Chapter 28 Rational Expectations: Implications for Policy

1) Whether one views the activist Keynesian policies of the 1960s and 1970s as destabilizing or simply

believes the economy would have been less stable absent these policies, most economists agree that A) stabilization policies proved more difficult in practice than many economists had expected. B) stabilization policies proved not to be inflationary. C) the monetarists were right in believing that the private economy is inherently stable. D) the Keynesians were right in believing that the private economy is inherently stable. Answer: A 2) The argument that econometric policy evaluation is likely to be misleading if policymakers assume stable economic relationships is known as A) the monetarist revolution. B) the Lucas critique. C) public choice theory. D) none of the above. Answer: B 3) Rational expectations theory suggests that the success of an anti-inflationary policy depends on the A) adoption of a gold standard. B) passage of a tax cut. C) credibility of the policy in the eyes of the public. D) imposition of wage and price controls. Answer: C 4) Lucas argues that when policies change, expectations will change thereby A) changing the relationships in econometric models. B) causing the government to abandon its activist stance. C) forcing the Fed to keep its deliberations secret. D) doing both (a) and (b) of the above. Answer: A 5) The rational expectations hypothesis implies that when macroeconomic policy changes, A) the economy will become highly unstable. B) the way expectations are formed will change. C) people will be slow to catch on to the change. D) people will make systematic mistakes. Answer: B 6) The interest rate thought to have the most important impact on aggregate demand is the A) short-term interest rate. B) T-bill rate. C) rate on 90-day CDs. D) long-term interest rate. Answer: D

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7) A rise in short-term interest rates that is believed only to be temporary A) is likely to have a significant effect on long-term interest rates. B) will have a bigger impact on long-term interest rates than if the rise in short-term rates had been permanent. C) is likely to have only a small impact on long-term interest rates. D) cannot possibly affect long-term interest rates. Answer: C 8) In the new classical macroeconomic model developed by Lucas and Sargent, an anticipated monetary expansion will A) increase aggregate output. B) reduce aggregate output. C) have no effect on aggregate output. D) increase aggregate output and the aggregate price level. Answer: C 9) In a new classical macroeconomic model developed by Lucas and Sargent, expansionary macropolicies affect aggregate output A) only when the macropolicy change is anticipated. B) only when the macropolicy change is unanticipated. C) only after a long and variable lag, provided the policy is anticipated. D) relatively quickly, provided the policy is anticipated. Answer: B 10) An expansionary monetary policy will cause aggregate output to expand in the new classical 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 new classical model when monetary policy is changed. Answer: A 11) 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) none of the above is true. Answer: C 12) 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

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13) In the view of the new classical economists, an increase in the money supply will affect aggregate output and employment A) only if the increase in money supply is anticipated. B) only if the increase in money supply is expected. C) only if the increase in money supply is unanticipated. D) only if the increase in money supply is the result of an announced open market operation. Answer: C 14) An important feature of the new classical model is that an expansionary policy, such as an increase in the rate of money growth, can lead to a decline in aggregate output A) if the public expects an even more expansionary policy than the one that is actually implemented. B) if the policy comes as a surprise. C) if the public expects a less expansionary policy than the one that is actually implemented. D) if the policy is anticipated. Answer: A 15) The similarity between the monetarists and the new classical economists is that A) both believe that only unanticipated policies can effect aggregate output and employment. B) both believe that only anticipated policies can effect aggregate output and employment. C) both believe that discretionary policies may be destabilizing. D) both believe that discretionary policies will be ineffective in changing aggregate output and employment. Answer: C 16) In the new classical model, an anticipated increase in the money stock will cause A) the price level and aggregate output to increase. B) aggregate output to increase. C) the price level to increase. D) have no effect on either the price level or aggregate output. Answer: C 17) Many new classical economists are in agreement with monetarists in their advocacy of A) policy surprises. B) a constant money growth rule. C) discretionary policies. D) none of the above. Answer: B 18) The new classical macroeconomic model assumes 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

