Question 1

The classical model assumes that

Accepted Answer

A)  the supply of labor is fixed 
B)  the stock of capital and technology are fixed 
C)  the stock of capital and technology grows at a constant rate 
D)  the supply of labor grows at a constant rate 
E)  the supply of labor grows at an increasing rate. 
A)  the supply of labor is fixed 
B)  the stock of capital and technology are fixed 
C)  the stock of capital and technology grows at a constant rate 
D)  the supply of labor grows at a constant rate 
E)  the supply of labor grows at an increasing rate.

Question 2

-Refer to Figure 8-6.Suppose that a $1 trillion increase in government spending shifted the demand for funds curve from D₁ to D₂.What would happen to the sum of investment and consumption spending? That sum would

Accepted Answer

A)  remain unchanged 
B)  rise by $0.6 trillion 
C)  rise by $1 trillion 
D)  fall by $1 trillion 
E)  fall by $0.4 trillion 
A)  remain unchanged 
B)  rise by $0.6 trillion 
C)  rise by $1 trillion 
D)  fall by $1 trillion 
E)  fall by $0.4 trillion

Question 3

Household saving is the defined as consumption minus disposable income.

Accepted Answer

A) True 
 B)False

Question 4

The terms "long-run view" and "classical view" can be used interchangeably.

Accepted Answer

A) True 
 B)False

Question 5

-Refer to Figure 8-7.What is the equilibrium interest rate in the above figure?

Accepted Answer

A)  6% because that is where the total supply of funds equals the total demand. 
B)  5% because business and the government want to borrow as much as possible. 
C)  6% because that is where the amount of funds demanded is equal to the amount of funds demanded. 
D)  7% because households refuse to lend enough funds at a lower interest rate. 
E)  5% because households refuse to lend enough funds at a higher interest rate. 
A)  6% because that is where the total supply of funds equals the total demand. 
B)  5% because business and the government want to borrow as much as possible. 
C)  6% because that is where the amount of funds demanded is equal to the amount of funds demanded. 
D)  7% because households refuse to lend enough funds at a lower interest rate. 
E)  5% because households refuse to lend enough funds at a higher interest rate.

Question 6

Assuming the economy was in equilibrium,use the following information to determine the government's budget deficit.
$$\begin{array} { | l | r | } 
\hline \text { Cansumption Spending } & \mathbf { \$ 3 . 5 } \text { tillian } \
\hline \text { Net Taxes } & \mathbf { 2 } .7 \text { tillian } \
\hline \text { Hausehold Seving } & \mathbf { 2 . 5 \text { tillian } } \
\hline \text { Investment Spenfing } & \mathbf { 2 . 2 \text { tillian } } \
\hline \text { Guvernment Purchases } & \mathbf { \$ 3 . 0 \text { tillian } } \
\hline
\end{array}$$
The government's deficit (surplus)was

Accepted Answer

A)  -$0.3 trillion deficit ($0.3 trillion surplus) 
B)  -$0.2 trillion deficit 
C)  $0.2 trillion deficit 
D)  $0.3 trillion deficit 
E)  $0.5 trillion deficit 
A)  -$0.3 trillion deficit ($0.3 trillion surplus) 
B)  -$0.2 trillion deficit 
C)  $0.2 trillion deficit 
D)  $0.3 trillion deficit 
E)  $0.5 trillion deficit

Question 7

The labor supply curve

Accepted Answer

A)  slopes upward to illustrate that more people will want to work as the real wage increases 
B)  slopes upward to illustrate that changes in the real wage are directly proportional to changes in the nominal wage 
C)  may slope either upward or downward,depending upon the real wage 
D)  slopes downward to illustrate that a decrease in the real wage decreases the number of individuals willing to work 
E)  slopes downward to illustrate that the availability of workers is directly proportional to the real wage 
A)  slopes upward to illustrate that more people will want to work as the real wage increases 
B)  slopes upward to illustrate that changes in the real wage are directly proportional to changes in the nominal wage 
C)  may slope either upward or downward,depending upon the real wage 
D)  slopes downward to illustrate that a decrease in the real wage decreases the number of individuals willing to work 
E)  slopes downward to illustrate that the availability of workers is directly proportional to the real wage

Question 8

Say's Law states that by purchasing goods and services,buyers stimulate firms to produce goods and services equal to what has been purchased: Demand creates its own supply.

