1. If autonomous consumption rises more than expected, then output rises under the
a) new classical model. b) new Keynesian model. c) both of the above. d) neither of the above.
2. If the federal funds rates falls less than expected, then output falls under the
a) new classical model. b) new Keynesian model. c) both of the above. d) neither of the above.
3. If government spending rises more than anticipated, then equilibrium output should _____ and the equilibrium price level should _____ in the short run.
a) rise, rise b) rise, fall c) fall, rise d) fall, fall
4. If the money supply falls less than expected, then output (definitely) falls under the
a) new classical model. b) new Keynesian model. c) both of the above. d) neither of the above.
5. Starting at the natural rate, if the government acts to fight inflation (reduce the equilibrium price level), then the shift in AS will not be as large as the shift in AD under the
a) new classical model. b) new Keynesian model. c) cannot be determined.
6. The disinflation policies of the early 1980s were not costly due to
a) central bank independence. b) sticky prices. c) high government budget deficits. d) all of the above.