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19) The model that assumes that expectations are formed rationally but does not assume complete wage and price flexibility is known as the A) new classical model. B) Keynesian model. C) monetarist model. D) new Keynesian model. Answer: D 20) Wages and prices will tend to be sticky if A) both employers and employees find it advantageous to enter into long-term contracts. B) firms and their suppliers find long-term contracts economically efficient. C) employers and employees find negotiating frequent revision of wage rates very costly. D) all of the above can help explain sticky wages and prices. Answer: D 21) In the new Keynesian model, an anticipated increase in the money supply will cause A) the price level to increase. B) aggregate output and employment to rise. C) both (a) and (b) of the above to occur. D) neither (a) nor (b) of the above to occur. Answer: C 22) In the new Keynesian model, an anticipated increase in the money supply will cause A) only the price level to rise. B) both aggregate output and the price level to rise. C) the level of employment to fall. D) none of the above to occur. Answer: B 23) Mariann the economist argues that expectations are formed rationally, yet a preannounced monetary expansion will lower unemployment. Mariann is probably a A) Keynesian economist. B) monetarist. C) new classical economist. D) new Keynesian economist. Answer: D 24) Kristin the economist argues that an anticipated monetary expansion will cause aggregate output to increase but believes that aggregate output would increase by even a greater amount if the monetary expansion came as a surprise to everyone. Kristin is probably a A) a new Keynesian. B) a new classical economist. C) a monetarist. D) a Keynesian economist. Answer: A

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25) Wage and price rigidities created by long-term contracts suggest that an anticipated monetary expansion will A) have no effect on the aggregate price level. B) have no effect on the aggregate output. C) do both (a) and (b) of the above. D) do neither (a) nor (b) of the above. Answer: D 26) Wage and price rigidities created by long-term contracts suggest that an anticipated monetary expansion will have A) no effect on the aggregate price level. B) no effect on the aggregate output. C) an effect on aggregate output only. D) an effect on both aggregate output and the price level. Answer: D 27) Arthur Okun estimated that in the traditional model, the cost of lost output for each one percentage point reduction in the inflation rate is A) 9 percent of a year's real GNP. B) 0.25 percent of a year's real GNP. C) 0.04 percent of a year's real GNP. D) 25 percent of a year's real GNP. Answer: A 28) In a new classical view of the world, the best anti-inflation policy, when viewed as being credible, is A) a gradualist policy. B) a cold turkey policy. C) a complete monetary and fiscal reform measure. D) an activist policy. Answer: B 29) In both the new classical and new Keynesian models, an anti-inflationary policy will prove less costly in terms of lost output if A) the policy comes as a surprise. B) the policy is viewed to be credible. C) both (a) and (b) are true. D) neither (a) nor (b) are true. Answer: B 30) It may be necessary to cut the deficit as part of a credible anti-inflationary policy because the public knows that large deficits A) are inflationary by themselves in the long run. B) create inefficiencies. C) put pressure on the Fed to expand the money supply to keep interest rates from rising. D) put pressure on the Fed to contract the money supply to prevent employment from rising. Answer: C

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31) Evidence from countries that have successfully halted hyperinflations indicates that A) the creation of an independent monetary authority is an important element of a credible antiinflationary policy. B) a reduction in the budget deficit is an important element of a credible anti-inflationary policy. C) Okun's rule of thumb regarding the cost of reducing inflation has not held for these countries. D) all of the above are true. Answer: D 32) The "Lucas critique" indicates that A) Keynesian criticisms of rational expectations models are well-founded. B) Keynesian criticisms of rational expectations models are not well-founded. C) expectations are important in determining the outcome of an activist policy. D) both (b) and (c) of the above are true. Answer: C 33) The "Lucas critique" indicates that A) Keynesian criticisms of rational expectations models are well-founded. B) Keynesian criticisms of rational expectations models are not well-founded. C) expectations are important in determining the outcome of an activist policy. D) both (b) and (c) of the above are true. Answer: C 34) The "Lucas critique" is A) an attack on the usefulness of conventional econometric models as forecasting tools. B) an attack on the usefulness of conventional econometric models as indicators of the potential impacts on the economy of particular policies. C) an attack on the usefulness of rational expectations models of macroeconomic activity. D) both (a) and (b) of the above. Answer: B 35) The "Lucas critique" A) indicates that expectations are important in determining the outcome of an activist policy. B) is an attack on the usefulness of conventional econometric models as indicators of the potential impacts on the economy of particular policies. C) is an attack on the usefulness of rational expectations models of macroeconomic activity. D) is all of the above. E) is only (a) and (b) of the above. Answer: E

