Question 1

The implication of Say's law is that

Accepted Answer

A) Gross Domestic Product is the same whether we use the expenditure approach or the income approach. 
B) a barter economy is the most efficient economy. 
C) increased consumption today leads to increased production tomorrow. 
D) overproduction in a market economy is not possible. 
A) Gross Domestic Product is the same whether we use the expenditure approach or the income approach. 
B) a barter economy is the most efficient economy. 
C) increased consumption today leads to increased production tomorrow. 
D) overproduction in a market economy is not possible.

Question 2

-In the above figure, what could cause the shift of aggregate demand fromAD₁ to AD₂?

Accepted Answer

A) depletion of raw materials 
B) an increase in input prices 
C) a decrease in consumer confidence 
D) an increase in international trade barriers 
A) depletion of raw materials 
B) an increase in input prices 
C) a decrease in consumer confidence 
D) an increase in international trade barriers

Question 3

A reduction in nominal wages will cause which of the following?

Accepted Answer

A) a movement along the short-run aggregate supply curve 
B) a shift of both the short-run and long-run aggregate supply curves 
C) a rightward shift in the short-run aggregate supply curve 
D) a leftward shift in the short-run aggregate supply curve to shift to the left 
A) a movement along the short-run aggregate supply curve 
B) a shift of both the short-run and long-run aggregate supply curves 
C) a rightward shift in the short-run aggregate supply curve 
D) a leftward shift in the short-run aggregate supply curve to shift to the left

Question 4

The Keynesian model is basically

Accepted Answer

A) a long-run theory. 
B) a short-run theory. 
C) a combination of long- and short-run theories. 
D) a theory about the economy in both the long run and the short run. 
A) a long-run theory. 
B) a short-run theory. 
C) a combination of long- and short-run theories. 
D) a theory about the economy in both the long run and the short run.

Question 5

One effect of a stronger dollar is

Accepted Answer

A) an increase in U.S. exports and a reduction in U.S. imports. 
B) a reduction in U.S. exports and an increase in U.S. imports. 
C) an increase in net exports. 
D) an increase in both imports and exports. The effect on net exports is uncertain. 
A) an increase in U.S. exports and a reduction in U.S. imports. 
B) a reduction in U.S. exports and an increase in U.S. imports. 
C) an increase in net exports. 
D) an increase in both imports and exports. The effect on net exports is uncertain.

Question 6

In the classical model, high unemployment due to a change in aggregate demand

Accepted Answer

A) can persist for an indefinite period of time. 
B) will return to its normal level quickly as wages adjust. 
C) will persist if due to a supply shock but not if due to a demand shock. 
D) never exists because unemployment can never deviate from its normal level. 
A) can persist for an indefinite period of time. 
B) will return to its normal level quickly as wages adjust. 
C) will persist if due to a supply shock but not if due to a demand shock. 
D) never exists because unemployment can never deviate from its normal level.

Question 7

-Refer to the above figure. Which point or points represent(s)a long-run equilibrium?

Accepted Answer

A) A only 
B) B only 
C) C only 
D) both A and B 
A) A only 
B) B only 
C) C only 
D) both A and B

Question 8

The condition of fully flexible wages and prices was assumed by

Accepted Answer

A) the classical economists. 
B) the Keynesian economists. 
C) modern economists. 
D) no economists. 
A) the classical economists. 
B) the Keynesian economists. 
C) modern economists. 
D) no economists.

Question 9

Say's law states that

Accepted Answer

A) desired expenditures will equal actual expenditures. 
B) people produce only the goods they want. 
C) demand is always less than supply. 
D) overproduction is never possible because of limited resources. 
A) desired expenditures will equal actual expenditures. 
B) people produce only the goods they want. 
C) demand is always less than supply. 
D) overproduction is never possible because of limited resources.

Question 10

Consider a nation in which most workers are unionized. If all the nation's unions band together and succeed in boosting wages established by long-term labor contracts, then

Accepted Answer

A) there is a leftward shift in just LRAS. 
B) there is a leftward shift in both LRAS and SRAS. 
C) there is a rightward shift in just SRAS. 
D) there is a rightward movement along the SRAS curve. 
A) there is a leftward shift in just LRAS. 
B) there is a leftward shift in both LRAS and SRAS. 
C) there is a rightward shift in just SRAS. 
D) there is a rightward movement along the SRAS curve.

Question 11

The classical model makes little distinction between the long run and short run because

Accepted Answer

A) the model has not been fully developed yet. 
B) the classical economists knew that we are always operating in the short run. 
C) current changes influence the long run, so it is not possible to plan for the future. 
D) wages and prices adjust so fast that the economy is quickly moving towards the long run. 
A) the model has not been fully developed yet. 
B) the classical economists knew that we are always operating in the short run. 
C) current changes influence the long run, so it is not possible to plan for the future. 
D) wages and prices adjust so fast that the economy is quickly moving towards the long run.

Question 12

What shape did the short-run aggregate supply curve have during the 1930s, according to Keynes?
 Explain.

Accepted Answer

Keynes argued the short-run aggregate su

Question 13

-Refer to the above figure. At the initial long-run equilibrium, the price level is ________, and the price level will be ________.

Accepted Answer

A) 20; 45 
B) 20; 40 
C) 40; 45 
D) 20; 20 
A) 20; 45 
B) 20; 40 
C) 40; 45 
D) 20; 20

Question 14

Which of the following actions would cause the aggregate demand curve to shift to the left?

