1) A group of modern economists who believe that markets clear very rapidly and that expanding the money supply will always increase prices rather than employment are the ?
d. new classical school
2) New classical theories were an attempt to explain ?
a. how unemployment could have persisted for so long during the Great Depression
b. The increase in the growth rate of real output in the 1950s
c. the stagflation of the 1970s
d. Why policy changes that are perceived as permanent have more of an impact on a person’s behaviour than policy changes that are viewed as temporary.
3) If the demand for money depends on the interest rate the velocity of circulation is ?
a. not constant and the quantity theory of money does hold.
b. constant and the quantity theory of money does hold.
c. not constant and the quantity theory of money does not hold.
d. constant and the quantity theory of money does not hold.
4) The persistence of a phenomenon such as unemployment, even then its causes have been removed is called ?
a. the fallacy of composition
b. negative entropy.
d. ceteris paribus
5) The rational-expectation hypothesis suggests that the forecasts that people make concerning future inflation rates ?
a. consistently overestimate the actual rate of inflation in the future.
b. are always correct
c. consistently underestimate the actual rate of inflation in the future
d. are correct on average, but are subject to errors that are distributed randomly
6) Rapid increase in the price level during periods of recession of high unemployment are known as ?
7) The government increase government spending to try to reduce unemployment This is an example of ?
b. monetary policy
c. fine tuning
d. automatic stablisers
8) Keynesian economics became popular because it was able to explain ?
a. stagflation in the late 1970s
b. demand-pull inflation in the 1960s
c. low growth rates in the 1950s
d. The prolonged existence of high unemployment during the Great depression
9) According to the classical economists the economy ?
a. requires fine tuning to reach full employment
b. can never deviate from full employment
c. will never be at full employment
d. is self-correcting.
10) Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are ?
a. market prices
b. sticky prices
c. fixed prices
d. regulatory prices