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36) Robert Lucas contends that econometric models that contain equations describing the relationships among hundreds of variables, and have been estimated with past data, A) fail to account for changes in the way expectations are formed. B) are not appropriate for evaluating economic responses to proposed policy changes. C) are ideally suited for evaluating economic responses to proposed policy changes. D) both (a) and (b) of the above. Answer: D 37) The Lucas critique A) shows that the public's expectations about a policy will not influence the response to the policy. B) indicates that conventional econometric models cannot be used for policy evaluation. C) indicates that conventional econometric models can be used for short-run policy evaluation. D) indicates that both (a) and (c) of the above are correct. Answer: B 38) The Lucas critique demonstrates that A) the effects of a particular policy depend critically on the public's expectations about the policy. B) conventional econometric models cannot be used for policy evaluation. C) indicates that conventional econometric models can only be used for short-run policy evaluation. D) all of the above are correct. E) both (a) and (b) of the above are correct. Answer: E 39) The basic principle of the Lucas critique is not that expectations are always rational, but that A) the formation of expectations changes when the behavior of a forecasted variable changes. B) expectations cannot influence the response to policy. C) the effects of a particular policy do not depend on the public's expectations about the policy. D) none of the above. Answer: A 40) In the new classical model, A) all wages and prices are perfectly flexible with respect to expected changes in the price level. B) a rise in the expected price level results in an immediate and equal rise in wages and prices. C) anticipated policy has no effect on aggregate output and unemployment. D) all of the above. E) only (a) and (b) of the above. Answer: D 41) In the new classical model, A) all wages and prices are perfectly flexible with respect to expected changes in the price level. B) a rise in the expected price level results in an immediate and equal rise in wages and prices. C) only unanticipated policy can affect aggregate output and unemployment. D) all of the above. E) only (a) and (b) of the above. Answer: D

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42) In the new classical model, A) wages and prices are sticky with respect to expected changes in the price level. B) unanticipated policy has no effect on aggregate output and unemployment. C) an anticipated increase in the money supply will increase aggregate output temporarily. D) only unanticipated policy can affect aggregate output and unemployment. Answer: D 43) In the new classical model, A) wages and prices are sticky with respect to expected changes in the price level. B) a rise in the expected price level results in an immediate and equal rise in wages and prices. C) an anticipated increase in the money supply will increase aggregate output temporarily. D) unanticipated policy has no effect on aggregate output and unemployment. Answer: B 44) In the new classical model, A) a rise in the expected price level results in an immediate and equal rise in wages and prices. B) anticipated policy has no effect on aggregate output and unemployment. C) unanticipated policy has no effect on aggregate output and unemployment. D) only (a) and (b) of the above. Answer: D 45) In the new classical model, an expansionary monetary policy causes 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 46) If all wages and prices are perfectly flexible with respect to expected changes in the price level, 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) an increase in the price level. D) both (a) and (c) of the above. E) both (b) and (c) of the above. Answer: E

