QUESTION 

1. The Keynesian AD curve differs from the classical AD curve in that: 

   a. the classical AD curve can shift in response to non-monetary shocks.

   b. the Keynesian AD curve can shift in response to monetary shocks.

   c. the Keynesian AD curve can shift in response to non-monetary shocks.

   d. there is no difference, both are determined by the quantity theory.

   e. none of the above.

QUESTION 8

1. All of the following will shift the Keynesian AD curve to the right except a(n): 

   a. increase in consumer confidence.

   b. decrease in taxes.

   c. increase in government spending.

   d. increase in the MPC.

   e. increase in transfer payments.

QUESTION 10

1. The Keynesian model differs from the classical model in that 

   a. people do not have perfect information about the future in the Keynesian model.

   b. real wages are not flexible in the Keynesian model.

   c. monetary policy affects aggregate demand in the Keynesian model.

   d. expectations are crucial in the classical model.

   e. all of the above.

QUESTION 11

1. In the view of the new classical economists, an increase in the money stock will affect real output and employment only if the increase in the money stock

   a. was caused by an aggregate supply shock.

   b. is accompanied by an expansionary fiscal policy shift.

   c. was anticipated.

   d. was unanticipated.

QUESTION 12

1. The concept of "rational expectations" is consistent with the notion of 

   a.   utility maximization.

   b. profit maximization.

   c. strong mechanisms towards equilibrium in markets

   d. auction markets.

   e. all of the above.

QUESTION 13

1. New classical macroeconomists believe that 

   a.   markets clear each and every period.

   b. the labor market does not clear.

   c. individuals are locked into money wage constraints.

   d. individuals face market constraints in their ability to act in their own self-interest.

   e. none of the above.

QUESTION 14

1. A difference between the classical and new classical models is that 

   a.   classical economists assumed that labor suppliers knew the real wage, while the new classical economists assume they form a rational expectation of the real wage.

   b. classical economists assumed that the money wage was flexible while the new classical economists assume it was fixed.

   c. new classical models do not assume perfect competition.

   d. labor supply in the classical model is a function of the real wage while labor supply depends on the money wage in the new classical model.

   e. both a and c.

QUESTION 15

1. An unanticipated decline in investment demand within the new classical model will cause

   a.   the price level to fall with no effect on output.

   b. output to fall with no effect on the price level.

   c. both the price level and output to fall.

   d. no change in either the level of price or output.