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The new classical model has the word classical associated with it because, when an increase
in the money supply is anticipated, ____.
A) aggregate output drops below the natural rate level
B) aggregate output rises above the natural rate level
C) aggregate output remains at the natural rate level
D) aggregate output increases in the short run, but not in the long run
Answer: C
Diff: 2 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
If a rise in the expected price level results in an immediate and equal rise in wages and
prices, then an expansionary monetary policy will cause ____.
A) the aggregate demand curve to shift to the right, and output to increase only if the policy is
anticipated
B) the aggregate demand curve to shift to the right, and output to increase only if the policy is
unanticipated
C) a decline in the price level
D) both B and C of the above
Answer: B
Diff: 2 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
1 5) In the new classical model, an unanticipated increase in the money supply will cause
____.
A) output to increase in the short run, but not in the long run
B) an increase in the price level
C) government budget deficits to increase
D) only A and B of the above
Answer: D
Diff: 3 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
- In the new classical model, an anticipated policy of a continually increasing money supply
____.
A) causes the aggregate demand curve to shift continually to the right
B) causes the aggregate demand curve to shift continually to the left
C) is shown as a movement along the aggregate demand curve
D) both b and C of the above
Answer: A
Diff: 1 Type: MC Page Ref: 695
Skill: Applied
Objective List: 25.1 Discern between activist and non-activists views on monetary policy