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47) 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 48) 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 49) 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) does none of the above. Answer: A 50) According to the new classical school of thought, a continually increasing money supply causes A) the aggregate demand curve to shift continually to the right, and the price level to increase continually. B) the aggregate supply curve to shift continually to the right, and the price level to increase continually. C) the long-run aggregate supply curve to shift continually to the right, and the price level to increase continually. D) all of the above. Answer: A 51) In the new classical model, an anticipated policy of a continually increasing money supply causes A) the aggregate demand curve to shift right along a stationary aggregate supply curve, leading to continually increasing aggregate output and prices. B) the aggregate supply curve to shift left along a stationary aggregate demand curve, leading to continually contracting aggregate output and prices. C) the aggregate demand curve to shift continually to the right while simultaneously the aggregate supply curve shifts continually inward, leading to higher and higher price levels. D) the aggregate demand curve to shift continually to the left while simultaneously the aggregate supply curve shifts continually outward, leading to higher and higher price levels. Answer: C

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52) The short-run response to an anticipated expansionary policy in the new classical model includes A) a temporary increase in both aggregate output and the price level. B) an increase in the price level, but no change in aggregate output. C) an increase in the aggregate output, but no change in the price level. D) none of the above. Answer: B 53) In the new classical model, an unanticipated increase in the money supply causes A) the aggregate demand curve to shift to the right along a stationary aggregate supply curve. B) both the aggregate demand and supply curves to shift simultaneously to the right. C) the aggregate demand curve to shift to the right as the aggregate supply curve simultaneously shifts to the left. D) both the aggregate demand and supply curves to shift simultaneously to the left. Answer: A 54) 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 55) The policy ineffectiveness proposition A) asserts that anticipated changes in monetary policy cannot affect real aggregate output. B) rules out output effects from policy surprises. C) implies that an anticipated contractionary monetary policy cannot reduce the rate of inflation. D) implies that an anticipated expansionary monetary policy will not cause the price level to rise. Answer: A 56) The policy ineffectiveness proposition A) asserts that anticipated changes in monetary policy cannot affect real aggregate output. B) does not rule out output effects from policy surprises. C) implies that an anticipated contractionary monetary policy cannot reduce the rate of inflation. D) implies that an anticipated expansionary monetary policy will not cause the price level to rise. E) both (a) and (b) of the above. Answer: E 57) The notion that anticipated monetary policy has no effect on the real aggregate output is commonly called the A) Lucas critique. B) policy ineffectiveness proposition. C) natural rate hypothesis. D) new Keynesian proposition. Answer: B

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58) In the new classical model, an expansionary monetary policy will lead to a decline in aggregate output if A) the increase in money supply is less than anticipated. B) the increase in money supply is greater than anticipated. C) the increase in money supply comes as a surprise. D) the Fed announces the policy decision prior to its implementation. Answer: A 59) New Keynesians object to the new classical model's assumptions of A) rational expectations. B) wage and price flexibility with respect to expected changes in the price level. C) both (a) and (b) of the above. D) neither (a) nor (b) of the above. Answer: B 60) New Keynesians object to which of the following assumptions? A) Rational expectations B) Wage and price stickiness C) Long-term contracts as a source of wage and price rigidities. D) None of the above Answer: D 61) New Keynesians object to which of the following assumptions? A) Rational expectations B) Wage and price stickiness C) Complete wage and price flexibility D) Long-term contracts as a source of wage and price rigidities. Answer: C 62) Critics of the new classical model object to complete wage and price flexibility because of the existence of A) long-term contracts. B) firms' fixed price contracts with suppliers. C) implicit wage contracts that limit wage hikes to once a year. D) all of the above. E) only (a) and (b) of the above. Answer: D

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63) Rigidities which diminish wage and price flexibility such as long-term contracts suggest that an increase in the expected price level A) might not translate into complete adjustment of wages and prices. B) might cause the aggregate demand curve to shift inward. C) might cause the aggregate supply curve to shift outward. D) will have no effect on the short run aggregate supply curve. E) will do none of the above. Answer: A 64) New Keynesians assume that A) expectations are rational. B) wages and prices are completely flexible with respect to expected changes in the price level. C) wages and prices do not respond fully to expected changes in the price level. D) both (a) and (b) of the above. E) both (a) and (c) of the above. Answer: E 65) New Keynesians assume that A) expectations are rational. B) wages and prices are less than completely flexible with respect to expected changes in the price level. C) both (a) and (b) of the above are true. D) neither (a) nor (c) of the above are true. Answer: C 66) New Keynesians assume that A) expectations are rational. B) wages and prices are sticky. C) long-term contracts are a source of sticky wages and prices. D) all of the above are true. E) only (a) and (b) of the above are true. Answer: D 67) New Keynesians contend that A) unanticipated policy has a larger effect than anticipated policy on aggregate output. B) anticipated policy has a larger effect than unanticipated policy on aggregate output. C) anticipated policy does not affect aggregate output. D) both (a) and (b) of the above. Answer: A

