Question 1

Which of the following events led to the debate over the applicability of the classical model?

Accepted Answer

A)  World War II 
B)  World War I 
C)  Korean War 
D)  The Great Depression 
E)  The Great Society 
A)  World War II 
B)  World War I 
C)  Korean War 
D)  The Great Depression 
E)  The Great Society

Question 2

-Refer to Figure 8-5.What is the equilibrium interest rate?

Accepted Answer

A)  4 percent 
B)  6 percent 
C)  8 percent 
D)  10 percent 
E)  It cannot be determined with the information given. 
A)  4 percent 
B)  6 percent 
C)  8 percent 
D)  10 percent 
E)  It cannot be determined with the information given.

Question 3

Assume a closed economy.If consumption spending is $6.2 trillion,investment spending is $2.5 trillion,net taxes are $1.5 trillion and total income is $11 trillion,how much must government purchases be?

Accepted Answer

A)  $2.3 trillion 
B)  $0.8 trillion 
C)  $3.3 trillion 
D)  $7 trillion 
E)  cannot be determined without more information 
A)  $2.3 trillion 
B)  $0.8 trillion 
C)  $3.3 trillion 
D)  $7 trillion 
E)  cannot be determined without more information

Question 4

Crowding out refers to a(n)

Accepted Answer

A)  decrease in the amount of goods produced after too many goods have crowded onto the market 
B)  business tactic used to steal a competitor's customers 
C)  increase in one sector's spending caused by an increase in another sector's spending 
D)  decrease in the price level after too many goods have crowded onto the market 
E)  decline in one sector's spending caused by an increase in another sector's spending 
A)  decrease in the amount of goods produced after too many goods have crowded onto the market 
B)  business tactic used to steal a competitor's customers 
C)  increase in one sector's spending caused by an increase in another sector's spending 
D)  decrease in the price level after too many goods have crowded onto the market 
E)  decline in one sector's spending caused by an increase in another sector's spending

Question 5

In the classical model,the supply of funds to the loanable funds market comes from

Accepted Answer

A)  household saving and the government's budget surplus,if any 
B)  net taxes 
C)  household saving and the government budget deficit,if any 
D)  planned investment 
E)  total income 
A)  household saving and the government's budget surplus,if any 
B)  net taxes 
C)  household saving and the government budget deficit,if any 
D)  planned investment 
E)  total income

Question 6

A key assumption of the classical model is that

Accepted Answer

A)  government intervention is important to get markets to clear 
B)  prices adjust until quantity supplied equals quantity demanded 
C)  markets never clear in the long run 
D)  demand adjusts in order to meet supply 
E)  prices remain constant and supply and demand adjust 
A)  government intervention is important to get markets to clear 
B)  prices adjust until quantity supplied equals quantity demanded 
C)  markets never clear in the long run 
D)  demand adjusts in order to meet supply 
E)  prices remain constant and supply and demand adjust

Question 7

The supply of loanable funds curve is upward-sloping because a rise in the interest rate

Accepted Answer

A)  decreases the opportunity cost of firms' investment spending 
B)  stimulates the economy 
C)  decreases the opportunity cost to households of consuming 
D)  increases the opportunity cost to households of consuming 
E)  increases the government's desire to run a budget deficit 
A)  decreases the opportunity cost of firms' investment spending 
B)  stimulates the economy 
C)  decreases the opportunity cost to households of consuming 
D)  increases the opportunity cost to households of consuming 
E)  increases the government's desire to run a budget deficit

Question 8

How do people in a market economy obtain income that is used to buy goods and services?

