Question

Question 39

In terms of forming expectations about the future, which school of Macroeconomic thought would most strongly agree with the following: "we base our decisions about the future on all available information and all information is available"?

the "Say What?" School

the Keynesians

the Monetarists

Rational Expectationists

Question 40

“Money is all that matters" could be thought of as the motto of

the Keynesians

the Monetarists

the Very Silly Theorists

Rational Expectationists

the Trump family

Question 41

The Classical AS curve suggests that (hint: Say's Law):

real output is directly related to the price level

idle capital & unemployed workers are available in the economy

the price level is constant

changes in aggregate demand will have no impact on the level of full-employment real GDP

Question 42

Rational Expectationists say that a fully anticipated increase in aggregate demand, perhaps as a result of easy (expansionary) monetary policy

misallocates resources

instantaneously moves the economy up the AS curve

shifts the AS curve to the left

shifts the AS curve to the right

increases real GDP & output prices

Question 43

Which school of macroeconomic thought believes that due to "crowding out", expansionary fiscal policy can potentially end up being contractionary?

Rational Expectations Theory

Monetarism

none of these

Keynesianism

Question 44

The concept that claims the fiscal policy will typically have no effect on real GDP because households will increase their saving to pay for an impending increase in taxes to finance that policy is known as

the paradox of thrift

Ricky Ricardo

Ricardian Equivalence

crowding out

adaptive expectations

Question 45

“Sticky” prices and wages are most closely associated with which group of economists?

Group of answer choices

Monetarists

none of these

Classicals

Keynesians

Rational Expectationists

Answer 1

39. The correct answer is rational expectationists.

This is because economists who believe in rational expectations propagated that the economic agents will make their decisions based on all the available information.

Keynesians and monetarists did not base their theories on all the available information to make future decisions.

40. The correct answer is monetarists.

This is because monetarists stressed the importance of money and money supply in the economy in their theories and money occupied a central stage.

Keynesians laid more focus on fiscal policy. Rational expectationists propagated that policies do not work in the economy.

41. The correct answer is d. Classical AS curve is a vertical straight line. It is based on the Say's law which says that economy always operates on the full employment level in the economy. Thus, whatever is the aggregate demand, there will be no change in the full employment level because of the vertical AS curve.

The other options are incorrect because Classicals say that there is always full employment in the economy. Thus, unemployment cannot be there. Classicals assumed price level to be flexible in the economy. Hence, it cannot be constant.

42. The correct answer is that it shifts the AS curve to the left. This is because in case of rational expectations, individuals can fully anticipate the affect of easy monetary policy due to which the there is an offsetting leftward shift of AS. This renders the monetary policy ineffective.

43. The correct answer is Monetarism.

44. The correct answer is Ricardian equivalence.

45. The correct answer is Keynesians.