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68) New Keynesians contend that A) unanticipated policy has a larger effect than anticipated policy on aggregate output. B) anticipated policy has a larger effect than unanticipated policy on aggregate output. C) anticipated policy does affect aggregate output. D) both (a) and (c) of the above. Answer: D 69) In the new Keynesian model A) all wages and prices are perfectly flexible with respect to expected changes in the price level. B) a rise in the expected price level results in an immediate and equal rise in wages and prices. C) anticipated policy has no effect on aggregate output and unemployment. D) none of the above are true. Answer: D 70) In the new Keynesian model A) wages and prices are assumed to be sticky with respect to expected changes in the price level. B) anticipated policy does affect aggregate output. C) unanticipated policy has a larger effect than anticipated policy on aggregate output and unemployment. D) all of the above are correct. E) both (a) and (b) of the above are correct. Answer: D 71) In the new Keynesian model A) wages and prices are assumed to be sticky with respect to expected changes in the price level. B) only unanticipated policy can affect aggregate output and unemployment. C) only anticipated policy can affect aggregate output and unemployment. D) unanticipated policy has no effect on aggregate output and unemployment. Answer: A 72) In the new Keynesian model A) wages and prices are sticky with respect to expected changes in the price level. B) unanticipated policy has no effect on aggregate output and unemployment. C) an anticipated increase in the money supply will increase aggregate output temporarily. D) only (a) and (b) of the above are correct. E) only (a) and (c) of the above are correct. Answer: E

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73) Like the new classical model, the new Keynesian model A) concludes that anticipated policies do not affect aggregate output and unemployment. B) distinguishes between the effects of anticipated versus unanticipated policy, with anticipated policy having a greater effect. C) distinguishes between the effects of anticipated versus unanticipated policy, with unanticipated policy having a greater effect. D) assumes that wages and prices are perfectly flexible with respect to changes in the expected price level. Answer: C 74) In the new Keynesian model, an expansionary monetary policy causes 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) an increase in the price level. D) both (a) and (c) of the above. Answer: C 75) If not all wages and prices are perfectly flexible with respect to expected changes in the price level, then an expansionary monetary policy will cause A) the aggregate demand curve to shift to the right, and output to increase. B) the aggregate demand curve to shift to the left, and output to decrease. C) an increase in the price level. D) both (a) and (c) of the above. Answer: D 76) If an expected rise in the price level does not result in an immediate and equal increase in wages and prices, then the expansionary monetary policy will cause A) the aggregate demand curve to shift to the right and output to increase, whether or not the policy was anticipated. B) the aggregate demand curve to shift to the right, and output to increase only if the policy is unanticipated. C) the aggregate supply curve to shift inward by more than the aggregate demand curve shifts outward, resulting in a decline in aggregate output. D) none of the above. Answer: A 77) The short-run responses to an anticipated expansionary policy in the new Keynesian model include A) a temporary increase in aggregate output. B) an increase in the price level. C) no increase in aggregate output. D) both (a) and (b) of the above. Answer: D

