Question 1

According to the classical model

Accepted Answer

A) long-term unemployment is unavoidable. 
B) unemployment is a temporary phenomenon. 
C) unemployment only exists during periods of war. 
D) the natural rate of unemployment is zero. 
A) long-term unemployment is unavoidable. 
B) unemployment is a temporary phenomenon. 
C) unemployment only exists during periods of war. 
D) the natural rate of unemployment is zero.

Question 2

A change in tastes for U.S. produced goods will

Accepted Answer

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

Question 3

Keynesian economists argue that

Accepted Answer

A) the natural rate of unemployment is below the actual rate. 
B) unemployment is a long-lasting phenomenon in the economy. 
C) unemployment only exists during periods of war in the economy. 
D) the natural rate of unemployment is zero. 
A) the natural rate of unemployment is below the actual rate. 
B) unemployment is a long-lasting phenomenon in the economy. 
C) unemployment only exists during periods of war in the economy. 
D) the natural rate of unemployment is zero.

Question 4

The classical economists argued that planned saving and planned investment will always be equal because of changes in

Accepted Answer

A) the level of real disposable income. 
B) the interest rate. 
C) the price level. 
D) wages. 
A) the level of real disposable income. 
B) the interest rate. 
C) the price level. 
D) wages.

Question 5

What effect does a stronger dollar have on aggregate supply?
 Why?

Accepted Answer

A stronger dollar means that U.S. reside

Question 6

Suppose the U.S. dollar weakens against the euro (and against other major currencies). We know with certainty that this weakening of the dollar will cause which of the following to occur?

Accepted Answer

A) a recessionary gap 
B) an inflationary gap 
C) a deflationary gap 
D) none of the above 
A) a recessionary gap 
B) an inflationary gap 
C) a deflationary gap 
D) none of the above

Question 7

If the U.S. government were to relax its restrictions on offshore oil well drilling and open drilling in Alaskan national parks, the result to aggregate supply would be to

Accepted Answer

A) cause a shift in the SRAS to the left. 
B) cause a shift in the LRAS to the left. 
C) cause no long-term shifts in AS. 
D) cause a shift in both LRAS and SRAS to the right. 
A) cause a shift in the SRAS to the left. 
B) cause a shift in the LRAS to the left. 
C) cause no long-term shifts in AS. 
D) cause a shift in both LRAS and SRAS to the right.

Question 8

What is Say's law and what does it mean?

Accepted Answer

Say's law is: Supply creates its own dem

Question 9

After a small hurricane in Florida, unemployment is low as there is a great deal of construction work and businesses run at full capacity. This suggests that

Accepted Answer

A) the economy is operating above the full-employment level and will eventually adjust back to long-run aggregate supply. 
B) living standards are falling as employment and economic activity are too high. 
C) the economy is operating below its long-run level and living standards are less than they would have been without the hurricane. 
D) the hurricane is beneficial since it is increasing employment and replacing less efficient capital with newer and more efficient capital. 
A) the economy is operating above the full-employment level and will eventually adjust back to long-run aggregate supply. 
B) living standards are falling as employment and economic activity are too high. 
C) the economy is operating below its long-run level and living standards are less than they would have been without the hurricane. 
D) the hurricane is beneficial since it is increasing employment and replacing less efficient capital with newer and more efficient capital.

Question 10

Which of the following statements is NOT true about Say's law?

Accepted Answer

A) Desired expenditures will equal actual expenditures. 
B) Surpluses will be eliminated by falling prices and shortages will be eliminated by increasing prices. 
C) People produce more goods than they want for their own use only if they seek to trade them for other goods. 
D) Markets would be regularly hit by severe shortages and surpluses. 
A) Desired expenditures will equal actual expenditures. 
B) Surpluses will be eliminated by falling prices and shortages will be eliminated by increasing prices. 
C) People produce more goods than they want for their own use only if they seek to trade them for other goods. 
D) Markets would be regularly hit by severe shortages and surpluses.

