Question 1

The relationship between the price level and the real Gross Domestic Product (GDP)without full adjustment or full information is represented by

Accepted Answer

A) the long-run aggregate supply curve. 
B) the short-run aggregate supply curve. 
C) the aggregate demand curve. 
D) the distance between the long-run aggregate supply curve and the short-run aggregate supply curve. 
A) the long-run aggregate supply curve. 
B) the short-run aggregate supply curve. 
C) the aggregate demand curve. 
D) the distance between the long-run aggregate supply curve and the short-run aggregate supply curve.

Question 2

An appreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

Accepted Answer

A) lowers, lowers 
B) increases, increases 
C) increases, lowers 
D) lowers, increases 
A) lowers, lowers 
B) increases, increases 
C) increases, lowers 
D) lowers, increases

Question 3

Which of the following statements is correct?
I. If other factors are held constant, the level of employment in the economy determines real Gross Domestic Product (GDP).
II. According to classical economists, only voluntary unemployment exists in the long run.

Accepted Answer

A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II 
A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II

Question 4

Leakages in the circular flow model are

Accepted Answer

A) caused by people not acting rational. 
B) possible when unemployment exists. 
C) reflected in the vertical long-run aggregate supply curve. 
D) caused by people saving instead of spending. 
A) caused by people not acting rational. 
B) possible when unemployment exists. 
C) reflected in the vertical long-run aggregate supply curve. 
D) caused by people saving instead of spending.

Question 5

According to the classical theory, an inward shift in aggregate demand would reduce

Accepted Answer

A) real Gross Domestic Product (GDP)and the price level. 
B) the price level but have no effect on real Gross Domestic Product (GDP). 
C) real income but have no impact on the price Gross Domestic Product (GDP). 
D) the price level but increase real Gross Domestic Product (GDP). 
A) real Gross Domestic Product (GDP)and the price level. 
B) the price level but have no effect on real Gross Domestic Product (GDP). 
C) real income but have no impact on the price Gross Domestic Product (GDP). 
D) the price level but increase real Gross Domestic Product (GDP).

Question 6

The inflation associated with the oil price shocks in the 1970s after OPEC restricted the supply of oil is an example of

Accepted Answer

A) cost-push inflation due to a supply shock. 
B) cost-push inflation due to a demand shock. 
C) demand-pull inflation due to a demand shock. 
D) demand-pull inflation due to a supply shock. 
A) cost-push inflation due to a supply shock. 
B) cost-push inflation due to a demand shock. 
C) demand-pull inflation due to a demand shock. 
D) demand-pull inflation due to a supply shock.

Question 7

"In the classical model, the equilibrium level of real Gross Domestic Product (GDP)is completely supply-determined." Do you agree or disagree?
 Why?

Accepted Answer

Agree. The long-run aggregate supply cur

Question 8

Given the assumptions of the classical model

Accepted Answer

A) the economy will often experience recessions and expansions. 
B) expansion will be the normal condition, but recessions will often be severe and require government intervention. 
C) the macroeconomy is erratic, and problems will often be increased over time. 
D) the market is a self-correcting mechanism. 
A) the economy will often experience recessions and expansions. 
B) expansion will be the normal condition, but recessions will often be severe and require government intervention. 
C) the macroeconomy is erratic, and problems will often be increased over time. 
D) the market is a self-correcting mechanism.

Question 9

The short-run aggregate supply curve in modern Keynesian analysis

Accepted Answer

A) is a horizontal line the same as in the Keynesian model. 
B) is a vertical line the same as in the classical model. 
C) is an upward sloping curve. 
D) is a negatively sloped curve. 
A) is a horizontal line the same as in the Keynesian model. 
B) is a vertical line the same as in the classical model. 
C) is an upward sloping curve. 
D) is a negatively sloped curve.

Question 10

Inflation caused by continually decreasing short-run aggregate supply is

Accepted Answer

A) cost-pull inflation. 
B) cost-push inflation. 
C) demand-pull inflation. 
D) demand-push inflation. 
A) cost-pull inflation. 
B) cost-push inflation. 
C) demand-pull inflation. 
D) demand-push inflation.