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78) In the new Keynesian model, an unanticipated increase in the money supply causes A) the aggregate demand curve to shift to the right along a stationary aggregate supply curve. B) both the aggregate demand and supply curves to shift simultaneously to the right. C) the aggregate demand curve to shift to the right as the aggregate supply curve simultaneously shifts to the left. D) both the aggregate demand and supply curves to shift simultaneously to the left. Answer: A 79) When compared to an unanticipated expansion, an anticipated expansion in the money supply in the new Keynesian model causes A) the aggregate demand curve to shift to the right by a smaller magnitude, leading to a smaller increase in aggregate output. B) the aggregate demand curve to shift to the right as the aggregate supply curve shifts inward, leading to a smaller increase in aggregate output. C) both the aggregate demand and supply curves to shift to the right, leading to a greater increase in aggregate output. D) none of the above. Answer: B 80) In the new Keynesian model, an expansionary monetary policy will A) not cause aggregate output to increase, even if the policy is unanticipated. B) have a greater effect on aggregate output if the policy is unanticipated. C) have a greater effect on aggregate output if the policy is anticipated. D) have no effect on the price level. Answer: B 81) In contrast to the new classical model, the new Keynesian model A) indicates that anticipated policy does have an effect on aggregate output. B) does not deny the potential for beneficial effects from activist stabilization policy. C) assumes that wages and prices are perfectly flexible with respect to expected changes in the price level. D) implies all of the above. E) implies only (a) and (b) of the above. Answer: E 82) The new Keynesian model recognizes that anticipated policy affects the aggregate supply curve, but that A) anticipated policy, nevertheless, has no effect on aggregate output. B) unanticipated policy has a greater effect on aggregate output. C) both (a) and (b) of the above are possible. D) neither (a) nor (b) of the above are possible. Answer: B

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83) The new Keynesian model recognizes that anticipated policy affects the aggregate supply curve, but because of rigidities introduced by long-term contracts, A) the aggregate supply curve will be slower to shift inward when compared to the adjustment in the new classical model. B) wage and price adjustment is not as complete as in the new classical model. C) aggregate output will increase above the natural rate level in the short run. D) all of the above will occur. E) only (a) and (b) of the above will occur. Answer: D 84) Wage and price rigidities created by long-term contracts imply that an anticipated monetary expansion will cause A) the price level to rise. B) aggregate output to increase in the short run. C) a permanent increase in aggregate output. D) both (a) and (b) of the above to occur. E) both (a) and (c) of the above to occur. Answer: D 85) In the first half of 1985, Bolivia's inflation rate was running at 20,000 percent, but was stopped in its tracks within one month at very little cost of lost output. Important elements to Bolivia's success included A) slowing money growth. B) closing many state-owned enterprises. C) balancing the federal government budget on a day-by-day basis. D) all of the above. E) only (a) and (b) of the above. Answer: D 86) According to the Lucas critique if past increases in the short-term interest rate have always been temporary, then A) the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate. B) the term-structure relationship using past data will show no effect of changes in the short-term interest rate on the long-term rate. C) one cannot predict the term-structure relationship as it depends on expectations. D) the term-structure relationship using past data will nevertheless show a strong effect of changes in the short-term interest rate on the long-term rate because of a change in the way expectations are formed. Answer: A

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87) If past increases in the short-term interest rate have always been temporary, then the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate. If the public now expects the rise in short-term interest rates to be permanent, then, according to the Lucas critique, A) the response of long-term rates will be far smaller than that indicated by the term-structure equation. B) the response of long-term rates will be far greater than that indicated by the term-structure equation. C) the response of long-term rates will be quite close to that indicated by the term-structure equation. D) none of the above occur. Answer: B 88) Macroeconomic models which distinguish between the effects of anticipated versus unanticipated policy include A) the new Keynesian model. B) the new classical model. C) the Keynesian model. D) all of the above. E) only (a) and (b) of the above. Answer: E 89) Macroeconomic models which distinguish between the effects of anticipated versus unanticipated policy include A) the new Keynesian model. B) the new classical model. C) the traditional model. D) only (a) and (b) of the above. Answer: D 90) Macroeconomic models that distinguish between the effects of anticipated versus unanticipated policy include A) the Keynesian model. B) the new classical model. C) the traditional model. D) only (a) and (b) of the above. Answer: B

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