Question 1

Say's law promises that each and every firm in the economy will be able to sell all of the particular output it produces.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following real-world phenomena does the classical model ignore?

Accepted Answer

A)  Frictional unemployment 
B)  Inflation 
C)  Real output growth 
D)  Cyclical unemployment 
E)  Structural unemployment 
A)  Frictional unemployment 
B)  Inflation 
C)  Real output growth 
D)  Cyclical unemployment 
E)  Structural unemployment

Question 3

In the classical view,all markets clear,except the labor market.

Accepted Answer

A) True 
 B)False

Question 4

In the classical model,markets clear

Accepted Answer

A)  in the short run 
B)  every month 
C)  immediately 
D)  in the long run 
E)  as soon as any shock occurs 
A)  in the short run 
B)  every month 
C)  immediately 
D)  in the long run 
E)  as soon as any shock occurs

Question 5

According to the classical model,if the government wanted to increase employment,it could do so by increasing its own spending.That would lead firms to produce more output,for which they would need to hire more workers.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements about modern macroeconomic theory is most accurate?

Accepted Answer

A)  Keynes' ideas help us understand movements in output around its long-run trend,while the Classical model is more useful in explaining the long-run trend itself. 
B)  The classical model helps us understand movements in output around its long-run trend,while the short-run macro model is more useful in explaining the long-run trend itself. 
C)  Both classical and short-run macro models help us understand movements in output around its long-run trend,but neither model is effective at explaining the long-run trend itself. 
D)  Neither the classical nor the short-run macro model helps us understand movements in output around its long-run trend,but both are useful in explaining the long-run trend itself. 
E)  Only the short-run macro model is useful in understanding movements in output around its long-run trend,and in explaining the long-run trend itself. 
A)  Keynes' ideas help us understand movements in output around its long-run trend,while the Classical model is more useful in explaining the long-run trend itself. 
B)  The classical model helps us understand movements in output around its long-run trend,while the short-run macro model is more useful in explaining the long-run trend itself. 
C)  Both classical and short-run macro models help us understand movements in output around its long-run trend,but neither model is effective at explaining the long-run trend itself. 
D)  Neither the classical nor the short-run macro model helps us understand movements in output around its long-run trend,but both are useful in explaining the long-run trend itself. 
E)  Only the short-run macro model is useful in understanding movements in output around its long-run trend,and in explaining the long-run trend itself.

Question 7

In the classical model,if government tries to increase employment and output by increasing its own purchases,

Accepted Answer

A)  it will achieve its goal and economic conditions will improve 
B)  it will not attain its objective unless it also decreases taxes 
C)  its actions will cause the interest rate to rise,which will choke off investment spending 
D)  firms will be motivated to increase their output,thereby creating even more jobs 
E)  saving will also increase,as more people are employed 
A)  it will achieve its goal and economic conditions will improve 
B)  it will not attain its objective unless it also decreases taxes 
C)  its actions will cause the interest rate to rise,which will choke off investment spending 
D)  firms will be motivated to increase their output,thereby creating even more jobs 
E)  saving will also increase,as more people are employed

Question 8

What is the relationship between household saving and taxes?

Accepted Answer

A)  taxes = income - consumption - household saving 
B)  household saving = income + taxes - consumption 
C)  taxes = income + consumption + household saving 
D)  household saving = consumption + income - taxes 
E)  taxes = household saving - income + consumption 
A)  taxes = income - consumption - household saving 
B)  household saving = income + taxes - consumption 
C)  taxes = income + consumption + household saving 
D)  household saving = consumption + income - taxes 
E)  taxes = household saving - income + consumption

Question 9

The investment demand curve

Accepted Answer

A)  is upward sloping 
B)  is downward sloping 
C)  is horizontal 
D)  begins sloping upward then flattens out 
E)  begins sloping downward,then flattens out 
A)  is upward sloping 
B)  is downward sloping 
C)  is horizontal 
D)  begins sloping upward then flattens out 
E)  begins sloping downward,then flattens out

Question 10

The labor demand curve slopes downward because

Accepted Answer

A)  firms wish to hire fewer workers as the wage rate increases 
B)  households wish to hire fewer workers as the wage rate decreases 
C)  firms wish to hire more workers as the wage rate increases 
D)  firms wish to supply fewer workers as the wage rate increases 
E)  households wish to provide fewer hours of work as the wage rate decreases 
A)  firms wish to hire fewer workers as the wage rate increases 
B)  households wish to hire fewer workers as the wage rate decreases 
C)  firms wish to hire more workers as the wage rate increases 
D)  firms wish to supply fewer workers as the wage rate increases 
E)  households wish to provide fewer hours of work as the wage rate decreases

Question 11

A decrease in government spending would cause all but one of the following to happen.Which is the exception?

Accepted Answer

A)  The government's budget deficit would shrink. 
B)  The interest rate would decrease. 
C)  Consumption spending would increase. 
D)  Investment spending would increase. 
E)  Total output would decrease. 
A)  The government's budget deficit would shrink. 
B)  The interest rate would decrease. 
C)  Consumption spending would increase. 
D)  Investment spending would increase. 
E)  Total output would decrease.

