Question 1

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy.
  
-Equilibrium will occur in this economy at an output level of:

Accepted Answer

A)  $0. 
B)  $2 trillion. 
C)  $5 trillion. 
D)  $0 and $5 trillion. 
A)  $0. 
B)  $2 trillion. 
C)  $5 trillion. 
D)  $0 and $5 trillion.

Question 2

Using the Keynesian approach, if leakages from the spending stream are less than injections, the current level of output is:

Accepted Answer

A)  less than the equilibrium level of output, and will increase. 
B)  less than the equilibrium level of output, and will decrease. 
C)  greater than the equilibrium level of output, and will increase. 
D)  greater than the equilibrium level of output, and will decrease. 
A)  less than the equilibrium level of output, and will increase. 
B)  less than the equilibrium level of output, and will decrease. 
C)  greater than the equilibrium level of output, and will increase. 
D)  greater than the equilibrium level of output, and will decrease.

Question 3

Which of the following schools of thought would argue that an economy could persistently operate well below full employment?

Accepted Answer

A)  The classical school. 
B)  The new classical school. 
C)  The new Keynesian school. 
D)  All of the above. 
A)  The classical school. 
B)  The new classical school. 
C)  The new Keynesian school. 
D)  All of the above.

Question 4

The economic theory, popular before the Great Depression, that says the economy will automatically adjust to full employment is:

Accepted Answer

A)  classical economics. 
B)  Keynesian economics. 
C)  supply-side economics. 
D)  monetarism. 
A)  classical economics. 
B)  Keynesian economics. 
C)  supply-side economics. 
D)  monetarism.

Question 5

The basis of the following figure based on the Keynesian approach.
  
-If the level of output were zero:

Accepted Answer

A)  the level of economic activity would grow. 
B)  leakages from the spending stream would be zero. 
C)  injections into the spending stream would be $1 trillion. 
D)  all of the above. 
A)  the level of economic activity would grow. 
B)  leakages from the spending stream would be zero. 
C)  injections into the spending stream would be $1 trillion. 
D)  all of the above.

Question 6

In Keynesian economics, the key to understanding how total spending can be more or less than current production is the role played by:

Accepted Answer

A)  net exports. 
B)  business inventories. 
C)  business investment spending. 
D)  government transfer payments. 
A)  net exports. 
B)  business inventories. 
C)  business investment spending. 
D)  government transfer payments.

Question 7

Which of the following approaches to the macroeconomy would be least likely to advocate limiting government intervention to bring the economy to full employment?

Accepted Answer

A)  Classical economics. 
B)  New Classical economics. 
C)  New Keynesian economics. 
D)  Monetarism. 
A)  Classical economics. 
B)  New Classical economics. 
C)  New Keynesian economics. 
D)  Monetarism.

Question 8

When the economy is suffering high rates of both inflation and unemployment it is experiencing _________________.

Accepted Answer

The answer of When the economy is suffering high rates...

Question 9

-Based on this aggregate supply and aggregate demand figure, which statement best describes the classical economic viewpoint?

Accepted Answer

A)  Aggregate supply would shift to the left if prices and wages rose from P2W2 to P1W1. 
B)  If prices and wages were at P1W1 and aggregate demand were AD2, prices and wages would fall to P2W2. 
C)  The economy would be operating at full employment if prices and wages were at P1W1 and aggregate demand was AD2. 
D)  If prices and wages were at P2W2 and aggregate demand was AD2, an increase in prices and wages to P1W1 would cause demand-pull inflation. 
A)  Aggregate supply would shift to the left if prices and wages rose from P2W2 to P1W1. 
B)  If prices and wages were at P1W1 and aggregate demand were AD2, prices and wages would fall to P2W2. 
C)  The economy would be operating at full employment if prices and wages were at P1W1 and aggregate demand was AD2. 
D)  If prices and wages were at P2W2 and aggregate demand was AD2, an increase in prices and wages to P1W1 would cause demand-pull inflation.

