Question 1

Which of the following views from classical economics would be accepted by a Keynesian economist?

Accepted Answer

A)   Supply creates its own demand.
B)   The economy will automatically go into equilibrium at a full employment level of output.
C)   There is no need for government intervention to bring the economy to an acceptable level of output.
D)   None of the above would be accepted by a Keynesian economist.

Question 2

Anticipations about inflation and how the economy should perform that are formed by households and businesses from their understandings of how they would be affected by proposed government policies are:

Accepted Answer

A)   rational expectations.
B)   adaptive expectations.
C)   policy-review expectations.
D)   experience-adjustment expectations.

Question 3

The primary conclusion of Keynesian economics is that:

Accepted Answer

A)   there is no tradeoff between unemployment and inflation.
B)   businesses will change their prices to achieve macroeconomic goals.
C)   a free market economy will automatically operate at full employment.
D)   a free market economy can operate at less than full employment for long periods of time.

Question 4

The policy position of Keynesian economics is:

Accepted Answer

A)   there is no need for government intervention to correct economic problems.
B)   government should provide incentives to households and businesses to increase production.
C)   government can be used to stimulate demand and move the economy to full employment.
D)   government intervention in the economy will be made ineffective by actions of households and businesses.

Question 5

According to the classical economists, how would the behavior of wages and prices ensure that the economy operates at full employment?

Accepted Answer

Wages and prices were fully fl...

Question 6

According to the classical school of economics, an increase in aggregate demand would NOT lead to an increase in:

Accepted Answer

A)   wages.
B)   prices.
C)   the full employment level of output.
D)   any of the above.

Question 7

The four components of model building are:

Accepted Answer

A)   identifying variables, applying universal truths, collecting data, and drawing conclusions.
B)   identifying assumptions, collecting data, drawing conclusion, and setting policy.
C)   establishing assumptions, identifying variables, collecting and analyzing data, and drawing conclusions.
D)   establishing assumptions, collecting data, setting policy, and implementing policy.

Question 8

Assumptions:

Accepted Answer

A)   are a key component of a model.
B)   are conditions held to be true in a model.
C)   influence the conclusions derived from the model.
D)   all of the above.

Question 9

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy.
 
-At a total output level of $6 trillion, injections into the spending stream are:

Accepted Answer

A)   zero.
B)   equal to leakages from the spending stream.
C)   less than leakages from the spending stream.
D)   greater than leakages from the spending stream.

Question 10

-Which figure illustrates an economy producing at full employment, regardless of the level of prices and wages?

Accepted Answer

A)   Figure B.
B)   Figure D.
C)   Figure B and Figure D.
D)   None of the figures.

Question 11

Milton Friedman and the "Chicago School"are most closely associated with:

Accepted Answer

A)   monetarism.
B)   classical economics.
C)   supply-side economics.
D)   new classical economics.

Question 12

Classical economics is most closely associated with a:

Accepted Answer

A)   mercantilist philosophy.
B)   free market philosophy.
C)   mixed capitalism philosophy.
D)   command economy philosophy.

Question 13

According to new classical economics, over the long run the economy will operate:

Accepted Answer

A)   at full employment.
B)   with zero unemployment.
C)   at the natural rate of unemployment.
D)   with significant unemployment because of misguided government policies.

Question 14

According to new classical economists, the long-run economy will operate:

Accepted Answer

A)   with no unemployment.
B)   with cyclical unemployment.
C)   at the natural rate of unemployment.
D)   with a high level of unemployment because of weak government regulation.

Question 15

Which of the following is not a supply-side proposal?

Accepted Answer

A)   Less government intervention in the economy.
B)   Higher taxes on individuals.
C)   Lower taxes on businesses.
D)   Less government red tape and regulation.

Question 16

The concept of controlling the level of economic activity by purposefully influencing the size of the spending stream is most closely associated with:

Accepted Answer

A)   James Mill.
B)   Adam Smith.
C)   Milton Friedman.
D)   John Maynard Keynes.

Question 17

How do Keynesian and new Keynesian economists differ from classical and new classical economists in their views on the proper role of government in the macroeconomy?

Accepted Answer

Classical economists argued that there w...

Question 18

An economy that has its levels of output, employment, and prices affected by developments in other countries is:

Accepted Answer

A)   an open economy.
B)   a closed economy.
C)   not a capitalist economy.
D)   a pass-through economy.

Question 19

What are rational expectations and adaptive expectations, and how could they distort the effects of government macroeconomic policies?

Accepted Answer

Rational expectations assume that indivi...

Question 20

Which of the following statements about the classical school of economics is FALSE?

Accepted Answer

A)   It dates back to Adam Smith and his book, The Wealth of Nations.
B)   Its followers hold that government intervention is necessary to keep the economy at full employment.
C)   It was largely rejected during the 1930s because it could not explain or remedy the Great Depression.
D)   Its followers hold that everything leaked from the spending stream through saving is returned through investment spending.

Exam 9: Macroeconomic Viewpoints and Models

Which of the following is not a supply-side proposal?

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Milton Friedman and the "Chicago School"are most closely associated with:

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According to new classical economists, the long-run economy will operate:

Correct AnswerverifiedShow Answer

Which of the following views from classical economics would be accepted by a Keynesian economist?

Correct AnswerverifiedShow Answer

The policy position of Keynesian economics is:

Correct AnswerverifiedShow Answer

The concept of controlling the level of economic activity by purposefully influencing the size of the spending stream is most closely associated with:

Correct AnswerverifiedShow Answer

Which of the following statements about the classical school of economics is FALSE?

Correct AnswerverifiedShow Answer

The four components of model building are:

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The primary conclusion of Keynesian economics is that:

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The following figure illustrates the Keynesian model of equilibrium in the macroeconomy. -At a total output level of $6 trillion, injections into the spending stream are:

Correct AnswerverifiedShow Answer

-Which figure illustrates an economy producing at full employment, regardless of the level of prices and wages?

Correct AnswerverifiedShow Answer

What are rational expectations and adaptive expectations, and how could they distort the effects of government macroeconomic policies?

Correct AnswerverifiedRational expectations assume that indivi...View AnswerShow Answer

According to the classical economists, how would the behavior of wages and prices ensure that the economy operates at full employment?

Correct AnswerverifiedWages and prices were fully fl...View AnswerShow Answer

According to the classical school of economics, an increase in aggregate demand would NOT lead to an increase in:

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Assumptions:

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Classical economics is most closely associated with a:

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According to new classical economics, over the long run the economy will operate:

Correct AnswerverifiedShow Answer

Anticipations about inflation and how the economy should perform that are formed by households and businesses from their understandings of how they would be affected by proposed government policies are:

Correct AnswerverifiedShow Answer

An economy that has its levels of output, employment, and prices affected by developments in other countries is:

Correct AnswerverifiedShow Answer

How do Keynesian and new Keynesian economists differ from classical and new classical economists in their views on the proper role of government in the macroeconomy?

Correct AnswerverifiedClassical economists argued that there w...View AnswerShow Answer

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Rational expectations assume that indivi...
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Wages and prices were fully fl...
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Classical economists argued that there w...
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