Question 12

The demand for loanable funds curve is downward sloping because

Accepted Answer

A)  as the interest rate falls business firms demand fewer loanable funds 
B)  as the interest rate falls business firms demand more loanable funds 
C)  as the interest rate rises business firms demand more loanable funds 
D)  as the interest rate rises,the government demands more loanable funds 
E)  as the interest rate rises,the government demands fewer loanable funds 
A)  as the interest rate falls business firms demand fewer loanable funds 
B)  as the interest rate falls business firms demand more loanable funds 
C)  as the interest rate rises business firms demand more loanable funds 
D)  as the interest rate rises,the government demands more loanable funds 
E)  as the interest rate rises,the government demands fewer loanable funds

Question 13

In the long run,if an economy's consumption spending is $5 trillion,its planned investment is $2 trillion,government spending is $1 trillion,net tax revenue is $1 trillion,and household savings are $2 trillion,total output should be

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 14

When represented graphically,the government's demand for funds curve is

Accepted Answer

A)  downward sloping 
B)  upward sloping 
C)  vertical 
D)  initially downward sloping,then upward sloping 
E)  initially rightward sloping,then downward sloping 
A)  downward sloping 
B)  upward sloping 
C)  vertical 
D)  initially downward sloping,then upward sloping 
E)  initially rightward sloping,then downward sloping

Question 15

In the classical model,even when a country runs a trade deficit,Say's law holds.

Accepted Answer

A) True 
 B)False

Question 16

Diminishing marginal returns means that aggregate production function is

Accepted Answer

A)  linear 
B)  downward sloping 
C)  upward sloping 
D)  concave 
E)  convex 
A)  linear 
B)  downward sloping 
C)  upward sloping 
D)  concave 
E)  convex

Question 17

The government budget deficit is

Accepted Answer

A)  the difference between government purchases and government revenues from bonds and taxes 
B)  caused by a lack of business sector investment 
C)  created when the government expenditures exceed net taxes 
D)  caused by leakages in the economy 
E)  is created by government injections 
A)  the difference between government purchases and government revenues from bonds and taxes 
B)  caused by a lack of business sector investment 
C)  created when the government expenditures exceed net taxes 
D)  caused by leakages in the economy 
E)  is created by government injections

Question 18

Leakages are

Accepted Answer

A)  negative tax revenues 
B)  government spending on nonessential goods and services 
C)  amounts of income earned,but not spent,by the household sector during a given year 
D)  a sign that an economy's total output is excessive 
E)  sums spent by sectors other than households 
A)  negative tax revenues 
B)  government spending on nonessential goods and services 
C)  amounts of income earned,but not spent,by the household sector during a given year 
D)  a sign that an economy's total output is excessive 
E)  sums spent by sectors other than households

Question 19

A country's total output,or real GDP,is determined only by its aggregate production function.

Accepted Answer

A) True 
 B)False

Question 20

Households make their savings available to borrowers through

Accepted Answer

A)  resource markets 
B)  the loanable funds market 
C)  the labor market 
D)  the taxes 
E)  spending 
A)  resource markets 
B)  the loanable funds market 
C)  the labor market 
D)  the taxes 
E)  spending

Say's law promises that each and every firm in the economy will be able to sell all of the particular output it produces.

Which of the following real-world phenomena does the classical model ignore?

In the classical view,all markets clear,except the labor market.

In the classical model,markets clear

According to the classical model,if the government wanted to increase employment,it could do so by increasing its own spending.That would lead firms to produce more output,for which they would need to hire more workers.

Which of the following statements about modern macroeconomic theory is most accurate?

In the classical model,if government tries to increase employment and output by increasing its own purchases,

What is the relationship between household saving and taxes?

The investment demand curve

The labor demand curve slopes downward because

A decrease in government spending would cause all but one of the following to happen.Which is the exception?

The demand for loanable funds curve is downward sloping because

In the long run,if an economy's consumption spending is $5 trillion,its planned investment is $2 trillion,government spending is $1 trillion,net tax revenue is $1 trillion,and household savings are $2 trillion,total output should be

When represented graphically,the government's demand for funds curve is

In the classical model,even when a country runs a trade deficit,Say's law holds.

Diminishing marginal returns means that aggregate production function is

The government budget deficit is

Leakages are

A country's total output,or real GDP,is determined only by its aggregate production function.

Households make their savings available to borrowers through

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

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Exam 8:The Classical Long run Model

Say's law promises that each and every firm in the economy will be able to sell all of the particular output it produces.

Which of the following real-world phenomena does the classical model ignore?

In the classical view,all markets clear,except the labor market.

In the classical model,markets clear

According to the classical model,if the government wanted to increase employment,it could do so by increasing its own spending.That would lead firms to produce more output,for which they would need to hire more workers.

Which of the following statements about modern macroeconomic theory is most accurate?

In the classical model,if government tries to increase employment and output by increasing its own purchases,

What is the relationship between household saving and taxes?

The investment demand curve

The labor demand curve slopes downward because

A decrease in government spending would cause all but one of the following to happen.Which is the exception?

The demand for loanable funds curve is downward sloping because

In the long run,if an economy's consumption spending is $5 trillion,its planned investment is $2 trillion,government spending is $1 trillion,net tax revenue is $1 trillion,and household savings are $2 trillion,total output should be

When represented graphically,the government's demand for funds curve is

In the classical model,even when a country runs a trade deficit,Say's law holds.

Diminishing marginal returns means that aggregate production function is

The government budget deficit is

Leakages are

A country's total output,or real GDP,is determined only by its aggregate production function.

Households make their savings available to borrowers through

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