Question 1

Explain why Keynesian and new Keynesian economists do not think an economy can be relied upon to bring itself to full employment.

Accepted Answer

Keynes argued that an economy could only

Question 2

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy.
  
-If the economy were operating at an output level of $4 trillion, you would expect business inventories to be:

Accepted Answer

A)  zero. 
B)  increasing. 
C)  decreasing. 
D)  unchanging. 
A)  zero. 
B)  increasing. 
C)  decreasing. 
D)  unchanging.

Question 3

A primary assumption of new classical economics is:

Accepted Answer

A)  wages and prices are not flexible. 
B)  an upward sloping aggregate demand curve. 
C)  over the long run the economy will operate at the natural rate of unemployment. 
D)  all of the above. 
A)  wages and prices are not flexible. 
B)  an upward sloping aggregate demand curve. 
C)  over the long run the economy will operate at the natural rate of unemployment. 
D)  all of the above.

Question 4

The interest rate effect, the wealth effect, and the foreign trade effect cause the aggregate supply curve to be upward sloping in the new classical model.

Accepted Answer

A) True 
 B)False

Question 5

What are the interest rate effect, the wealth effect, and the foreign trade effect, and what is their impact on aggregate demand in new classical economics?

Accepted Answer

When prices fall, so do interest rates,

Question 6

How does the aggregate supply curve appear in the classical economic model, and what assumption of the model causes it to appear as it does?

Accepted Answer

Because we are always at full

Question 7

In the Keynesian model, when total spending in the economy is greater than total output, business inventories will ____________.

Accepted Answer

The answer of In the Keynesian model, when total spending...

Question 8

Keynesian economists do not think flexible wages and prices ensure that an economy will operate at full employment.

Accepted Answer

A) True 
 B)False

Question 9

In the Keynesian model, if total spending by households, businesses, government units and foreign buyers is less than the total output produced in the economy, then:

Accepted Answer

A)  total output will decrease. 
B)  total spending will increase as long as the economy is not at full employment. 
C)  total output will decrease and total spending will increase as long as the economy is not at full employment. 
D)  any of the above could happen. 
A)  total output will decrease. 
B)  total spending will increase as long as the economy is not at full employment. 
C)  total output will decrease and total spending will increase as long as the economy is not at full employment. 
D)  any of the above could happen.

Question 10

The basis of the following figure based on the Keynesian approach.
  
-Injections into the spending stream exceed leakages from the spending stream by approximately $0.5 trillion at an output level of:

Accepted Answer

A)  $0 trillion. 
B)  $2 trillion. 
C)  $6 trillion. 
D)  none of the above. 
A)  $0 trillion. 
B)  $2 trillion. 
C)  $6 trillion. 
D)  none of the above.

Question 11

Which of the following is NOT an assumption of new classical economics?

Accepted Answer

A)  free markets. 
B)  flexible wages and prices. 
C)  a downward sloping aggregate demand curve. 
D)  an economy operating in the long run at an unemployment rate that is higher than the natural rate. 
A)  free markets. 
B)  flexible wages and prices. 
C)  a downward sloping aggregate demand curve. 
D)  an economy operating in the long run at an unemployment rate that is higher than the natural rate.

Question 12

According to Keynesian economics, the economy is in equilibrium when:

Accepted Answer

A)  injections into the spending stream equal leakages from the spending stream. 
B)  total spending on new goods and services is greater than the total output of the economy plus imports. 
C)  the amount spent by households on goods and services equals the amount spent by businesses, government units, and foreign buyers. 
D)  all of the above. 
A)  injections into the spending stream equal leakages from the spending stream. 
B)  total spending on new goods and services is greater than the total output of the economy plus imports. 
C)  the amount spent by households on goods and services equals the amount spent by businesses, government units, and foreign buyers. 
D)  all of the above.

Question 13

According to the new classical approach, an increase in aggregate demand in the short run could lead to an increase in:

Accepted Answer

A)  total output and the price level. 
B)  total output with no change in the price level. 
C)  the price level with no change in total output. 
D)  all of the above. 
A)  total output and the price level. 
B)  total output with no change in the price level. 
C)  the price level with no change in total output. 
D)  all of the above.

Question 14

Classical and new classical economics focus on the relationship between total output and:

Accepted Answer

A)  inflation. 
B)  price levels. 
C)  the money supply. 
D)  aggregate demand. 
A)  inflation. 
B)  price levels. 
C)  the money supply. 
D)  aggregate demand.

Question 15

-At an output level of $100 billion, total leakages are:

Accepted Answer

A)  $40 billion. 
B)  $50 billion. 
C)  $60 billion. 
D)  $80 billion. 
A)  $40 billion. 
B)  $50 billion. 
C)  $60 billion. 
D)  $80 billion.

Question 16

The basic position of supply-side economics is:

Accepted Answer

A)  taxes on the wealthy should be reduced. 
B)  minimum wage laws should be abolished. 
C)  government should provide incentives to households and businesses to increase their productivity. 
D)  government should increase research and development subsidies to stimulate technological advances. 
A)  taxes on the wealthy should be reduced. 
B)  minimum wage laws should be abolished. 
C)  government should provide incentives to households and businesses to increase their productivity. 
D)  government should increase research and development subsidies to stimulate technological advances.