Question 11

The approach to understanding the determination of real GDP and the price level that emphasizes flexible wages and prices and competitive markets is

Accepted Answer

A) the classical model. 
B) the Keynesian model. 
C) Adam Smith's Law. 
D) the aggregate demand model. 
A) the classical model. 
B) the Keynesian model. 
C) Adam Smith's Law. 
D) the aggregate demand model.

Question 12

According to the classical model, more saving leads to more investment because

Accepted Answer

A) the people who save are the same people who invest. 
B) the interest rate adjusts to keep investment equal to saving. 
C) saving and investment are two sides of the same activity. 
D) the interest rate is set by the federal government. 
A) the people who save are the same people who invest. 
B) the interest rate adjusts to keep investment equal to saving. 
C) saving and investment are two sides of the same activity. 
D) the interest rate is set by the federal government.

Question 13

The gap that exists when equilibrium real Gross Domestic Product (GDP)is greater than full employment real Gross Domestic Product (GDP)is called a(n)

Accepted Answer

A) employment gap. 
B) inflationary gap. 
C) recessionary gap. 
D) demand gap. 
A) employment gap. 
B) inflationary gap. 
C) recessionary gap. 
D) demand gap.

Question 14

If the price level kept increasing, the short-run aggregate supply (SRAS)curve would get steeper because

Accepted Answer

A) all the unemployed would eventually be hired. 
B) there are limits to how long workers can work long hours and capital can go without proper maintenance. 
C) the rate at which capacity can be expanded increases indefinitely. 
D) the long-run aggregate supply curve is horizontal. 
A) all the unemployed would eventually be hired. 
B) there are limits to how long workers can work long hours and capital can go without proper maintenance. 
C) the rate at which capacity can be expanded increases indefinitely. 
D) the long-run aggregate supply curve is horizontal.

Question 15

Which of the following statements is TRUE about the long-run and short-run aggregate supply curve in the classical model?

Accepted Answer

A) The long-run aggregate supply curve is vertical, and the short-run curve is horizontal. 
B) The long-run aggregate supply curve is not defined, and the short run curve is vertical. 
C) The long-run and short-run curves start out horizontal and eventually become vertical. 
D) The long-run curve is vertical, and there is no short-run curve since all adjustments occur quickly. 
A) The long-run aggregate supply curve is vertical, and the short-run curve is horizontal. 
B) The long-run aggregate supply curve is not defined, and the short run curve is vertical. 
C) The long-run and short-run curves start out horizontal and eventually become vertical. 
D) The long-run curve is vertical, and there is no short-run curve since all adjustments occur quickly.

Question 16

If equilibrium level of real Gross Domestic Product (GDP)is less than the full-employment real Gross Domestic Product (GDP)consistent with the position of the economy's long-run aggregate supply (LRAS)curve, then the difference between full-employment real Gross Domestic Product (GDP)and current equilibrium real Gross Domestic Product (GDP)is

Accepted Answer

A) an aggregate demand shock. 
B) an aggregate supply shock. 
C) a recessionary gap. 
D) an inflationary gap. 
A) an aggregate demand shock. 
B) an aggregate supply shock. 
C) a recessionary gap. 
D) an inflationary gap.

Question 17

The short-run aggregate supply curve in modern Keynesian analysis represents the relationship between

Accepted Answer

A) the real output of goods and services in the economy and the price level. 
B) the real output of goods and services in the economy and the price level when people have fully adjusted their behavior. 
C) the real output of goods and services in the economy and the price level when people have not fully adjusted their behavior. 
D) the nominal output of goods and services and the real output of goods and services. 
A) the real output of goods and services in the economy and the price level. 
B) the real output of goods and services in the economy and the price level when people have fully adjusted their behavior. 
C) the real output of goods and services in the economy and the price level when people have not fully adjusted their behavior. 
D) the nominal output of goods and services and the real output of goods and services.

Question 18

Which of the following is NOT an assumption of the classical model?

Accepted Answer

A) Wages and prices are flexible. 
B) Investment will lead to money illusion. 
C) People are motivated by self-interest. 
D) Pure competition exists. 
A) Wages and prices are flexible. 
B) Investment will lead to money illusion. 
C) People are motivated by self-interest. 
D) Pure competition exists.