Accepted Answer

A)  Supplying labor and other resources to firms 
B)  Trading goods and services in a barter system 
C)  Selling goods and services to each other 
D)  None of the above 
E)  b and c 
A)  Supplying labor and other resources to firms 
B)  Trading goods and services in a barter system 
C)  Selling goods and services to each other 
D)  None of the above 
E)  b and c

Question 9

Assuming the economy was in equilibrium,use the following information to determine the amount of funds demanded by the government in the loanable funds market.
$$\begin{array} { | l | r | } 
\hline \text { Consumption Spending } & \$ 3.5 \text { trillion } \
\hline \text { Net Taxes } & \$ 2.7 \text { trillion } \
\hline \text { Household Saving } & \$ 2.5 \text { trillion } \
\hline \text { Investment Spending } & \$ 2.2 \text { trillion } \
\hline \text { Government Purchases } & \$ 3.0 \text { trillion } \
\hline
\end{array}$$

Accepted Answer

A)  $0.3 trillion 
B)  $2.2 trillion 
C)  $2.5 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion 
A)  $0.3 trillion 
B)  $2.2 trillion 
C)  $2.5 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion

Question 10

In the classical model,taxes and spending are treated as two separate variables.

Accepted Answer

A) True 
 B)False

Question 11

John Maynard Keynes and his followers argued that

Accepted Answer

A)  the classical model does a good job of explaining the economy's operation in both the short run and long run 
B)  the short run is unimportant so economists should focus their attention on the long run 
C)  the economy should be allowed to function with minimal government interference 
D)  the economy operates the same way in both the short run and long run 
E)  while the classical model might explain economic performance in the long run,the long run could take a long time to reach 
A)  the classical model does a good job of explaining the economy's operation in both the short run and long run 
B)  the short run is unimportant so economists should focus their attention on the long run 
C)  the economy should be allowed to function with minimal government interference 
D)  the economy operates the same way in both the short run and long run 
E)  while the classical model might explain economic performance in the long run,the long run could take a long time to reach

Question 12

According to Say's Law,supply creates its own demand.

Accepted Answer

A) True 
 B)False

Question 13

In the classical model,we assume there is no ongoing inflation,so there is no need to distinguish between the nominal interest rate and the real interest rate.

Accepted Answer

A) True 
 B)False

Question 14

In the classical model,which of the following is treated as independent of the interest rate?

Accepted Answer

A)  the quantity of loanable funds demanded by government 
B)  the quantity of loanable funds demanded by businesses 
C)  the total quantity of loanable funds demanded 
D)  household saving 
E)  the total quantity of loanable funds supplied 
A)  the quantity of loanable funds demanded by government 
B)  the quantity of loanable funds demanded by businesses 
C)  the total quantity of loanable funds demanded 
D)  household saving 
E)  the total quantity of loanable funds supplied

Question 15

Which of the following is not an accurate description of the point at which the labor supply and labor demand curves meet?

Accepted Answer

A)  The point at which the market for labor has cleared 
B)  The real wage at which the quantity of labor demanded is equal to the quantity of labor supplied 
C)  The point at which there is no frictional unemployment 
D)  The point at which there is no unemployment 
E)  The wage at which the number of workers firms want to hire is equal to the number of people who want jobs 
A)  The point at which the market for labor has cleared 
B)  The real wage at which the quantity of labor demanded is equal to the quantity of labor supplied 
C)  The point at which there is no frictional unemployment 
D)  The point at which there is no unemployment 
E)  The wage at which the number of workers firms want to hire is equal to the number of people who want jobs

Question 16

In the classical model,we include unintended inventory changes.

Accepted Answer

A) True 
 B)False

Question 17

In the classical model,government purchases or tax cuts are appropriate policies to raise GDP.

Accepted Answer

A) True 
 B)False

Question 18

Using the following information on a hypothetical economy in equilibrium,calculate total output for 2008.
$$\begin{array} { | l | l | } 
\hline \text { Consumption Spenting } & \$ 3.5 \text { trillion } \
\hline \text { Net Taxes } & \$ 2.7 \text { trillion } \
\hline \text { Household Seving } & \$ 2.5 \text { trilion } \
\hline \text { Investment Spenting } & \$ 2.2 \text { trilion } \
\hline \text { Government Purchases } & \$ 3.0 \text { trillion } \
\hline
\end{array}$$
If exports are exactly equal to imports,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 19

