Question 1

-Refer to Figure 8-1.If the labor market is in equilibrium,there is no

Accepted Answer

A)  unemployment 
B)  frictional unemployment 
C)  structural unemployment 
D)  seasonal unemployment 
E)  cyclical unemployment 
A)  unemployment 
B)  frictional unemployment 
C)  structural unemployment 
D)  seasonal unemployment 
E)  cyclical unemployment

Question 2

-After examining Figure 8-3,it is possible to conclude that

Accepted Answer

A)  people do not save money nor pay taxes in this model 
B)  firms purchase resources from households and other firms in this model 
C)  households are the only ones who purchase and firms the only ones who sell in this model 
D)  completion of a sale represents a break in the flow of goods and services,and inputs in this model 
E)  all households and firms individually receive the same amount of money in this model 
A)  people do not save money nor pay taxes in this model 
B)  firms purchase resources from households and other firms in this model 
C)  households are the only ones who purchase and firms the only ones who sell in this model 
D)  completion of a sale represents a break in the flow of goods and services,and inputs in this model 
E)  all households and firms individually receive the same amount of money in this model

Question 3

Which of the following does not usually occur when there is an increase in government spending?

Accepted Answer

A)  Government purchases crowd out private-sector spending. 
B)  Total spending decreases. 
C)  The interest rate increases. 
D)  Investment spending declines. 
E)  Household saving increases. 
A)  Government purchases crowd out private-sector spending. 
B)  Total spending decreases. 
C)  The interest rate increases. 
D)  Investment spending declines. 
E)  Household saving increases.

Question 4

Using the following information on a hypothetical economy in equilibrium,calculate total output for 2008.
$\begin{array}{|l|l}
\text { Consumption Spending } & \$ 3.5 \text { trillion } \
\hline \text { Net Taxes } & \$ 2.7 \text { trillion } \
\hline \text { Household Saving } & \$ 2.5 \text { trillion } \
\hline \text { Investment Spending } & \$ 2.2 \text { trillion } \
\hline \text { Government Purchases } & \$ 3.0 \text { trillion } \
\hline \text { Exports } & \$ 1.1 \text { trillion } \
\hline \text { Imports } & \$ 1.1 \text { trillion }
\end{array}$

Total output for 2008 is

Accepted Answer

A)  $5.2 trillion 
B)  $5.7 trillion 
C)  $8.4 trillion 
D)  $8.7 trillion 
E)  $13.9 trillion 
A)  $5.2 trillion 
B)  $5.7 trillion 
C)  $8.4 trillion 
D)  $8.7 trillion 
E)  $13.9 trillion

Question 5

As long as the loanable funds market clears,Say's law holds..

Accepted Answer

A) True 
 B)False

Question 6

Say's Law is the idea that

Accepted Answer

A)  in the long run,the economy reaches full employment automatically 
B)  the aggregate production function,along with the labor market,determines the economy's level of output 
C)  total output will always exceed total spending 
D)  whenever a good or service is produced,an equal amount of income is created 
E)  markets always clear 
A)  in the long run,the economy reaches full employment automatically 
B)  the aggregate production function,along with the labor market,determines the economy's level of output 
C)  total output will always exceed total spending 
D)  whenever a good or service is produced,an equal amount of income is created 
E)  markets always clear

Question 7

Which of the following statements is true when total spending equals total output?

Accepted Answer

A)  Saving plus taxes equals investment plus government purchases. 
B)  Output equals investment plus government purchases plus saving plus taxes. 
C)  Output equals consumption spending plus investment plus government purchases plus saving plus taxes. 
D)  Output equals consumption plus investment plus taxes. 
E)  Saving plus investment equals taxes plus government purchases. 
A)  Saving plus taxes equals investment plus government purchases. 
B)  Output equals investment plus government purchases plus saving plus taxes. 
C)  Output equals consumption spending plus investment plus government purchases plus saving plus taxes. 
D)  Output equals consumption plus investment plus taxes. 
E)  Saving plus investment equals taxes plus government purchases.

Question 8

Suppose the current equilibrium real wage is $15 an hour.Which of the following is true?

