Question 1

Which of the following is a statement of Say's law?

Accepted Answer

A)  Good money always drives out bad. 
B)  Must be reformed in order to preserve it. 
C)  Any output supplied to the market generates an equal amount of demand. 
D)  An economy left alone will always return to equilibrium. 
A)  Good money always drives out bad. 
B)  Must be reformed in order to preserve it. 
C)  Any output supplied to the market generates an equal amount of demand. 
D)  An economy left alone will always return to equilibrium. C

Question 2

At the beginning of the Great Depression

Accepted Answer

A)  neoclassical economists insisted that the government should increase spending. 
B)  neoclassical economists predicted that the economy would soon return to normal. 
C)  neoclassical economists agreed that the problem was lack of effective demand. 
D)  neoclassical economists predicted the fall of capitalism. 
A)  neoclassical economists insisted that the government should increase spending. 
B)  neoclassical economists predicted that the economy would soon return to normal. 
C)  neoclassical economists agreed that the problem was lack of effective demand. 
D)  neoclassical economists predicted the fall of capitalism. B

Question 3

In the classical version of the circular flow of economic life, all savings by households

Accepted Answer

A)  are deposited in banks. 
B)  are borrowed by businesses for investment purposes. 
C)  become part of total demand for goods and services. 
D)  all of the above 
A)  are deposited in banks. 
B)  are borrowed by businesses for investment purposes. 
C)  become part of total demand for goods and services. 
D)  all of the above D

Question 4

According to conservative economists, involuntary unemployment

Accepted Answer

A)  does not exist. 
B)  should be imposed on those unwilling to work. 
C)  occurs during an economic expansion. 
D)  could be eliminated by effective government programs. 
A)  does not exist. 
B)  should be imposed on those unwilling to work. 
C)  occurs during an economic expansion. 
D)  could be eliminated by effective government programs.

Question 5

What are the three main markets that comprise market capitalism?

Accepted Answer

A)  The market for goods, the market for services, and the market for technology. 
B)  The market for goods, the market for services, and the market for labor. 
C)  The market for goods and services, the market for labor, and financial markets. 
D)  The market for goods and services, the market for technology, and real estate markets. 
A)  The market for goods, the market for services, and the market for technology. 
B)  The market for goods, the market for services, and the market for labor. 
C)  The market for goods and services, the market for labor, and financial markets. 
D)  The market for goods and services, the market for technology, and real estate markets.

Question 6

In the classical version of the circular flow of economic life, all savings are done by

Accepted Answer

A)  households. 
B)  households and businesses. 
C)  only businesses. 
D)  government, businesses, and households. 
A)  households. 
B)  households and businesses. 
C)  only businesses. 
D)  government, businesses, and households.

Question 7

Which of the following is true of Say's law?

Accepted Answer

A)  There is often a lack of sufficient demand for goods and services. 
B)  There can never be excess production above demand for any length of time. 
C)  The economy is naturally prone to severe booms and busts. 
D)  There is a constant danger of runaway inflation. 
A)  There is often a lack of sufficient demand for goods and services. 
B)  There can never be excess production above demand for any length of time. 
C)  The economy is naturally prone to severe booms and busts. 
D)  There is a constant danger of runaway inflation.

Question 8

Traditional economics recognizes four broad categories or factors of production. These include:

Accepted Answer

A)  land, natural resources, labor, entrepreneurship. 
B)  land, technology, labor, capital. 
C)  land, labor, capital, entrepreneurship. 
D)  land, capital, entrepreneurship, and natural resources. 
A)  land, natural resources, labor, entrepreneurship. 
B)  land, technology, labor, capital. 
C)  land, labor, capital, entrepreneurship. 
D)  land, capital, entrepreneurship, and natural resources.

Question 9

In the neoclassical view of the macroeconomy, the supply of savings is

Accepted Answer

A)  unrelated to the interest rate. 
B)  inversely related to the interest rate. 
C)  positively related to the interest rate is fixed. 
A)  unrelated to the interest rate. 
B)  inversely related to the interest rate. 
C)  positively related to the interest rate is fixed.

Question 10

In the neoclassical view of the macroeconomy, a temporary lack of demand for all goods and services will lead to

Accepted Answer

A)  inflation. 
B)  a fall in the price level. 
C)  an expansion. 
D)  a recession. 
A)  inflation. 
B)  a fall in the price level. 
C)  an expansion. 
D)  a recession.