Question 17

The classical economists believed changes in wages and prices would help to ensure that the economy would operate at full employment.

Accepted Answer

A) True 
 B)False

Question 18

According to the rational and adaptive expectations arguments:

Accepted Answer

A)  we must expect that policymakers will act rationally when adapting the economy to the needs of the general public. 
B)  it is in the best interest of each business and household to act exactly as macroeconomic policymakers expect it to act. 
C)  the Keynesian school is correct in saying the economy can never be expected to operate without some cyclical unemployment. 
D)  the effects of macroeconomic policies might be distorted by adjustments in business and household behaviors in anticipation of policymakers' strategies. 
A)  we must expect that policymakers will act rationally when adapting the economy to the needs of the general public. 
B)  it is in the best interest of each business and household to act exactly as macroeconomic policymakers expect it to act. 
C)  the Keynesian school is correct in saying the economy can never be expected to operate without some cyclical unemployment. 
D)  the effects of macroeconomic policies might be distorted by adjustments in business and household behaviors in anticipation of policymakers' strategies.

Question 19

In the classical model, a decrease in aggregate demand will:

Accepted Answer

A)  cause inflation to rise in the short run. 
B)  lead to lower wages and prices, bringing the economy back to full employment. 
C)  be offset by a decrease in aggregate supply. 
D)  require government intervention to return the economy back to full employment. 
A)  cause inflation to rise in the short run. 
B)  lead to lower wages and prices, bringing the economy back to full employment. 
C)  be offset by a decrease in aggregate supply. 
D)  require government intervention to return the economy back to full employment.

Question 20

The conclusions and policy implications of an economic model are influenced by the:

Accepted Answer

A)  data that are analyzed in the model. 
B)  assumptions on which the model is built. 
C)  choice of variables described in the model. 
D)  all of the above. 
A)  data that are analyzed in the model. 
B)  assumptions on which the model is built. 
C)  choice of variables described in the model. 
D)  all of the above.

Explain why Keynesian and new Keynesian economists do not think an economy can be relied upon to bring itself to full employment.

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy. -If the economy were operating at an output level of $4 trillion, you would expect business inventories to be:

A primary assumption of new classical economics is:

The interest rate effect, the wealth effect, and the foreign trade effect cause the aggregate supply curve to be upward sloping in the new classical model.

What are the interest rate effect, the wealth effect, and the foreign trade effect, and what is their impact on aggregate demand in new classical economics?

How does the aggregate supply curve appear in the classical economic model, and what assumption of the model causes it to appear as it does?

In the Keynesian model, when total spending in the economy is greater than total output, business inventories will ____________.

Keynesian economists do not think flexible wages and prices ensure that an economy will operate at full employment.

In the Keynesian model, if total spending by households, businesses, government units and foreign buyers is less than the total output produced in the economy, then:

The basis of the following figure based on the Keynesian approach. -Injections into the spending stream exceed leakages from the spending stream by approximately $0.5 trillion at an output level of:

Which of the following is NOT an assumption of new classical economics?

According to Keynesian economics, the economy is in equilibrium when:

According to the new classical approach, an increase in aggregate demand in the short run could lead to an increase in:

Classical and new classical economics focus on the relationship between total output and:

-At an output level of $100 billion, total leakages are:

The basic position of supply-side economics is:

The classical economists believed changes in wages and prices would help to ensure that the economy would operate at full employment.

According to the rational and adaptive expectations arguments:

In the classical model, a decrease in aggregate demand will:

The conclusions and policy implications of an economic model are influenced by the:

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

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Exam 9: Macroeconomic Viewpoints and Models

Explain why Keynesian and new Keynesian economists do not think an economy can be relied upon to bring itself to full employment.

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy. -If the economy were operating at an output level of $4 trillion, you would expect business inventories to be:

A primary assumption of new classical economics is:

The interest rate effect, the wealth effect, and the foreign trade effect cause the aggregate supply curve to be upward sloping in the new classical model.

What are the interest rate effect, the wealth effect, and the foreign trade effect, and what is their impact on aggregate demand in new classical economics?

How does the aggregate supply curve appear in the classical economic model, and what assumption of the model causes it to appear as it does?

In the Keynesian model, when total spending in the economy is greater than total output, business inventories will ____________.

Keynesian economists do not think flexible wages and prices ensure that an economy will operate at full employment.

In the Keynesian model, if total spending by households, businesses, government units and foreign buyers is less than the total output produced in the economy, then:

The basis of the following figure based on the Keynesian approach. -Injections into the spending stream exceed leakages from the spending stream by approximately $0.5 trillion at an output level of:

Which of the following is NOT an assumption of new classical economics?

According to Keynesian economics, the economy is in equilibrium when:

According to the new classical approach, an increase in aggregate demand in the short run could lead to an increase in:

Classical and new classical economics focus on the relationship between total output and:

-At an output level of $100 billion, total leakages are:

The basic position of supply-side economics is:

The classical economists believed changes in wages and prices would help to ensure that the economy would operate at full employment.

According to the rational and adaptive expectations arguments:

In the classical model, a decrease in aggregate demand will:

The conclusions and policy implications of an economic model are influenced by the:

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