Accepted Answer

A)  A real wage above $15 an hour would lead to an excess demand for labor 
B)  A real wage above $15 an hour would lead to an excess supply of labor 
C)  The real wage must fall to prevent unemployment 
D)  The real wage must rise to prevent unemployment 
E)  A real wage below $15 an hour would lead to an excess supply of labor 
A)  A real wage above $15 an hour would lead to an excess demand for labor 
B)  A real wage above $15 an hour would lead to an excess supply of labor 
C)  The real wage must fall to prevent unemployment 
D)  The real wage must rise to prevent unemployment 
E)  A real wage below $15 an hour would lead to an excess supply of labor

Question 9

Which of the following events triggered intense debate over the classical model of the economy?

Accepted Answer

A)  The U.S.Civil War 
B)  World War I 
C)  the Baby Boom 
D)  The Great Depression 
E)  World War II 
A)  The U.S.Civil War 
B)  World War I 
C)  the Baby Boom 
D)  The Great Depression 
E)  World War II

Question 10

The labor demand curve slopes

Accepted Answer

A)  upward to illustrate that the more productive the worker,the higher the real wage the employer is willing to pay that worker 
B)  upward to illustrate that the higher the wage rate,the fewer workers are demanded 
C)  upward or downward in direct proportion to the rate of inflation 
D)  downward to illustrate that the lower the real wage,the more workers employers are willing to hire 
E)  downward to illustrate that the availability of workers is directly proportional to the real wage 
A)  upward to illustrate that the more productive the worker,the higher the real wage the employer is willing to pay that worker 
B)  upward to illustrate that the higher the wage rate,the fewer workers are demanded 
C)  upward or downward in direct proportion to the rate of inflation 
D)  downward to illustrate that the lower the real wage,the more workers employers are willing to hire 
E)  downward to illustrate that the availability of workers is directly proportional to the real wage

Question 11

-Refer to Figure 8-2.The economy is at full employment if

Accepted Answer

A)  the quantity of labor supplied exceeds the quantity demanded 
B)  the quantity of labor demanded exceeds the quantity supplied 
C)  130 million workers are employed 
D)  the real hourly wage is rising 
E)  we reach the maximum point on the production function 
A)  the quantity of labor supplied exceeds the quantity demanded 
B)  the quantity of labor demanded exceeds the quantity supplied 
C)  130 million workers are employed 
D)  the real hourly wage is rising 
E)  we reach the maximum point on the production function

Question 12

In the classical model,the government needs to worry about total spending.

Accepted Answer

A) True 
 B)False

Question 13

In the classical model,

Accepted Answer

A)  markets do not automatically clear. 
B)  business demand for loanable fund exceeds business planned investment spending. 
C)  there is no government sector,only private consumption and planned investment. 
D)  businesses engage in interest-free borrowing. 
E)  the government's demand for funds is vertical. 
A)  markets do not automatically clear. 
B)  business demand for loanable fund exceeds business planned investment spending. 
C)  there is no government sector,only private consumption and planned investment. 
D)  businesses engage in interest-free borrowing. 
E)  the government's demand for funds is vertical.

Question 14

What is the effect of diminishing returns to labor on the slope of the aggregate production function (where output is measured on the vertical axis and employment is measured on the horizontal axis)?

Accepted Answer

A)  It implies that the slope of the curve increases as the number of workers employed increases. 
B)  It implies that the slope of the curve becomes negative as the number of workers employed increases. 
C)  It implies that the slope of the curve decreases (or becomes flatter)as the number of workers employed increases. 
D)  It keeps the slope the same throughout. 
E)  It has nothing to do with the slope of the aggregate production function. 
A)  It implies that the slope of the curve increases as the number of workers employed increases. 
B)  It implies that the slope of the curve becomes negative as the number of workers employed increases. 
C)  It implies that the slope of the curve decreases (or becomes flatter)as the number of workers employed increases. 
D)  It keeps the slope the same throughout. 
E)  It has nothing to do with the slope of the aggregate production function.

Question 15

Which of the following is an injection in an open economy?

Accepted Answer

A)  Saving 
B)  Imports 
C)  Exports 
D)  Taxes 
E)  Money 
A)  Saving 
B)  Imports 
C)  Exports 
D)  Taxes 
E)  Money

Question 16

The classical model does a good job of explaining the __________ while doing poor a job of explaining the __________.