Accepted Answer

A) True 
 B)False

Question 9

In the classical long-run model,

Accepted Answer

A)  we focus on labor resources,rather than capital or land 
B)  we study thousands of different resource markets 
C)  we concentrate our attention on three resource markets: land,labor,and capital 
D)  we focus on two markets: households and firms 
E)  the number of variables we include depends upon whether we are focusing on the short run or the long run 
A)  we focus on labor resources,rather than capital or land 
B)  we study thousands of different resource markets 
C)  we concentrate our attention on three resource markets: land,labor,and capital 
D)  we focus on two markets: households and firms 
E)  the number of variables we include depends upon whether we are focusing on the short run or the long run

Question 10

A critical assumption in the classical model is that

Accepted Answer

A)  markets are perfectly competitive in the short run 
B)  markets clear in the long run 
C)  markets clear in the short run 
D)  markets are perfectly competitive in the long run 
E)  all variables are expressed in nominal terms 
A)  markets are perfectly competitive in the short run 
B)  markets clear in the long run 
C)  markets clear in the short run 
D)  markets are perfectly competitive in the long run 
E)  all variables are expressed in nominal terms

Question 11

If an economy's consumption spending is $5 trillion,investment is $2 trillion,government spending is $1 trillion,net taxes are $1 trillion and household saving is $2 trillion,total income is

Accepted Answer

A)  $3 trillion 
B)  $5 trillion 
C)  $7 trillion 
D)  $8 trillion 
E)  $11 trillion 
A)  $3 trillion 
B)  $5 trillion 
C)  $7 trillion 
D)  $8 trillion 
E)  $11 trillion

Question 12

-Refer to Figure 8-1.According to the graph,the equilibrium real hourly wage and quantity of labor employed,respectively,are

Accepted Answer

A)  $10,110 million workers 
B)  $8,130 million workers 
C)  $8,150 million workers 
D)  $6,150 million workers 
E)  $6,130 million workers 
A)  $10,110 million workers 
B)  $8,130 million workers 
C)  $8,150 million workers 
D)  $6,150 million workers 
E)  $6,130 million workers

Question 13

When the government is running a budget surplus,

Accepted Answer

A)  the demand for loanable funds includes only business investment spending 
B)  the supply of loanable funds includes only business investment spending 
C)  the loanable funds market cannot be in equilibrium 
D)  the supply of loanable funds includes only household saving 
E)  there will be an excess supply of loanable funds 
A)  the demand for loanable funds includes only business investment spending 
B)  the supply of loanable funds includes only business investment spending 
C)  the loanable funds market cannot be in equilibrium 
D)  the supply of loanable funds includes only household saving 
E)  there will be an excess supply of loanable funds

Question 14

-Refer to Figure 8-1.If the real hourly wage rate was $6,what would be the effect?

Accepted Answer

A)  There would be a shortage of 40 million workers and the wage rate would rise. 
B)  There would be a shortage of 20 million workers and the wage rate would rise. 
C)  There would be a surplus of 40 million workers and the wage rate would fall. 
D)  There would be a surplus of 20 million workers and the wage rate would fall. 
E)  There would be unemployment. 
A)  There would be a shortage of 40 million workers and the wage rate would rise. 
B)  There would be a shortage of 20 million workers and the wage rate would rise. 
C)  There would be a surplus of 40 million workers and the wage rate would fall. 
D)  There would be a surplus of 20 million workers and the wage rate would fall. 
E)  There would be unemployment.

Question 15

Assume the economy is currently in equilibrium.Use the following information to calculate the total value of leakages
$ \begin{array}{ll}\text { Consumption Spending } & \$ 5 \text { trillion } \ \text { Net Taxes } & \$ 2.9 \text { trillion } \ \text { Household Saving } & \$ 2.8 \text { trillion } \ \text { Investment Spending } & \$ 2.3 \text { trillion } \ \text { Government Purchases } & \$ 3.4 \text { trillion }\end{array} $
Total injections are

Accepted Answer

A)  $10.7 trillion 
B)  $5.1 trillion 
C)  $5.9 trillion 
D)  $5.7 trillion 
E)  $5.3 trillion 
A)  $10.7 trillion 
B)  $5.1 trillion 
C)  $5.9 trillion 
D)  $5.7 trillion 
E)  $5.3 trillion

Question 16

What is the equilibrium condition in the loanable funds market?

Accepted Answer

A)  S + G = IP - T 
B)  S = IP + T - G 
C)  S + IP = G - T 
D)  S - T = IP + G 
E)  S = IP + G - T 
A)  S + G = IP - T 
B)  S = IP + T - G 
C)  S + IP = G - T 
D)  S - T = IP + G 
E)  S = IP + G - T

Question 17

What is the relationship between the government's budget deficit and its tax revenue?

