When demand shocks lead to recessions, it is mainly due to:
A. price inflexibility.
B. the inability of government policy to affect demand.
C. unexpected changes in the supply of goods and services.
D. government regulations that prevent firms from adjusting output in response to the shocks.
Answer: A
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Which of the following is a Nobel Prize winning economist who argued that theories should be tested based on the validity of their predictions?
A) Milton Friedman. B) Ben Bernanke. C) Alan Greenspan. D) Larry Summers.
Which monetarist idea has been absorbed into mainstream macroeconomics?
A. The net export effect has a stronger effect on fiscal policy than monetary policy B. Cuts in tax rates significantly increase the productive capacity of the economy over the historical averages C. Excessive growth in the money supply over long periods leads to inflation D. The Federal funds rate is a more important monetary target than the money supply