Accepted Answer

A)  short run;long run 
B)  business cycle;long run 
C)  short run;business cycle 
D)  unemployment rate;interest rates 
E)  long run;short run 
A)  short run;long run 
B)  business cycle;long run 
C)  short run;business cycle 
D)  unemployment rate;interest rates 
E)  long run;short run

Question 17

What key observation did the classical model attempt to explain?

Accepted Answer

A)  the economy performs well in the short run,but not so well in the long run 
B)  business cycles are the most important economic problem 
C)  over the short run,the economy performs rather poorly 
D)  markets do not clear without government intervention 
E)  over the long run,the economy performs rather well 
A)  the economy performs well in the short run,but not so well in the long run 
B)  business cycles are the most important economic problem 
C)  over the short run,the economy performs rather poorly 
D)  markets do not clear without government intervention 
E)  over the long run,the economy performs rather well

Question 18

In the classical model with an open economy,an increase in government purchases can affect a country's exchange rate,causing its imports and exports to change.

Accepted Answer

A) True 
 B)False

Question 19

What condition must be met in order for total spending to equal total output?

Accepted Answer

A)  The sum of saving and government purchases must equal the sum of planned investment and net taxes. 
B)  The sum of saving and net taxes must equal the sum of planned investment and government purchases. 
C)  The sum of saving and planned investment must equal the sum of government purchases and net taxes. 
D)  Saving must equal net taxes. 
E)  The sum of saving and net taxes must equal planned investment minus government purchases. 
A)  The sum of saving and government purchases must equal the sum of planned investment and net taxes. 
B)  The sum of saving and net taxes must equal the sum of planned investment and government purchases. 
C)  The sum of saving and planned investment must equal the sum of government purchases and net taxes. 
D)  Saving must equal net taxes. 
E)  The sum of saving and net taxes must equal planned investment minus government purchases.

Question 20

In the classical model,fiscal policy is both ineffective and unnecessary.

Accepted Answer

A) True 
 B)False

-Refer to Figure 8-1.If the labor market is in equilibrium,there is no

-After examining Figure 8-3,it is possible to conclude that

Which of the following does not usually occur when there is an increase in government spending?

As long as the loanable funds market clears,Say's law holds..

Say's Law is the idea that

Which of the following statements is true when total spending equals total output?

Suppose the current equilibrium real wage is $15 an hour.Which of the following is true?

Which of the following events triggered intense debate over the classical model of the economy?

The labor demand curve slopes

-Refer to Figure 8-2.The economy is at full employment if

In the classical model,the government needs to worry about total spending.

In the classical model,

What is the effect of diminishing returns to labor on the slope of the aggregate production function (where output is measured on the vertical axis and employment is measured on the horizontal axis)?

Which of the following is an injection in an open economy?

The classical model does a good job of explaining the while doing poor a job of explaining the .

What key observation did the classical model attempt to explain?

In the classical model with an open economy,an increase in government purchases can affect a country's exchange rate,causing its imports and exports to change.

What condition must be met in order for total spending to equal total output?

In the classical model,fiscal policy is both ineffective and unnecessary.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 8:The Classical Long run Model

-Refer to Figure 8-1.If the labor market is in equilibrium,there is no

-After examining Figure 8-3,it is possible to conclude that

Which of the following does not usually occur when there is an increase in government spending?

As long as the loanable funds market clears,Say's law holds..

Say's Law is the idea that

Which of the following statements is true when total spending equals total output?

Suppose the current equilibrium real wage is $15 an hour.Which of the following is true?

Which of the following events triggered intense debate over the classical model of the economy?

The labor demand curve slopes

-Refer to Figure 8-2.The economy is at full employment if

In the classical model,the government needs to worry about total spending.

In the classical model,

What is the effect of diminishing returns to labor on the slope of the aggregate production function (where output is measured on the vertical axis and employment is measured on the horizontal axis)?

Which of the following is an injection in an open economy?

The classical model does a good job of explaining the __________ while doing poor a job of explaining the __________.

What key observation did the classical model attempt to explain?

In the classical model with an open economy,an increase in government purchases can affect a country's exchange rate,causing its imports and exports to change.

What condition must be met in order for total spending to equal total output?

In the classical model,fiscal policy is both ineffective and unnecessary.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

The classical model does a good job of explaining the while doing poor a job of explaining the .