Reading 23: Aggregate Supply and Aggregate Demand-LOS d 习题精 2011, face, statements, following, contrast

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Session 5: Economics: Market Structure and Macroeconomic Analysis
Reading 23: Aggregate Supply and Aggregate Demand

LOS d: Compare and contrast the classical, Keynesian, and monetarist schools of macroeconomics.

 

 

Which of the following statements is most accurate regarding monetarists? Monetarists believe that:

A) discretionary monetary policy is the best way to moderate fluctuations in prices and output.

B) steady, predictable money growth is the best monetary policy.

C) fiscal policy is the most powerful of all government tools used to affect prices and output.

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Monetarists believe that the Fed’s tools are powerful and should not be used to moderate fluctuations in prices and outputs. Thus, steady, predictable growth is the best monetary policy. They believe in the power of the money supply, not fiscal policy, to affect prices and outputs.

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Monetarists believe that:

A) shifts in aggregate demand arise from changes in expectations.

B) discretionary monetary policy should be used to stabilize the economy.

C) monetary policy has a significant impact on aggregate demand.

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Monetarists believe that monetary policy has a significant impact on aggregate demand. Because of timing problems, most monetarists believe that discretionary monetary policy should not be used to stabilize the economy. Keynesian economists believe shifts in aggregate demand arise primarily from changes in expectations. Classical economists believe money wages tend to adjust quickly; both monetarists and Keynesians believe wages are “downward sticky.”

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At a recent symposium, “The Great Economic Debate of the Decade” several panelists were asked to state their opinions on aggregate demand and aggregate supply.

Panelist 1 stated that he believed shifts in both aggregate demand and aggregate supply were driven primarily by changes in technology over time.

Panelist 2 stated that she believed the focus of economic policy should be to directly increase aggregate demand by increasing the money supply or through fiscal policy.

The views of Panelist 1 and Panelist 2 would best be described as which economic school of thought?

Panelist 1

Panelist 2

A) Supply side Monetarist

B) Classical Keynesian

C) Keynesian New Keynesian

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The classical economists believe that shifts in both aggregate demand and aggregate supply are primarily driven by changes in technology over time. Keynesian economists believe that aggregate demand can be increased through monetary policy (increasing the money supply) or through fiscal policy (increasing government spending, decreasing taxes, or both). They do not focus on aggregate supply. Monetarists believe that the main factor leading to business cycles and deviations from full-employment equilibrium is monetary policy.

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Which of the following most accurately describes the Monetarist school of macroeconomic thought in relation to aggregate demand and aggregate supply? Monetarists believe that the money supply should be:

A) increased by a constant rate annually.

B) reduced during inflationary periods and increased during recessionary periods.

C) increased during inflationary periods and reduced during recessionary periods.

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Monetarists believe that to keep aggregate demand stable and growing, the central bank should follow a policy of steady and predictable increases in the money supply. Furthermore, monetarists believe that recessions are caused by inappropriate decreases in the money supply and that recessions can be persistent because money wage rates are downward sticky.

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