Advmacro hw (6)

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Economics

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Jan 9, 2024

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Advanced Macroeconomic Theory Homework - Set 8 Instructions: Please choose the correct option (A, B, C, or D) for each question. The "Lucas Islands Model" assumes that information is: A. Perfectly symmetric among all agents. B. Asymmetric, with policymakers having more information than private agents. C. Imperfect and varies across agents. D. Completely irrelevant for economic decision-making. According to the concept of "strategic complementarities" in macroeconomics, how do individual decisions depend on the choices of others? A. Individuals make decisions independently of others. B. Individual decisions are negatively correlated with others. C. Individual decisions are positively correlated with others. D. Individual decisions are random and unrelated to others. The "term structure of interest rates" refers to: A. The relationship between inflation and nominal interest rates. B. The pattern of interest rates for different maturities on bonds. C. The impact of fiscal policy on interest rates. D. The relationship between exchange rates and interest rates. The concept of "non-accelerating inflation rate of unemployment" (NAIRU) suggests that: A. Inflation can be reduced without affecting unemployment.

B. There is a trade-off between inflation and unemployment. C. Unemployment can be reduced without causing inflation. D. There is a level of unemployment below which inflation is stable. The "efficiency wage theory" suggests that paying workers higher than the market-clearing wage can: A. Lead to lower unemployment. B. Reduce worker productivity. C. Increase turnover and absenteeism. D. Have no impact on labor market outcomes. In the context of the Mundell-Fleming model, what is the impact of a fiscal expansion under a fixed exchange rate regime? A. Appreciation of the domestic currency. B. Depreciation of the domestic currency. C. No impact on the exchange rate. D. A shift from a trade surplus to a trade deficit. According to the "information friction" hypothesis, what role does imperfect information play in macroeconomic outcomes? A. Imperfect information has no impact on economic decisions. B. Imperfect information leads to market inefficiencies. C. Imperfect information enhances market stability. D. Imperfect information causes hyperinflation. The concept of "general equilibrium" in macroeconomics refers to a situation where:

A. All markets clear simultaneously. B. Only the labor market is in equilibrium. C. The government controls all economic activities. D. There are persistent imbalances in the trade sector. The "Taylor Rule" provides guidelines for: A. Optimal fiscal policy. B. Setting interest rates to control inflation and stabilize the economy. C. Exchange rate management. D. Implementing capital controls. The concept of "rational bubbles" suggests that asset prices can deviate from fundamentals: A. Only temporarily. B. Due to irrational behavior. C. Indefinitely. D. Only in highly regulated markets.

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