Question 1

Diagram 6a
  
-Diagram 6a indicates that

Accepted Answer

A)  the economy is experiencing stagflation. 
B)  the economy is experiencing economic growth. 
C)  the economy is experiencing inflation. 
D)  the economy is experiencing unemployment. 
A)  the economy is experiencing stagflation. 
B)  the economy is experiencing economic growth. 
C)  the economy is experiencing inflation. 
D)  the economy is experiencing unemployment.

Question 2

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

Question 3

In the classical view of the macroeconomy, if there is not enough investment spending to use all available savings

Accepted Answer

A)  the Federal Reserve will raise the interest rate. 
B)  the interest rate will fall. 
C)  excess savings will be hoarded. 
D)  excess savings will be used to pay taxes. 
A)  the Federal Reserve will raise the interest rate. 
B)  the interest rate will fall. 
C)  excess savings will be hoarded. 
D)  excess savings will be used to pay taxes.

Question 4

According to classical economics, if the federal government was to default on its debt, driving up interest rates throughout the economy, what will happen to the level of investment spending by businesses on equipment and non-residential buildings?

Accepted Answer

A)  Nothing, it stays the same. 
B)  It will rise. 
C)  It will fall. 
A)  Nothing, it stays the same. 
B)  It will rise. 
C)  It will fall.

Question 5

Classical economists believe that the tendency of competition to press down the interest rates set by banks remedies the problem of planned savings exceeding planned investment.

Accepted Answer

A) True 
 B)False

Question 6

If the objective of government policy during a recession is to increase aggregate demand, then it should

Accepted Answer

A)  raise income taxes. 
B)  increase government spending. 
C)  decrease government transfers. 
D)  decrease government spending. 
A)  raise income taxes. 
B)  increase government spending. 
C)  decrease government transfers. 
D)  decrease government spending.

Question 7

Suppose that there is $3 trillion of savings in the economy currently offered for borrowing. Suppose that at an interest rate of 8% only $2.6 trillion is demanded in loans by businesses for investment. What happens to the remaining savings in the economy?

Accepted Answer

A)  It is redirected toward individual consumption. 
B)  It lies idle. 
C)  It is redirected toward investment spending. 
D)  It is appropriated by the government. 
A)  It is redirected toward individual consumption. 
B)  It lies idle. 
C)  It is redirected toward investment spending. 
D)  It is appropriated by the government.

Question 8

At very low levels of income, consumer spending is likely to

Accepted Answer

A)  be less than income. 
B)  be greater than income. 
C)  be the same as income. 
D)  be the same as savings. 
A)  be less than income. 
B)  be greater than income. 
C)  be the same as income. 
D)  be the same as savings.

Question 9

In the real world, a decrease in consumption will cause businesses' expectations of future profits to increase.

Accepted Answer

A) True 
 B)False

Question 10

According to Classical 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 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 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 11

Conservatives and Keynesians differ on the appropriate response of the government to a recession. Which of the following is a true statement?

Accepted Answer

A)  Keynesians believe that governments should increase spending to make up for a deficiency of aggregate demand. 
B)  Keynesians believe that governments should intervene in the economy only in the case of an outside shock. 
C)  Keynesians believe that governments do not need to intervene, because the economy is always in equilibrium. 
D)  Keynesians believe that governments can prevent an outside shock. 
A)  Keynesians believe that governments should increase spending to make up for a deficiency of aggregate demand. 
B)  Keynesians believe that governments should intervene in the economy only in the case of an outside shock. 
C)  Keynesians believe that governments do not need to intervene, because the economy is always in equilibrium. 
D)  Keynesians believe that governments can prevent an outside shock.

Question 12

Compared to people of moderate means, the wealthy tend to have

Accepted Answer

A)  Compared to people of moderate means, the wealthy tend to have 
B)  
B)  higher average propensities to save. 
C)  lower average propensities to save. 
D)  the same average propensity to consume 
A)  Compared to people of moderate means, the wealthy tend to have 
B)  
B)  higher average propensities to save. 
C)  lower average propensities to save. 
D)  the same average propensity to consume

Question 13

Keynesian economists oppose wage cutting when unemployment rises because:

Accepted Answer

A)  They believe it would be unfair to workers 
B)  Wage cutting reduces workers' income which will cause a decline in spending and unemployment 
C)  Wage cutting will decrease profits and reduce investment incentives 
D)  All of the above 
A)  They believe it would be unfair to workers 
B)  Wage cutting reduces workers' income which will cause a decline in spending and unemployment 
C)  Wage cutting will decrease profits and reduce investment incentives 
D)  All of the above

Question 14

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

Question 15

Why do Classical Economists believe all savings will be invested?