Accepted Answer

A)  Budget deficit = government spending + tax revenue 
B)  Budget deficit = government spending - tax revenue 
C)  Government spending = budget deficit / tax revenue 
D)  Tax revenue = government spending + budget deficit 
E)  Budget deficit = tax revenue - government spending 
A)  Budget deficit = government spending + tax revenue 
B)  Budget deficit = government spending - tax revenue 
C)  Government spending = budget deficit / tax revenue 
D)  Tax revenue = government spending + budget deficit 
E)  Budget deficit = tax revenue - government spending

Question 18

The supply of loanable funds curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 19

In the classical model,the government needs to worry about employment.

Accepted Answer

A) True 
 B)False

Question 20

According to Keynesian economists,

Accepted Answer

A)  the economy will return quickly to full employment in most cases 
B)  if output is below its potential,the economy will soon return to full employment 
C)  production can be stuck below its full-employment level for extended periods of time 
D)  the Great Depression proved that classical economics does a good job of explaining how the economy operates 
E)  he economy will achieve full employment in the short run but,in the long run,GDP will fluctuate 
A)  the economy will return quickly to full employment in most cases 
B)  if output is below its potential,the economy will soon return to full employment 
C)  production can be stuck below its full-employment level for extended periods of time 
D)  the Great Depression proved that classical economics does a good job of explaining how the economy operates 
E)  he economy will achieve full employment in the short run but,in the long run,GDP will fluctuate

The classical model assumes that

-Refer to Figure 8-6.Suppose that a $1 trillion increase in government spending shifted the demand for funds curve from D₁ to D₂.What would happen to the sum of investment and consumption spending? That sum would

Household saving is the defined as consumption minus disposable income.

The terms "long-run view" and "classical view" can be used interchangeably.

-Refer to Figure 8-7.What is the equilibrium interest rate in the above figure?

Assuming the economy was in equilibrium,use the following information to determine the government's budget deficit. Cansumption Spending tillian Net Taxes .7 tillian Hausehold Seving Investment Spenfing Guvernment Purchases The government's deficit (surplus)was

The labor supply curve

Say's Law states that by purchasing goods and services,buyers stimulate firms to produce goods and services equal to what has been purchased: Demand creates its own supply.

In the classical long-run model,

A critical assumption in the classical model is that

If an economy's consumption spending is $5 trillion,investment is $2 trillion,government spending is $1 trillion,net taxes are $1 trillion and household saving is $2 trillion,total income is

-Refer to Figure 8-1.According to the graph,the equilibrium real hourly wage and quantity of labor employed,respectively,are

When the government is running a budget surplus,

-Refer to Figure 8-1.If the real hourly wage rate was $6,what would be the effect?

Assume the economy is currently in equilibrium.Use the following information to calculate the total value of leakages Consumption Spending \ 5 trillion Net Taxes \ 2.9 trillion Household Saving \ 2.8 trillion Investment Spending \ 2.3 trillion Government Purchases \ 3.4 trillion Total injections are

What is the equilibrium condition in the loanable funds market?

What is the relationship between the government's budget deficit and its tax revenue?

The supply of loanable funds curve is downward sloping.

In the classical model,the government needs to worry about employment.

According to Keynesian economists,

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

The classical model assumes that

-Refer to Figure 8-6.Suppose that a $1 trillion increase in government spending shifted the demand for funds curve from D₁ to D₂.What would happen to the sum of investment and consumption spending? That sum would

Household saving is the defined as consumption minus disposable income.

The terms "long-run view" and "classical view" can be used interchangeably.

-Refer to Figure 8-7.What is the equilibrium interest rate in the above figure?

Assuming the economy was in equilibrium,use the following information to determine the government's budget deficit. Cansumption Spending tillian Net Taxes .7 tillian Hausehold Seving Investment Spenfing Guvernment Purchases The government's deficit (surplus)was

The labor supply curve

Say's Law states that by purchasing goods and services,buyers stimulate firms to produce goods and services equal to what has been purchased: Demand creates its own supply.

In the classical long-run model,

A critical assumption in the classical model is that

If an economy's consumption spending is $5 trillion,investment is $2 trillion,government spending is $1 trillion,net taxes are $1 trillion and household saving is $2 trillion,total income is

-Refer to Figure 8-1.According to the graph,the equilibrium real hourly wage and quantity of labor employed,respectively,are

When the government is running a budget surplus,

-Refer to Figure 8-1.If the real hourly wage rate was $6,what would be the effect?

What is the equilibrium condition in the loanable funds market?

What is the relationship between the government's budget deficit and its tax revenue?

The supply of loanable funds curve is downward sloping.

In the classical model,the government needs to worry about employment.

According to Keynesian economists,

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