A difference between the new classical and monetarist models is that expectations in the new classical model are _____ while they are _____ in the monetarist model
a. forward looking; backward looking.
b. rational; adaptive.
c. correct; mistaken.
d. perfectly competitive; imperfectly competitive.
e. both a and b.
E
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In the above figure, if we start at AD1 and SRAS1, and the money supply increases unexpectedly, what would be the short-run equilibrium even with rational expectations?
A) P1 B) E2 C) E3 D) E1
In the long run, an increase in government purchases of military equipment would cause output to ________ and the aggregate price level to ________
A) stay constant; fall B) fall; fall C) fall; stay constant D) stay constant; rise
An increase in the money supply
a. reduces interest rates and shifts aggregate demand to the right. b. reduces interest rates and shifts aggregate supply to the right c. raises interest rates and shifts aggregate demand to the right. d. raises interest rates and shifts aggregate supply to the right.
Which one of the following statements is FALSE?
A) Generally, what matters most to consumers is what a good costs in dollars. B) The relative price of a good is its price measured relative to the price of other goods. C) The nominal price of a good is its price measured in current dollars. D) When the price of beer goes up by the same proportion as the prices of all other goods, the relative price of beer does not change.