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© 2014 Pearson Canada Inc."Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 25 Monetary Policy Theory
25.1 Response of Monetary Policy to Shocks
Non-activists believe that that expectations are ____ formed and that wages and prices
are ____ with respect to the expected price level.
A) adaptively; completely flexible
B) adaptively; sticky
C) rationally; completely flexible
D) rationally; sticky
Answer: C
Diff: 1 Type: MC Page Ref: 610
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
An expansionary monetary policy will cause aggregate output to expand in the non-activist
macroeconomic model ____.
A) if the policy is unanticipated
B) if the policy is anticipated
C) only after a long and variable lag, provided the policy is anticipated
D) never; output will never expand in the non-activist model when monetary policy is changed
Answer: A
Diff: 1 Type: MC Page Ref: 694
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
According to the new classical model, ____.
A) unanticipated policy has no effect
B) only anticipated policy can influence the business cycle
C) anticipated policy has no effect on the business cycle
D) both A and B of the above are true
Answer: C
Diff: 1 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
Steve the economist tells his students that one anticipated policy is just like any other—none
has any effect on aggregate output. You can probably infer that he is a ____.
A) Keynesian economist
B) monetarist
C) proponent of activist policies
D) new classical economist
Answer: D
Diff: 1 Type: MC Page Ref: 695
Skill: Applied
Objective List: 25.1 Discern between activist and non-activists views on monetary policy