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Chapter 14 Sticky Prices
Chapter 14 Sticky Prices
Chapter 12
A labor contract in which future wage increases are adjusted in the light of future inflation is called
A)
a union contract.
B)
an adjustable contract.
C)
an indexed contract.
D)
an inflation-adjusted contract.
Answer:
C
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2)
number of workers who stop looking for work because they believe that they will not find work.
C)
difference between labor supply and labor demand at the sticky wage.
D)
difference between labor supply and labor demand at the market clearing wage.
Answer:
C
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3)
In the Keynesian sticky wage model, the aggregate supply curve is upward sloping because, at the fixed
nominal wage, an increase in the price level
A)
D
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4)
In the Keynesian sticky wage model, an increase in the nominal wage shifts the aggregate
A)
B
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5)
C
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6)
C
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7)
B
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8)
In the Keynesian sticky wage model, an increase in current total factor productivity shifts the aggregate
A)
A
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9)
interest substitution.
B)
interest sticky.
C)
investment-savings.
D)
intertemporal substitution.
Answer:
C
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10)
The IS curve in the Keynesian sticky wage model is identical to which of the following in the
intertemporal monetary model?
A)
B
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11)
The IS curve in the Keynesian sticky wage model represents output demand at different levels of
A)
B
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12)
C
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13)
output-price level combinations at which money supply and money demand are equal.
B)
output-real interest rate combinations at which money supply and money demand are equal.
C)
real interest rate-price level combinations at which money supply and money demand are equal.
D)
B
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14)
long-run money.
B)
liquidity market.
C)
loan market.
D)
lifetime money.
Answer:
B
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15)
money demand is positively related to output and negatively related to the interest rate.
B)
money demand is positively related to output and the real money supply is negatively related to the price
level.
C)
money demand is negatively related to the interest rate and the real money supply is negatively related to
the price level.
D)
A
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16)
A
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17)
B
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18)
A
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19)
A
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20)
A
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21)
C
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22)
D
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23)
D
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24)
In the Keynesian sticky wage model, the aggregate demand curve represents combinations of
A)
the price level and the level of output at which the goods market and the labor market are in equilibrium.
B)
the price level and the level of output at which the goods market and the money market are in
equilibrium.
C)
the real interest rate and the level of output at which the goods market and the labor market are in
equilibrium.
D)
the real interest rate and the level of output at which the goods market and the money market are in
equilibrium.
Answer:
D
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25)
In the Keynesian sticky wage model, an increase in current government spending shifts
A)
C
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26)
In the Keynesian sticky wage model, an increase in future total factor productivity shifts the aggregate
A)
C
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27)
In the Keynesian sticky wage model, an increase in the money supply shifts the aggregate
A)
C
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28)
B
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29)
B
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30)
A
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31)
In the Keynesian sticky wage model, an increase in current total factor productivity
A)
B
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32)
In the Keynesian sticky wage model, an increase in future total factor productivity
A)
A
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33)
In the Keynesian sticky wage model, a rightward shift in the money demand schedule
A)
C
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34)
In the Keynesian sticky wage model, an increase in the money supply has which impact on output in the
long run?
A)
an increase
B)
a decrease
C)
none
D)
It depends.
Answer:
C
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35)
When wages are sticky and there are only shocks to the money supply, money is
A)
procyclical.
B)
acyclical.
C)
countercyclical.
D)
It depends.
Answer:
A
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36)
When wages are sticky and there are only shocks to the money supply, prices are
A)
procyclical.
B)
acyclical.
C)
countercyclical.
D)
It depends.
Answer:
A
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37)
When wages are sticky and there are only shocks to current total factor productivity, money is
A)
procyclical.
B)
acyclical.
C)
countercyclical.
D)
It depends.
Answer:
B
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38)
When wages are sticky and there are only shocks to current total factor productivity, prices are
A)
procyclical.
B)
acyclical.
C)
countercyclical.
D)
It depends.
Answer:
C
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39)
Changes in the money supply in the Keynesian sticky wage model is not a likely explanation of the
typical business cycle because the model counterfactually predicts that
A)
the real wage is countercyclical and the real money supply is procyclical.
D)
B
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40)
Changes in the money supply in the Keynesian sticky wage model are not a likely explanation of the
typical business cycle because the model counterfactually predicts
A)
D
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41)
Investment demand shocks in the Keynesian sticky wage model are not a likely explanation of the typical
business cycle because the model counterfactually predicts that
A)
prices are procyclical, the real wage is countercyclical, and average labor productivity is countercyclical.
C)
prices are countercyclical, the real wage is countercyclical, and average labor productivity is
countercyclical.
D)
employment is procyclical, prices are procyclical, and average labor productivity is countercyclical.
Answer:
B
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42)
The recession that is best explained as a response to monetary policy is the recession of
A)
1973-1974.
B)
1981-1982.
C)
1990-1991.
D)
2000-2001.
Answer:
B
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43)
The Keynesian transmission mechanism for monetary policy asserts that changes in the money supply
A)
affect real interest rates, which affect the level of aggregate demand.
B)
affect real interest rates, which affect the level of aggregate supply.
C)
affect the price level, which affects the level of aggregate demand.
D)
affect the price level, which affects the level of aggregate supply.
Answer:
A
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44)
When there is Keynesian unemployment in the sticky wage model, a Pareto optimum can be reached by
A)
A
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45)
C
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46)
To support the argument for an active role for government in stabilizing the economy, it must be true that
A)
consumers are not rational and that not all wages and prices are flexible.
B)
not all wages and prices are flexible and that government must be able to react quickly enough.
C)
government must be able to react quickly enough and that shocks to the economy be primarily due to
aggregate supply shocks.
D)
shocks to the economy be primarily due to aggregate supply shocks and that consumers are not rational.
Answer:
B
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47)
Milton Friedman's assertion that the government abstain from stabilization policy can be supported by
A)
the fact that it takes time for the government to observe the true state of the economy.
B)
the fact that it takes time for the government to implement policy.
C)
the fact that it takes time for policy actions to affect the economy.
D)
D
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48)
When the demand for money is unstable, it is best for the central bank to
A)
B
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49)
Keynesian sticky price models, as opposed to Keynesian sticky wage models, are typically called
A)
classical models.
Answer:
C
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50)
How does the sticky wage model need to be modified to consider sticky prices?
A)
C
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51)
They hire until the real wage equals the average labor productivity.
C)
A
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52)
A
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53)
The Keynesian sticky price model has become less relevant over time because
A)
laissez-faire is better.
Answer:
B
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54)
In response to a positive technology shock, which prediction of the sticky price model is difficult to
reconcile with the data?
A)
Output increases.
B)
Employment decreases.
C)
Money is procyclical.
Answer:
A
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Status:
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