656: Surveys by the bank of England suggest that consumers are

A) more influenced by their own experiences than by actual government numbers.

B) more influenced by actual government numbers than by their own experiences.

C) equally influenced by actual government numbers and their own experiences.

D) rarely influenced by either actual government numbers or by their own experiences.

52) Related to the Economics in Practice on p. 656: Surveys by the bank of England suggest that two important factors in influencing ________ are gas prices and media attention to price increases.

A) the income velocity of money

B) the stock of money

C) interest rates

D) consumer perceptions of inflation