Assuming the economy was in equilibrium,use the following information to determine the total amount of funds demanded in the loanable funds market.
$$\begin{array} { | l | l | } 
\hline \text { Cansumption Spending } & \mathbf { \$ 3 . 5 } \text { tillian } \
\hline \text { Net Taxes } & \mathbf { 2 } .7 \text { tillian } \
\hline \text { Hausehold Seving } & \mathbf { 2 . 5 \text { tillian } } \
\hline \text { Investment Spenfing } & \mathbf { 2 . 2 \text { tillian } } \
\hline \text { Guvernment Purchases } & \mathbf { \$ 3 . 0 \text { tillian } } \
\hline
\end{array}$$

Accepted Answer

A)  $0.3 trillion 
B)  $2.2 trillion 
C)  $2.5 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion 
A)  $0.3 trillion 
B)  $2.2 trillion 
C)  $2.5 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion

Question 20

Factor payments are

Accepted Answer

A)  amounts paid to resource owners for the use of their resource 
B)  amounts paid for goods 
C)  another term for revenues 
D)  the amount households put into savings 
E)  payments made to workers who are employed only part time 
A)  amounts paid to resource owners for the use of their resource 
B)  amounts paid for goods 
C)  another term for revenues 
D)  the amount households put into savings 
E)  payments made to workers who are employed only part time

Which of the following events led to the debate over the applicability of the classical model?

-Refer to Figure 8-5.What is the equilibrium interest rate?

Assume a closed economy.If consumption spending is $6.2 trillion,investment spending is $2.5 trillion,net taxes are $1.5 trillion and total income is $11 trillion,how much must government purchases be?

Crowding out refers to a(n)

In the classical model,the supply of funds to the loanable funds market comes from

A key assumption of the classical model is that

The supply of loanable funds curve is upward-sloping because a rise in the interest rate

How do people in a market economy obtain income that is used to buy goods and services?

In the classical model,taxes and spending are treated as two separate variables.

John Maynard Keynes and his followers argued that

According to Say's Law,supply creates its own demand.

In the classical model,we assume there is no ongoing inflation,so there is no need to distinguish between the nominal interest rate and the real interest rate.

In the classical model,which of the following is treated as independent of the interest rate?

Which of the following is not an accurate description of the point at which the labor supply and labor demand curves meet?

In the classical model,we include unintended inventory changes.

In the classical model,government purchases or tax cuts are appropriate policies to raise GDP.

Assuming the economy was in equilibrium,use the following information to determine the total amount of funds demanded in the loanable funds market. Cansumption Spending tillian Net Taxes .7 tillian Hausehold Seving Investment Spenfing Guvernment Purchases

Factor payments are

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

Which of the following events led to the debate over the applicability of the classical model?

-Refer to Figure 8-5.What is the equilibrium interest rate?

Assume a closed economy.If consumption spending is $6.2 trillion,investment spending is $2.5 trillion,net taxes are $1.5 trillion and total income is $11 trillion,how much must government purchases be?

Crowding out refers to a(n)

In the classical model,the supply of funds to the loanable funds market comes from

A key assumption of the classical model is that

The supply of loanable funds curve is upward-sloping because a rise in the interest rate

How do people in a market economy obtain income that is used to buy goods and services?

In the classical model,taxes and spending are treated as two separate variables.

John Maynard Keynes and his followers argued that

According to Say's Law,supply creates its own demand.

In the classical model,we assume there is no ongoing inflation,so there is no need to distinguish between the nominal interest rate and the real interest rate.

In the classical model,which of the following is treated as independent of the interest rate?

Which of the following is not an accurate description of the point at which the labor supply and labor demand curves meet?

In the classical model,we include unintended inventory changes.

In the classical model,government purchases or tax cuts are appropriate policies to raise GDP.

Assuming the economy was in equilibrium,use the following information to determine the total amount of funds demanded in the loanable funds market. Cansumption Spending tillian Net Taxes .7 tillian Hausehold Seving Investment Spenfing Guvernment Purchases

Factor payments are

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