Exam 22: The Classical Foundations

In the Classical model, an increase in aggregate demand leads to __________ real GDP and __________ price level.

If the equation of exchange holds, and if the velocity of money and total output are fixed, then, if the money supply doubles,

In the Classical model, what is certain to shift the aggregate demand curve?

If C + I = Y and Y - C = S, then

The two cornerstones of Classical economics are the Quantity Theory and

In the Classical view, rising interest rates reduce

If GDP = $300 billion and velocity = 1.5, then the money supply is

Classical economists and modern monetarists agree that the best way to examine the economy is through the use of

In an economy without government or a foreign sector it is always true that

The Great Depression is thought to have been prolonged and made deeper by

In the Cambridge approach, if k is .5, total output is $50 billion, and the money supply is $100 billion, the price level is

Using the cash balance approach with k = 1/2 and GDP equal to $600 billion, cash balances must be equal to

In the Classical model, aggregate demand determines the

In the Classical model, the price level is determined by

Under the assumption of rational expectations, an anticipated increase in the money supply has no effect on

In the view of the Classical economists, rising aggregate demand leads to

Modern monetarists view any increases or decreases in total output stemming from expansions or contractions in the money supply as

In the Classical interest theory, saving and investment determine

A decrease in the money supply shifts the aggregate __________ curve to the __________.

Say's law