Accepted Answer

A) an increase in consumer spending caused by a cut in the personal income tax rate 
B) an increase in government spending caused by increased spending on highways and bridge construction 
C) a decrease net export spending caused by an appreciation of the home currency 
D) an increase in exports caused by an increase in economic activity in the European Union 
A) an increase in consumer spending caused by a cut in the personal income tax rate 
B) an increase in government spending caused by increased spending on highways and bridge construction 
C) a decrease net export spending caused by an appreciation of the home currency 
D) an increase in exports caused by an increase in economic activity in the European Union

Question 15

Cost-push inflation occurs

Accepted Answer

A) when the aggregate supply curve shifts to the left, while aggregate demand remains stable. 
B) when the aggregate supply curve shifts to the right, while aggregate demand remains stable. 
C) when the aggregate demand curve shifts to the left, while aggregate supply remains stable. 
D) when the aggregate demand curve shifts to the right, while aggregate supply remains stable. 
A) when the aggregate supply curve shifts to the left, while aggregate demand remains stable. 
B) when the aggregate supply curve shifts to the right, while aggregate demand remains stable. 
C) when the aggregate demand curve shifts to the left, while aggregate supply remains stable. 
D) when the aggregate demand curve shifts to the right, while aggregate supply remains stable.

Question 16

According to the classical model, desired saving is

Accepted Answer

A) a function of real GDP. 
B) equal to desired investment. 
C) identical to the demand for saving at each level of real GDP. 
D) affected by the money illusion at low income levels. 
A) a function of real GDP. 
B) equal to desired investment. 
C) identical to the demand for saving at each level of real GDP. 
D) affected by the money illusion at low income levels.

Question 17

Which one of the following is TRUE?

Accepted Answer

A) The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium wage level. 
B) The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium level of exports. 
C) The intersection of aggregate demand and aggregate supply identifies an equilibrium level of employment and an equilibrium level of investment. 
D) The intersection of aggregate demand and aggregate supply identifies an equilibrium price level and an equilibrium level of real GDP. 
A) The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium wage level. 
B) The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium level of exports. 
C) The intersection of aggregate demand and aggregate supply identifies an equilibrium level of employment and an equilibrium level of investment. 
D) The intersection of aggregate demand and aggregate supply identifies an equilibrium price level and an equilibrium level of real GDP.

Question 18

-Refer to the above figure. Which point or points represent(s)a short-run equilibrium?

Accepted Answer

A) A only 
B) B only 
C) C only 
D) both A and B 
A) A only 
B) B only 
C) C only 
D) both A and B

Question 19

The first systematic attempt to explain the determinants of the price level and national levels of income, employment, consumption and real Gross Domestic Product (GDP)was made by ________ economists.

Accepted Answer

A) Keynesian 
B) supply-side 
C) monetarist 
D) classical 
A) Keynesian 
B) supply-side 
C) monetarist 
D) classical

Question 20

The gap that exists when equilibrium real GDP is less than full-employment real GDP is

Accepted Answer

A) the short-run aggregate supply curve. 
B) money illusion. 
C) a recessionary gap. 
D) an inflationary gap. 
A) the short-run aggregate supply curve. 
B) money illusion. 
C) a recessionary gap. 
D) an inflationary gap.

The implication of Say's law is that

-In the above figure, what could cause the shift of aggregate demand fromAD₁ to AD₂?

A reduction in nominal wages will cause which of the following?

The Keynesian model is basically

One effect of a stronger dollar is

In the classical model, high unemployment due to a change in aggregate demand

-Refer to the above figure. Which point or points represent(s)a long-run equilibrium?

The condition of fully flexible wages and prices was assumed by

Say's law states that

Consider a nation in which most workers are unionized. If all the nation's unions band together and succeed in boosting wages established by long-term labor contracts, then

The classical model makes little distinction between the long run and short run because

What shape did the short-run aggregate supply curve have during the 1930s, according to Keynes? Explain.

-Refer to the above figure. At the initial long-run equilibrium, the price level is , and the price level will be .

Which of the following actions would cause the aggregate demand curve to shift to the left?

Cost-push inflation occurs

According to the classical model, desired saving is

Which one of the following is TRUE?

-Refer to the above figure. Which point or points represent(s)a short-run equilibrium?

The first systematic attempt to explain the determinants of the price level and national levels of income, employment, consumption and real Gross Domestic Product (GDP)was made by ________ economists.

The gap that exists when equilibrium real GDP is less than full-employment real GDP is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 10: Classical and Keynesian Macro Analyses

The implication of Say's law is that

-In the above figure, what could cause the shift of aggregate demand fromAD₁ to AD₂?

A reduction in nominal wages will cause which of the following?

The Keynesian model is basically

One effect of a stronger dollar is

In the classical model, high unemployment due to a change in aggregate demand

-Refer to the above figure. Which point or points represent(s)a long-run equilibrium?

The condition of fully flexible wages and prices was assumed by

Say's law states that

Consider a nation in which most workers are unionized. If all the nation's unions band together and succeed in boosting wages established by long-term labor contracts, then

The classical model makes little distinction between the long run and short run because

What shape did the short-run aggregate supply curve have during the 1930s, according to Keynes? Explain.

-Refer to the above figure. At the initial long-run equilibrium, the price level is ________, and the price level will be ________.

Which of the following actions would cause the aggregate demand curve to shift to the left?

Cost-push inflation occurs

According to the classical model, desired saving is

Which one of the following is TRUE?

-Refer to the above figure. Which point or points represent(s)a short-run equilibrium?

The first systematic attempt to explain the determinants of the price level and national levels of income, employment, consumption and real Gross Domestic Product (GDP)was made by ________ economists.

The gap that exists when equilibrium real GDP is less than full-employment real GDP is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-Refer to the above figure. At the initial long-run equilibrium, the price level is , and the price level will be .