Question 11

In the neoclassical view of the macroeconomy, any income not used for consumption

Accepted Answer

A)  will be used to pay taxes. 
B)  will be used for investment. 
C)  will be used for government projects. 
D)  will be used for exports. 
A)  will be used to pay taxes. 
B)  will be used for investment. 
C)  will be used for government projects. 
D)  will be used for exports.

Question 12

The assumption that all savings out of national income are channeled into investment each year is called

Accepted Answer

A)  the average propensity to consume. 
B)  Say's Law. 
C)  the Mellon Effect. 
D)  the Greenspan Rule. 
A)  the average propensity to consume. 
B)  Say's Law. 
C)  the Mellon Effect. 
D)  the Greenspan Rule.

Question 13

According to conservative economists, how does the economy recover from an external shock?

Accepted Answer

A)  Government policy can help to stabilize the economy. 
B)  The economy will restore itself to equilibrium automatically. 
C)  Another outside shock will counteract the first shock. 
D)  External shocks have no impact on an economy as large as the United States. 
A)  Government policy can help to stabilize the economy. 
B)  The economy will restore itself to equilibrium automatically. 
C)  Another outside shock will counteract the first shock. 
D)  External shocks have no impact on an economy as large as the United States.

Question 14

In the neoclassical view of the macroeconomy, investment spending is

Accepted Answer

A)  unrelated to the interest rate. 
B)  inversely related to the interest rate. 
C)  positively related to the interest rate. 
D)  completely unpredictable. 
A)  unrelated to the interest rate. 
B)  inversely related to the interest rate. 
C)  positively related to the interest rate. 
D)  completely unpredictable.

Question 15

In the neoclassical view of the macroeconomy, if capitalists find they are unable to sell all of their goods

Accepted Answer

A)  they will continue to produce at current levels but will reduce their prices to sell more goods. 
B)  they will maintain prices and put unsold goods into inventories. 
C)  they will cut back on production and lower prices. 
D)  they will cut back on production but maintain current prices to cover costs. 
A)  they will continue to produce at current levels but will reduce their prices to sell more goods. 
B)  they will maintain prices and put unsold goods into inventories. 
C)  they will cut back on production and lower prices. 
D)  they will cut back on production but maintain current prices to cover costs.

Question 16

Why does the interest rate typically fall during economic contractions?

Accepted Answer

A)  There is a high demand for loans from consumers. 
B)  Businesses have more retained profits and do not need to borrow from banks. 
C)  There is a lower demand for loans from consumers and businesses. 
D)  Banks are more willing to make loans and offer easier credit terms. 
A)  There is a high demand for loans from consumers. 
B)  Businesses have more retained profits and do not need to borrow from banks. 
C)  There is a lower demand for loans from consumers and businesses. 
D)  Banks are more willing to make loans and offer easier credit terms.

Question 17

Progressive economists argue that conservatives tend to blame the unemployed for their own unemployment. What does this mean?

Accepted Answer

A)  Conservatives argue that the unemployed have caused businesses to fail. 
B)  Conservatives argue that the unemployed do not pay buy enough goods and services causing the economy to go into a recession. 
C)  Conservatives argue that the unemployed are simply unwilling to work at the prevailing wage. 
D)  Conservatives argue that the unemployed have lost their jobs by being so industrious that they are no longer needed by their employers. 
A)  Conservatives argue that the unemployed have caused businesses to fail. 
B)  Conservatives argue that the unemployed do not pay buy enough goods and services causing the economy to go into a recession. 
C)  Conservatives argue that the unemployed are simply unwilling to work at the prevailing wage. 
D)  Conservatives argue that the unemployed have lost their jobs by being so industrious that they are no longer needed by their employers.

Question 18

In the neoclassical view of the macroeconomy, too many workers seeking work or unemployment will lead to

Accepted Answer

A)  falling wages. 
B)  rising wages. 
C)  rising interest rates. 
D)  government programs to help the unemployed. 
A)  falling wages. 
B)  rising wages. 
C)  rising interest rates. 
D)  government programs to help the unemployed.

Question 19

According to Say's law, a lack of demand

Accepted Answer

A)  may occur briefly in one industry until capital moves to another industry. 
B)  will never occur in the aggregate economy for any reason. 
C)  occurs whenever there is insufficient income to purchase goods produced. 
D)  will occur frequently, because people tend to hoard money. 
A)  may occur briefly in one industry until capital moves to another industry. 
B)  will never occur in the aggregate economy for any reason. 
C)  occurs whenever there is insufficient income to purchase goods produced. 
D)  will occur frequently, because people tend to hoard money.