Question 10

In Keynesian economics the most important factor determining whether the level of economic activity is growing or shrinking is:

Accepted Answer

A)  the multiplier effect. 
B)  government expenditure and tax policies. 
C)  the behavior of nonincome-determined spending. 
D)  the relationship between leakages from and injections into the spending stream. 
A)  the multiplier effect. 
B)  government expenditure and tax policies. 
C)  the behavior of nonincome-determined spending. 
D)  the relationship between leakages from and injections into the spending stream.

Question 11

Keynesian economics:

Accepted Answer

A)  has been the undisputed correct view of the macroeconomy since the 1930s. 
B)  reached its peak of popularity during the 1960s, came under attack in the 1970s and 1980s, and recently saw its policy tools used again. 
C)  was not popular until it was adopted by the Clinton administration as the official viewpoint for its economic policies. 
D)  failed during the 1930s because of its inability to explain the high rates of unemployment during the Great Depression. 
A)  has been the undisputed correct view of the macroeconomy since the 1930s. 
B)  reached its peak of popularity during the 1960s, came under attack in the 1970s and 1980s, and recently saw its policy tools used again. 
C)  was not popular until it was adopted by the Clinton administration as the official viewpoint for its economic policies. 
D)  failed during the 1930s because of its inability to explain the high rates of unemployment during the Great Depression.

Question 12

What role do inventories play in the Keynesian model?

Accepted Answer

Inventories become the barometer for eco

Question 13

Monetarism favors stabilizing the economy through controlling the money supply.

Accepted Answer

A) True 
 B)False

Question 14

How might the values of a model builder affect the assumptions on which the model is built?

Accepted Answer

The values of a model builder might actu

Question 15

Classical economics favored government intervention in the operation of an economy.

Accepted Answer

A) True 
 B)False

Question 16

The basic policy implication of the classical school is:

Accepted Answer

A)  government should maintain zero growth in the money supply. 
B)  there is no need for government intervention to correct economic problems. 
C)  government intervention to regulate the economy will be made more effective by coordinating actions of households and businesses. 
D)  price stickiness and conflicts between labor and management require government intervention to move an economy to full employment. 
A)  government should maintain zero growth in the money supply. 
B)  there is no need for government intervention to correct economic problems. 
C)  government intervention to regulate the economy will be made more effective by coordinating actions of households and businesses. 
D)  price stickiness and conflicts between labor and management require government intervention to move an economy to full employment.

Question 17

The classical school assumes that:

Accepted Answer

A)  supply creates its own demand, wage and prices are flexible, and savings equal investment. 
B)  supply creates its own demand, wage and prices are inflexible, and savings equal investment. 
C)  supply does not create its own demand, wage and prices are flexible, and savings do not necessarily equal investment. 
D)  supply does not create its own demand, wage and prices are inflexible, and savings do not necessarily equal investment. 
A)  supply creates its own demand, wage and prices are flexible, and savings equal investment. 
B)  supply creates its own demand, wage and prices are inflexible, and savings equal investment. 
C)  supply does not create its own demand, wage and prices are flexible, and savings do not necessarily equal investment. 
D)  supply does not create its own demand, wage and prices are inflexible, and savings do not necessarily equal investment.

Question 18

If, using the Keynesian approach, injections into the spending stream were $2.20 trillion, leakages from the spending stream were $2.50 trillion, and total output in the economy was $4.00 trillion, total spending would be:

Accepted Answer

A)  $3.70 trillion. 
B)  $4.00 trillion. 
C)  $4.30 trillion. 
D)  none of the above. 
A)  $3.70 trillion. 
B)  $4.00 trillion. 
C)  $4.30 trillion. 
D)  none of the above.

Question 19

Which of the following is not an assumption made by classical economists?

Accepted Answer

A)  Supply creates its own demand. 
B)  Wages and prices are flexible. 
C)  Savings always equals investment. 
D)  Interest rates are not in important. 
A)  Supply creates its own demand. 
B)  Wages and prices are flexible. 
C)  Savings always equals investment. 
D)  Interest rates are not in important.

Question 20

Supply-side economics calls for:

Accepted Answer

A)  regulatory reform to increase productivity. 
B)  lower taxes on businesses and individuals. 
C)  less presence of government in private decision making. 
D)  all of the above. 
A)  regulatory reform to increase productivity. 
B)  lower taxes on businesses and individuals. 
C)  less presence of government in private decision making. 
D)  all of the above.

