Answer all the questions below well.

According to the principle of the 'neutrality of money':

A changes in the money supply will only affect nominal variables.

B an increase in the money supply will increase real output.

C a decrease in the money supply will reduce real wages.

D there should be no increase in the money supply.

Which of the following methods for increasing national income might a monetarist or new classical

economist recommend?

A increase government spending

B decrease interest rates

C encourage firms to increase their productivity

D reduce the exchange rate of the domestic economy to encourage exports

17.3 Which of the following is NOT a feature of the new classical model of the economy?

A rational expectations

B hysteresis

C continuous market clearing

D policy ineffectiveness proposition

If the actual rate of unemployment is lower than the natural rate of unemployment because the

government has increased the rate of growth of the money supply, then, according to the

accelerationist hypothesis:

A the expectations-augmented Phillips curve shifts downwards.

B the expectations-augmented Phillips curve shifts upwards.

C the long-run Phillips curve shifts to the left.

D the long-run Phillips curve shifts to the right.

According to the accelerationist hypothesis, which of the following statements is correct?

A If inflation is temporarily above its expected level, then unemployment will be below its

natural level.

B If inflation is temporarily below its expected level, then unemployment will be below its

natural level.

C If inflation is temporarily above its expected level, then unemployment will be above its

natural level.

D If inflation is temporarily below its expected level, then unemployment will rise.

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