Question 20

Some neoclassical economists argue that recessions are caused by

Accepted Answer

A)  a deficiency of aggregate demand. 
B)  hoarding of savings. 
C)  outside shocks or disruptions. 
D)  free trade. 
A)  a deficiency of aggregate demand. 
B)  hoarding of savings. 
C)  outside shocks or disruptions. 
D)  free trade.

Which of the following is a statement of Say's law?

At the beginning of the Great Depression

In the classical version of the circular flow of economic life, all savings by households

According to conservative economists, involuntary unemployment

What are the three main markets that comprise market capitalism?

In the classical version of the circular flow of economic life, all savings are done by

Which of the following is true of Say's law?

Traditional economics recognizes four broad categories or factors of production. These include:

In the neoclassical view of the macroeconomy, the supply of savings is

In the neoclassical view of the macroeconomy, a temporary lack of demand for all goods and services will lead to

In the neoclassical view of the macroeconomy, any income not used for consumption

The assumption that all savings out of national income are channeled into investment each year is called

According to conservative economists, how does the economy recover from an external shock?

In the neoclassical view of the macroeconomy, investment spending is

In the neoclassical view of the macroeconomy, if capitalists find they are unable to sell all of their goods

Why does the interest rate typically fall during economic contractions?

Progressive economists argue that conservatives tend to blame the unemployed for their own unemployment. What does this mean?

In the neoclassical view of the macroeconomy, too many workers seeking work or unemployment will lead to

According to Say's law, a lack of demand

Some neoclassical economists argue that recessions are caused by

What Is Macroeconomics and the Evolution of Capitalism

The Keynesian Revolution

National Income Accounting

Classical and Keynesian Graphical Analysis

Introduction to Economic Growth

Introduction to Business Cycles

Investment and Profit, and the Multiplier

Consumer Spending, and Credit and Interest

Housing Bubble, Financial Crisis, and Government Spending, Taxes, and Deficits

The Trade Gap

Business Cycles

Globalization and the Spread of Instability

Inflation

Monetary Policy, Financial Regulation, and Debates Over Monetary Policy

Fiscal Policy: How to Stimulate the Economy

Fiscal Policy: Austerians and Deficit Hawks V Stimulus

A Road to Full Employment

Filters

Exam 2: The Classical View of the Macro-Economy

Which of the following is a statement of Say's law?

At the beginning of the Great Depression

In the classical version of the circular flow of economic life, all savings by households

According to conservative economists, involuntary unemployment

What are the three main markets that comprise market capitalism?

In the classical version of the circular flow of economic life, all savings are done by

Which of the following is true of Say's law?

Traditional economics recognizes four broad categories or factors of production. These include:

In the neoclassical view of the macroeconomy, the supply of savings is

In the neoclassical view of the macroeconomy, a temporary lack of demand for all goods and services will lead to

In the neoclassical view of the macroeconomy, any income not used for consumption

The assumption that all savings out of national income are channeled into investment each year is called

According to conservative economists, how does the economy recover from an external shock?

In the neoclassical view of the macroeconomy, investment spending is

In the neoclassical view of the macroeconomy, if capitalists find they are unable to sell all of their goods

Why does the interest rate typically fall during economic contractions?

Progressive economists argue that conservatives tend to blame the unemployed for their own unemployment. What does this mean?

In the neoclassical view of the macroeconomy, too many workers seeking work or unemployment will lead to

According to Say's law, a lack of demand

Some neoclassical economists argue that recessions are caused by

What Is Macroeconomics and the Evolution of Capitalism

The Keynesian Revolution

National Income Accounting

Classical and Keynesian Graphical Analysis

Introduction to Economic Growth

Introduction to Business Cycles

Investment and Profit, and the Multiplier

Consumer Spending, and Credit and Interest

Housing Bubble, Financial Crisis, and Government Spending, Taxes, and Deficits

The Trade Gap

Business Cycles

Globalization and the Spread of Instability

Inflation

Monetary Policy, Financial Regulation, and Debates Over Monetary Policy

Fiscal Policy: How to Stimulate the Economy

Fiscal Policy: Austerians and Deficit Hawks V Stimulus

A Road to Full Employment

Filters