Question 1

If asked about the basic functioning of the economy, a classical economist would claim that:

Accepted Answer

A)   the market tends toward stability and full employment.
B)   the market tends toward instability and cyclical unemployment.
C)   prices are sticky.
D)   the economy needs help in moving back to full employment.
E)   the short run is more significant than the long run.

Question 2

Classical economists believe that the economy is stable and tends toward full employment because:

Accepted Answer

A)   the government plays an active role in managing the economy.
B)   savings is a drain on demand and must be limited.
C)   the short run is more important than the long run, and economic policy only works in the short run.
D)   prices are flexible and allow the economy to quickly return to full employment.
E)   prices are sticky and will not prevent the economy from adjusting to full employment.

Question 3

Assume that you are a Keynesian economist. You are asked what the government should do if the economy enters a recession. What would you say in response?

Accepted Answer

You would probably state that the govern...

Question 4

Use the following graph to answer the next  questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS)  have decreased, with no change in short-run aggregate supply (SRAS) . 
-During the Great Recession, real gross domestic product (GDP)  fell yet the price level was largely unchanged, as depicted in the graph. Because of this, we know that:

Accepted Answer

A)   both aggregate demand and long-run aggregate supply increased during the recession.
B)   aggregate demand and long-run aggregate supply both decreased during the recession.
C)   aggregate demand decreased and long-run aggregate supply increased during the recession.
D)   aggregate demand decreased and short-run aggregate supply increased during the recession.
E)   long-run aggregate supply increased and short-run aggregate supply decreased during the recession. B

Question 5

Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because:

Accepted Answer

A)   the long run is more important than the short run, and economic policy works only in the long run.
B)   prices are flexible and allow the economy to quickly return to full employment.
C)   supply is more important than demand in determining economic growth and output.
D)   savings is a crucial part of economic growth and investment.
E)   prices are sticky and prevent the economy from adjusting to full employment.

Question 6

Use the following graph to answer the next  questions. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS)  or long-run aggregate supply (LRAS) . 
-The graph accurately summarizes what happened during the Great Depression, because during that time, the price level _________ and real gross domestic product (GDP)  _________.

Accepted Answer

A)   decreased; decreased
B)   increased; decreased
C)   remained unchanged; remained unchanged
D)   decreased; increased
E)   remained unchanged; decreased

Question 7

When held up against other economic downturns, the Great Depression:

Accepted Answer

A)   had very high levels of consumer sentiment.
B)   had stable stock prices.
C)   had high rates of deflation.
D)   had very high levels of international trade.
E)   had very small changes in real gross domestic product (GDP) .

Question 8

If asked about the basic functioning of the economy, a Keynesian economist would state that:

Accepted Answer

A)   prices are flexible.
B)   the market tends toward stability and full employment.
C)   the market tends toward instability and cyclical unemployment.
D)   savings is crucial to growth.
E)   the long run is more important than the short run. C

Question 9

The Great Recession was different from other recessions since World War II in that:

Accepted Answer

A)   real gross domestic product (GDP)  initially declined and then recovered sometime later.
B)   the trade deficit was largely unaffected.
C)   the rate of unemployment increased and then decreased at a later time.
D)   the decline in real GDP was much larger and lasted longer.
E)   the economy did not return to normal for at least one year.

Question 10

Use the following graph to answer the next  questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS)  have decreased, with no change in short-run aggregate supply (SRAS) . 
-The graph accurately summarizes what happened during the Great Recession, because during that time, the price level _________ and real gross domestic product (GDP)  _________.

Accepted Answer

A)   decreased; decreased
B)   increased; increased
C)   remained largely unchanged; decreased
D)   decreased; remained unchanged
E)   remained unchanged; increased

Question 11

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because:

Accepted Answer

A)   housing prices increased dramatically.
B)   the U.S. government decreased taxes.
C)   there was a severe decline in stock prices.
D)   the U.S. government increased the supply of money.
E)   there was an increase in the U.S. population.

Question 12

Prior to the Great Depression, U.S. stock prices decreased dramatically. This would tend to cause:

Accepted Answer

A)   aggregate demand to decrease.
B)   aggregate demand to increase.
C)   long-run aggregate supply to increase.
D)   short-run aggregate supply to increase.
E)   long-run aggregate supply to decrease.

Question 13

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because:

Accepted Answer

A)   a large number of U.S. banks failed.
B)   there was an increase in the U.S. population.
C)   the U.S. government decreased taxes.
D)   there were advances in technology in manufacturing.
E)   there was an increase in stock prices.

Question 14

During the Great Depression, thousands of U.S. banks failed. As a result:

Accepted Answer

A)   aggregate demand increased.
B)   long-run aggregate supply increased.
C)   aggregate demand decreased.
D)   short-run aggregate supply increased.
E)   short-run aggregate supply decreased.