Question 19

In economics, investment is defined as

Accepted Answer

A) the spending by businesses on capital goods and inventories. 
B) the spending by households on human capital and durable goods. 
C) disposable income minus consumption. 
D) disposable income plus consumption. 
A) the spending by businesses on capital goods and inventories. 
B) the spending by households on human capital and durable goods. 
C) disposable income minus consumption. 
D) disposable income plus consumption.

Question 20

In the Keynesian model which includes the Keynesian short-run aggregate supply curve

Accepted Answer

A) an increase in aggregate demand would causes the price level to rise, but does not change the level of real GDP. 
B) an increase in aggregate demand causes real GDP to rise without changing the price level. 
C) an increase in aggregate demand changes neither the price level nor the level of real GDP. 
D) an increase in aggregate demand causes real GDP and the price level to decrease. 
A) an increase in aggregate demand would causes the price level to rise, but does not change the level of real GDP. 
B) an increase in aggregate demand causes real GDP to rise without changing the price level. 
C) an increase in aggregate demand changes neither the price level nor the level of real GDP. 
D) an increase in aggregate demand causes real GDP and the price level to decrease.

The relationship between the price level and the real Gross Domestic Product (GDP)without full adjustment or full information is represented by

An appreciation of the U.S. dollar the price of U.S. imports, and the price of U.S. exports.

Which of the following statements is correct? I. If other factors are held constant, the level of employment in the economy determines real Gross Domestic Product (GDP). II. According to classical economists, only voluntary unemployment exists in the long run.

Leakages in the circular flow model are

According to the classical theory, an inward shift in aggregate demand would reduce

The inflation associated with the oil price shocks in the 1970s after OPEC restricted the supply of oil is an example of

"In the classical model, the equilibrium level of real Gross Domestic Product (GDP)is completely supply-determined." Do you agree or disagree? Why?

Given the assumptions of the classical model

The short-run aggregate supply curve in modern Keynesian analysis

Inflation caused by continually decreasing short-run aggregate supply is

The approach to understanding the determination of real GDP and the price level that emphasizes flexible wages and prices and competitive markets is

According to the classical model, more saving leads to more investment because

The gap that exists when equilibrium real Gross Domestic Product (GDP)is greater than full employment real Gross Domestic Product (GDP)is called a(n)

If the price level kept increasing, the short-run aggregate supply (SRAS)curve would get steeper because

Which of the following statements is TRUE about the long-run and short-run aggregate supply curve in the classical model?

The short-run aggregate supply curve in modern Keynesian analysis represents the relationship between

Which of the following is NOT an assumption of the classical model?

In economics, investment is defined as

In the Keynesian model which includes the Keynesian short-run aggregate supply curve

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 relationship between the price level and the real Gross Domestic Product (GDP)without full adjustment or full information is represented by

An appreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

Which of the following statements is correct? I. If other factors are held constant, the level of employment in the economy determines real Gross Domestic Product (GDP). II. According to classical economists, only voluntary unemployment exists in the long run.

Leakages in the circular flow model are

According to the classical theory, an inward shift in aggregate demand would reduce

The inflation associated with the oil price shocks in the 1970s after OPEC restricted the supply of oil is an example of

"In the classical model, the equilibrium level of real Gross Domestic Product (GDP)is completely supply-determined." Do you agree or disagree? Why?

Given the assumptions of the classical model

The short-run aggregate supply curve in modern Keynesian analysis

Inflation caused by continually decreasing short-run aggregate supply is

The approach to understanding the determination of real GDP and the price level that emphasizes flexible wages and prices and competitive markets is

According to the classical model, more saving leads to more investment because

The gap that exists when equilibrium real Gross Domestic Product (GDP)is greater than full employment real Gross Domestic Product (GDP)is called a(n)

If the price level kept increasing, the short-run aggregate supply (SRAS)curve would get steeper because

Which of the following statements is TRUE about the long-run and short-run aggregate supply curve in the classical model?

The short-run aggregate supply curve in modern Keynesian analysis represents the relationship between

Which of the following is NOT an assumption of the classical model?

In economics, investment is defined as

In the Keynesian model which includes the Keynesian short-run aggregate supply curve

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

An appreciation of the U.S. dollar the price of U.S. imports, and the price of U.S. exports.