Question 1

The classicals said that recessions are _____ because the economy is ____.

Accepted Answer

temporary;...

Question 2

The Keynesian point of view suggests that

Accepted Answer

A)  supply creates its own demand.
B)  demand creates its own supply.
C)  the market is always at equilibrium.
D)  full employment is the natural result of market forces.
E)  wage and price controls can halt deflationary pressures.

Question 3

"The economy can be in equilibrium,with aggregate supply equal to aggregate demand,at a level substantially below the full employment level of output." This statement best describes the views of

Accepted Answer

A)  both the classical economists and the Keynesians.
B)  neither the classical economists nor the Keynesians.
C)  the classical economists.
D)  the Keynesians.

Question 4

Assume the aggregate demand curve intersects the aggregate supply curve in its intermediate range.A decrease in the aggregate supply curve will

Accepted Answer

A)  increase the price level and decrease real GDP.
B)  decrease the price level and increase real GDP.
C)  increase both the price level and real GDP.
D)  decrease both the price level and real GDP.

Question 5

If the rate of interest did not equate saving and investment and total output was greater than total spending,the classical economist argued,competition would tend to force

Accepted Answer

A)  product and resource prices down.
B)  product prices up and resource prices down.
C)  product prices up and resource prices up.
D)  product prices down and resource prices up.

Question 6

At equilibrium GDP,aggregate demand _______ aggregate supply and savings _______ investment.

Accepted Answer

A)  is equal to;is equal to
B)  is not equal to;is not equal to
C)  is equal to;is not equal to
D)  is not equal to;is equal to

Question 7

In the classical model where aggregate supply is vertical with respect to the price level,an increase (shift) in aggregate demand will yield

Accepted Answer

A)  a relatively large increase in output.
B)  an equal change in output.
C)  a relatively large increase in the price level.
D)  a relatively small change in the price level.

Question 8

Which of the following statements best reflects Keynes' view of the aggregate supply curve?

Accepted Answer

A)  It tends to be vertical,because the economy naturally tends toward equilibrium positions of full employment.
B)  It tends to be upward sloping (but not vertical) ,because as we try to produce more output out of our given resources,some labor has to work overtime at higher pay,driving up costs and prices.
C)  It tends to be horizontal during periods when substantial amounts of resources are unemployed.
D)  It tends to slope downward and to the right reflecting people's natural tendency to postpone purchases when they lose their jobs.
E)  None of the choices are true of Keynes' view of the aggregate supply curvE.

Question 9

Classical economists believed that

Accepted Answer

A)  if saving exceeded investment,prices and interest rates would rise as business accumulated unwanted inventories.
B)  flexible prices and wages could not restore an economy to full employment if the interest rate were rigid.
C)  flexible interest rates,wages,and prices would assure full employment.
D)  voluntary unemployment reflected economic inefficiency.
E)  all unemployment was involuntary.

Question 10

When aggregate expenditures are equal to aggregate production,the economy is experiencing

Accepted Answer

A)  an inflationary GDP gap.
B)  a budget deficit.
C)  a trade deficit.
D)  macroeconomic equilibrium.

Question 11

Which of the following is false?

Accepted Answer

A)  Keynes believed that the economy was basically unstable.
B)  The classical economists believed that full employment was a "rare occurrence."
C)  Keynes argued that the expected rate of profit was the most important factor in determining the level of investment demand in an economy.
D)  The classical economists used the laws of supply and demand to prove the validity of Say's Law.

Question 12

Consumption is a function of ____.

Accepted Answer

The answer of Consumption is a function of ____....

Question 13

Say's law states that supply creates its own demand because

Accepted Answer

A)  there is always a buyer for every good produced.
B)  supply prices are always equal to demand prices.
C)  prices are such that,in the short run,producers know exactly how much to produce.
D)  the act of producing creates an income sufficient to purchase all that is produceD.

Question 14

In the classical theory of employment a decline in the rate of interest will _____ saving and _____ investment.

Accepted Answer

The answer of In the classical theory of employment a...

Question 15

-If aggregate demand shifts from AD1 to AD2,

Accepted Answer

A)  both output and the price level will rise.
B)  output will rise and the price level will fall.
C)  output will rise and the price level will remain the same.
D)  both output and the price level will fall.
E)  output will fall and the price level will risE.

Question 16

Keynesian macroeconomic theory has been summarized as the idea that

Accepted Answer

A)  supply creates its own demand.
B)  demand creates its own supply.
C)  demand quickly adjusts in order to accommodate changes in the quantity of output.
D)  full employment is assured in long-run equilibrium.
E)  full employment is assured in short-run equilibrium.

Question 17

The principal cause of the Great Depression of the 1930s was

Accepted Answer

A)  a collapse in aggregate demand.
B)  a collapse in aggregate supply.
C)  a collapse in the average price level.
D)  a collapse in government spending.
E)  the outbreak of the Second World War.

Question 18

The classical theory of the market concluded that the interest rate would equate _____ and ____.

Accepted Answer

The answer of The classical theory of the market concluded...

Question 19

If the economy is in the vertical portion of the AS curve,what will be the effect of an increase in the price level on output produced?

Accepted Answer

A)  Output will increase at a very rapid rate
B)  Output will not change
C)  Output will only slightly increase
D)  Output change cannot be predicted from information given

Question 20

Which of the following is true?

Accepted Answer

A)  To fight a depression,Keynes said that the government should spend money on carefully chosen projects.
B)  According to Keynes,an equilibrium below full employment was a rare occurrence.
C)  Keynes suggested that savers save and investors invest for different reasons.
D)  Keynes believed the economy was basically stable.

Exam 11: Classical and Keynesian Economics

The Keynesian point of view suggests that

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Keynesian macroeconomic theory has been summarized as the idea that

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-If aggregate demand shifts from AD1 to AD2,

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"The economy can be in equilibrium,with aggregate supply equal to aggregate demand,at a level substantially below the full employment level of output." This statement best describes the views of

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The classical theory of the market concluded that the interest rate would equate _____ and ____.

Correct AnswerverifiedShow Answer

Classical economists believed that

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At equilibrium GDP,aggregate demand _______ aggregate supply and savings _______ investment.

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The principal cause of the Great Depression of the 1930s was

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In the classical model where aggregate supply is vertical with respect to the price level,an increase (shift) in aggregate demand will yield

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The classicals said that recessions are _____ because the economy is ____.

Correct Answerverifiedtemporary;...View AnswerShow Answer

Assume the aggregate demand curve intersects the aggregate supply curve in its intermediate range.A decrease in the aggregate supply curve will

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If the economy is in the vertical portion of the AS curve,what will be the effect of an increase in the price level on output produced?

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Which of the following statements best reflects Keynes' view of the aggregate supply curve?

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Say's law states that supply creates its own demand because

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Which of the following is false?

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In the classical theory of employment a decline in the rate of interest will _____ saving and _____ investment.

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Which of the following is true?

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Consumption is a function of ____.

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If the rate of interest did not equate saving and investment and total output was greater than total spending,the classical economist argued,competition would tend to force

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When aggregate expenditures are equal to aggregate production,the economy is experiencing

Correct AnswerverifiedShow Answer

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The classical theory of the market concluded that the interest rate would equate _ and .

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At equilibrium GDP,aggregate demand _ aggregate supply and savings _ investment.

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The classicals said that recessions are _ because the economy is .

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temporary;...
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In the classical theory of employment a decline in the rate of interest will _ saving and _ investment.

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