Answer Happy

This section consists of multiple-choice questions. For each question, choose the most accurate option. Question 1 A increase in aggregate demand following from a rise in the supply of money A)[ ] can affect output in the New Keynesian model because of price stickiness. B)[ ] can affect output in the New Keynesian model because of the positive markup. C[ ] can affect output in the neoclassical model in a liquidity trap. D[ ] can affect output in the neoclassical model with an elastic labour supply. E)[ ] All of the above. F)[ ] A and B. G[ None of the above. [4 marks] Question 2 The intertemporal theory of consumption studied in the module has implications borne out by the empirical evidence that A)[ ] consumption is too sensitive to anticipated changes in income. B)[ ] consumption responds strongly to temporary changes in income. C[ ] liquidity constraints are important. D[ ] consumption is too smooth with respect to permanent changes in income. E)[ ] A and D. F[ ) none of the above. [4 marks]