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy. -Equilibrium will occur in this economy at an output level of:

Using the Keynesian approach, if leakages from the spending stream are less than injections, the current level of output is:

Which of the following schools of thought would argue that an economy could persistently operate well below full employment?

The economic theory, popular before the Great Depression, that says the economy will automatically adjust to full employment is:

The basis of the following figure based on the Keynesian approach. -If the level of output were zero:

In Keynesian economics, the key to understanding how total spending can be more or less than current production is the role played by:

Which of the following approaches to the macroeconomy would be least likely to advocate limiting government intervention to bring the economy to full employment?

When the economy is suffering high rates of both inflation and unemployment it is experiencing _________________.

-Based on this aggregate supply and aggregate demand figure, which statement best describes the classical economic viewpoint?

In Keynesian economics the most important factor determining whether the level of economic activity is growing or shrinking is:

Keynesian economics:

What role do inventories play in the Keynesian model?

Monetarism favors stabilizing the economy through controlling the money supply.

How might the values of a model builder affect the assumptions on which the model is built?

Classical economics favored government intervention in the operation of an economy.

The basic policy implication of the classical school is:

The classical school assumes that:

If, using the Keynesian approach, injections into the spending stream were $2.20 trillion, leakages from the spending stream were $2.50 trillion, and total output in the economy was $4.00 trillion, total spending would be:

Which of the following is not an assumption made by classical economists?

Supply-side economics calls for:

Introduction to Economics

Economic Decision Making and Economic Systems

Demand, Supply, and the Determination of Price

Goals and Problems of the Macroeconomy: Employment, Prices and Production

Foundations of the Macroeconomy

The Role of Government in the Macroeconomy

Money, Financial Institutions, and the Federal Reserve

Money Creation, Monetary Theory, and Monetary Policy

Households and Businesses: An Overview

Benefits, Costs, and Maximization

Production and the Costs of Production

Competition and Market Structures

Government and the Markets

Labor Markets, Unions, and the Distribution of Income-A

International Trade

International Finance

Filters

Exam 9: Macroeconomic Viewpoints and Models

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy. -Equilibrium will occur in this economy at an output level of:

Using the Keynesian approach, if leakages from the spending stream are less than injections, the current level of output is:

Which of the following schools of thought would argue that an economy could persistently operate well below full employment?

The economic theory, popular before the Great Depression, that says the economy will automatically adjust to full employment is:

The basis of the following figure based on the Keynesian approach. -If the level of output were zero:

In Keynesian economics, the key to understanding how total spending can be more or less than current production is the role played by:

Which of the following approaches to the macroeconomy would be least likely to advocate limiting government intervention to bring the economy to full employment?

When the economy is suffering high rates of both inflation and unemployment it is experiencing _________________.

-Based on this aggregate supply and aggregate demand figure, which statement best describes the classical economic viewpoint?

In Keynesian economics the most important factor determining whether the level of economic activity is growing or shrinking is:

Keynesian economics:

What role do inventories play in the Keynesian model?

Monetarism favors stabilizing the economy through controlling the money supply.

How might the values of a model builder affect the assumptions on which the model is built?

Classical economics favored government intervention in the operation of an economy.

The basic policy implication of the classical school is:

The classical school assumes that:

If, using the Keynesian approach, injections into the spending stream were $2.20 trillion, leakages from the spending stream were $2.50 trillion, and total output in the economy was $4.00 trillion, total spending would be:

Which of the following is not an assumption made by classical economists?

Supply-side economics calls for:

Introduction to Economics

Economic Decision Making and Economic Systems

Demand, Supply, and the Determination of Price

Goals and Problems of the Macroeconomy: Employment, Prices and Production

Foundations of the Macroeconomy

The Role of Government in the Macroeconomy

Money, Financial Institutions, and the Federal Reserve

Money Creation, Monetary Theory, and Monetary Policy

Households and Businesses: An Overview

Benefits, Costs, and Maximization

Production and the Costs of Production

Competition and Market Structures

Government and the Markets

Labor Markets, Unions, and the Distribution of Income-A

International Trade

International Finance

Filters