Accepted Answer

A)  Supply and demand. 
B)  Because of the circular flow. 
C)  Because that is what has always happened throughout history. 
D)  Because people only save money in order to invest it. 
A)  Supply and demand. 
B)  Because of the circular flow. 
C)  Because that is what has always happened throughout history. 
D)  Because people only save money in order to invest it.

Question 16

Keynes divided spending into four great flows which are

Accepted Answer

A)  consumer spending on durable goods, consumer spending on nondurable goods, consumer spending on personal services, and consumer spending on financial services. 
B)  business spending on buildings, business spending on equipment, business spending on raw materials, and business spending on advertising. 
C)  consumer spending, business spending, government spending, and spending by foreign on exports. 
D)  government spending on welfare, government spending on the military, government spending on education, and government spending on Social Security. 
A)  consumer spending on durable goods, consumer spending on nondurable goods, consumer spending on personal services, and consumer spending on financial services. 
B)  business spending on buildings, business spending on equipment, business spending on raw materials, and business spending on advertising. 
C)  consumer spending, business spending, government spending, and spending by foreign on exports. 
D)  government spending on welfare, government spending on the military, government spending on education, and government spending on Social Security.

Diagram 6a -Diagram 6a indicates that

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

In the classical view of the macroeconomy, if there is not enough investment spending to use all available savings

According to classical economics, if the federal government was to default on its debt, driving up interest rates throughout the economy, what will happen to the level of investment spending by businesses on equipment and non-residential buildings?

Classical economists believe that the tendency of competition to press down the interest rates set by banks remedies the problem of planned savings exceeding planned investment.

If the objective of government policy during a recession is to increase aggregate demand, then it should

Suppose that there is $3 trillion of savings in the economy currently offered for borrowing. Suppose that at an interest rate of 8% only $2.6 trillion is demanded in loans by businesses for investment. What happens to the remaining savings in the economy?

At very low levels of income, consumer spending is likely to

In the real world, a decrease in consumption will cause businesses' expectations of future profits to increase.

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

Conservatives and Keynesians differ on the appropriate response of the government to a recession. Which of the following is a true statement?

Compared to people of moderate means, the wealthy tend to have

Keynesian economists oppose wage cutting when unemployment rises because:

In the classical view of the macroeconomy, investment spending is

Why do Classical Economists believe all savings will be invested?

Keynes divided spending into four great flows which are

What Is Macroeconomics and the Evolution of Capitalism

The Classical View of the Macro-Economy

The Keynesian Revolution

National Income Accounting

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 5: Classical and Keynesian Graphical Analysis

Diagram 6a -Diagram 6a indicates that

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

In the classical view of the macroeconomy, if there is not enough investment spending to use all available savings

According to classical economics, if the federal government was to default on its debt, driving up interest rates throughout the economy, what will happen to the level of investment spending by businesses on equipment and non-residential buildings?

Classical economists believe that the tendency of competition to press down the interest rates set by banks remedies the problem of planned savings exceeding planned investment.

If the objective of government policy during a recession is to increase aggregate demand, then it should

Suppose that there is $3 trillion of savings in the economy currently offered for borrowing. Suppose that at an interest rate of 8% only $2.6 trillion is demanded in loans by businesses for investment. What happens to the remaining savings in the economy?

At very low levels of income, consumer spending is likely to

In the real world, a decrease in consumption will cause businesses' expectations of future profits to increase.

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

Conservatives and Keynesians differ on the appropriate response of the government to a recession. Which of the following is a true statement?

Compared to people of moderate means, the wealthy tend to have

Keynesian economists oppose wage cutting when unemployment rises because:

In the classical view of the macroeconomy, investment spending is

Why do Classical Economists believe all savings will be invested?

Keynes divided spending into four great flows which are

What Is Macroeconomics and the Evolution of Capitalism

The Classical View of the Macro-Economy

The Keynesian Revolution

National Income Accounting

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