Question 15

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _________ and real gross domestic product (GDP)  _________.

Accepted Answer

A)   increased; decreased
B)   decreased; remained unchanged
C)   increased; increased
D)   decreased; decreased
E)   remained unchanged; increased A

Question 16

The Great Recession was different from other recessions since World War II in that:

Accepted Answer

A)   the economy did not return to normal for at least one year.
B)   most consumers were unaffected by the recession.
C)   the overall economy took far longer to recover than the average.
D)   the rate of unemployment increased and then decreased at a later time.
E)   real gross domestic product (GDP)  initially declined and then recovered sometime later.

Question 17

Keynesian economists believe that:

Accepted Answer

A)   the long run is more important than the short run.
B)   prices are flexible.
C)   savings is crucial to growth.
D)   more focus should be placed on aggregate demand than aggregate supply.
E)   the market tends toward stability and full employment.

Question 18

The Great Depression ended in:

Accepted Answer

A)   June 2009.
B)   May 1937.
C)   August 1929.
D)   June 1938.
E)   August 2004.

Question 19

According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore:

Accepted Answer

A)   the government will need to stimulate aggregate demand.
B)   long-run aggregate supply is the primary source of economic growth.
C)   prices are quite rigid and inflexible.
D)   unemployment will tend to persist over time.
E)   long-run aggregate supply is irrelevant in determining growth.

Question 20

Use the following graph to answer the next  questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS)  have decreased, with no change in short-run aggregate supply (SRAS) . 
-As a result of aggregate demand and long-run aggregate supply decreasing, we can see that the price level _________ and real gross domestic product (GDP)  _________.

Accepted Answer

A)   remained unchanged; decreased
B)   increased; decreased
C)   decreased; remained unchanged
D)   remained unchanged; increased
E)   increased; increased

Exam 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

If asked about the basic functioning of the economy, a classical economist would claim that:

Correct Answer
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Classical economists believe that the economy is stable and tends toward full employment because:

Correct Answer
verified

Assume that you are a Keynesian economist. You are asked what the government should do if the economy enters a recession. What would you say in response?

Correct Answer
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You would probably state that the govern...
View Answer

Correct Answer
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B

Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because:

Correct Answer
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Correct Answer
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When held up against other economic downturns, the Great Depression:

Correct Answer
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If asked about the basic functioning of the economy, a Keynesian economist would state that:

Correct Answer
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C

The Great Recession was different from other recessions since World War II in that:

Correct Answer
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Correct Answer
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During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because:

Correct Answer
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Prior to the Great Depression, U.S. stock prices decreased dramatically. This would tend to cause:

Correct Answer
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During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because:

Correct Answer
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During the Great Depression, thousands of U.S. banks failed. As a result:

Correct Answer
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During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _ and real gross domestic product (GDP) _.

Correct Answer
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A

The Great Recession was different from other recessions since World War II in that:

Correct Answer
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Keynesian economists believe that:

Correct Answer
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The Great Depression ended in:

Correct Answer
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According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore:

Correct Answer
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Correct Answer
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Exam 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

If asked about the basic functioning of the economy, a classical economist would claim that:

Correct AnswerverifiedShow Answer

Classical economists believe that the economy is stable and tends toward full employment because:

Correct AnswerverifiedShow Answer

Assume that you are a Keynesian economist. You are asked what the government should do if the economy enters a recession. What would you say in response?

Correct AnswerverifiedYou would probably state that the govern...View AnswerShow Answer

Correct AnswerverifiedB

Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When held up against other economic downturns, the Great Depression:

Correct AnswerverifiedShow Answer

If asked about the basic functioning of the economy, a Keynesian economist would state that:

Correct AnswerverifiedC

The Great Recession was different from other recessions since World War II in that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because:

Correct AnswerverifiedShow Answer

Prior to the Great Depression, U.S. stock prices decreased dramatically. This would tend to cause:

Correct AnswerverifiedShow Answer

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because:

Correct AnswerverifiedShow Answer

During the Great Depression, thousands of U.S. banks failed. As a result:

Correct AnswerverifiedShow Answer

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _________ and real gross domestic product (GDP) _________.

Correct AnswerverifiedA

The Great Recession was different from other recessions since World War II in that:

Correct AnswerverifiedShow Answer

Keynesian economists believe that:

Correct AnswerverifiedShow Answer

The Great Depression ended in:

Correct AnswerverifiedShow Answer

According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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You would probably state that the govern...
View Answer

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B

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C

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During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _ and real gross domestic product (GDP) _.

Correct Answer
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A

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