Question 11

A recessionary gap occurs when

Accepted Answer

A) aggregate demand falls, but other things remain constant. 
B) short-run aggregate supply falls, but other things remain constant. 
C) the short-run equilibrium level of real GDP is greater than the level consistent with the long-run aggregate supply curve. 
D) the short-run equilibrium level of real GDP is less than the level consistent with the long-run aggregate supply curve. 
A) aggregate demand falls, but other things remain constant. 
B) short-run aggregate supply falls, but other things remain constant. 
C) the short-run equilibrium level of real GDP is greater than the level consistent with the long-run aggregate supply curve. 
D) the short-run equilibrium level of real GDP is less than the level consistent with the long-run aggregate supply curve.

Question 12

Keynesian economists argue that

Accepted Answer

A) prices and wages are flexible. 
B) prices and wages must be set by government. 
C) prices and wages are subject to downward "stickiness." 
D) prices and wages depend on the decisions by the Federal Reserve Bank. 
A) prices and wages are flexible. 
B) prices and wages must be set by government. 
C) prices and wages are subject to downward "stickiness." 
D) prices and wages depend on the decisions by the Federal Reserve Bank.

Question 13

Suppose the U.S. dollar weakens against the euro (and against other major currencies). This weakening of the dollar will cause which of the following to occur?

Accepted Answer

A) The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the right. 
B) The aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the right. 
C) The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the left. 
D) The aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the left. 
A) The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the right. 
B) The aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the right. 
C) The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the left. 
D) The aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the left.

Question 14

If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS)curve must be

Accepted Answer

A) vertical. 
B) upward sloping. 
C) horizontal. 
D) downward sloping. 
A) vertical. 
B) upward sloping. 
C) horizontal. 
D) downward sloping.

Question 15

Which of the following can cause inflation?

Accepted Answer

A) increases in short-run aggregate supply 
B) increases in long-run aggregate supply 
C) decreases in short-run aggregate supply 
D) decreases in aggregate demand 
A) increases in short-run aggregate supply 
B) increases in long-run aggregate supply 
C) decreases in short-run aggregate supply 
D) decreases in aggregate demand

Question 16

The Keynesian contention that the short-run aggregate supply curve is horizontal is based on the assumption that there are

Accepted Answer

A) sticky prices. 
B) flexible prices. 
C) real prices. 
D) upward sloping prices. 
A) sticky prices. 
B) flexible prices. 
C) real prices. 
D) upward sloping prices.

Question 17

A decrease in aggregate demand will cause

Accepted Answer

A) prices to fall according to classical economists, and unemployment to increase according to Keynes. 
B) prices to fall and unemployment to increase according to both classical economists and Keynes. 
C) aggregate supply to fall according to classical economists, and prices to fall according to Keynes. 
D) aggregate supply to fall according to Keynes, and unemployment to increase according to classical economists. 
A) prices to fall according to classical economists, and unemployment to increase according to Keynes. 
B) prices to fall and unemployment to increase according to both classical economists and Keynes. 
C) aggregate supply to fall according to classical economists, and prices to fall according to Keynes. 
D) aggregate supply to fall according to Keynes, and unemployment to increase according to classical economists.

Question 18

An individual who suffers from money illusion will

Accepted Answer

A) feel that a doubling of prices and income improves his economic position. 
B) concentrate on relative prices. 
C) never be fooled by the impact of price changes on the purchasing power of income. 
D) try to use counterfeit money. 
A) feel that a doubling of prices and income improves his economic position. 
B) concentrate on relative prices. 
C) never be fooled by the impact of price changes on the purchasing power of income. 
D) try to use counterfeit money.

Question 19

The short-run aggregate supply curve would shift and the long-run aggregate supply curve would remain fixed if

Accepted Answer

A) there was a temporary shock to aggregate demand. 
B) there was a temporary shock that influenced the supply side. 
C) there was a permanent increase in aggregate demand along with a permanent decrease in aggregate supply. 
D) there was a permanent increase in aggregate demand. 
A) there was a temporary shock to aggregate demand. 
B) there was a temporary shock that influenced the supply side. 
C) there was a permanent increase in aggregate demand along with a permanent decrease in aggregate supply. 
D) there was a permanent increase in aggregate demand.

Question 20

-In the above figure, if the relevant aggregate demand curve is AD₂, what type of gap exists and how large is it?

Accepted Answer

A) inflationary gap of $500 billion 
B) inflationary gap of $1 trillion 
C) recessionary gap of $1 trillion 
D) recessionary gap of $500 billion 
A) inflationary gap of $500 billion 
B) inflationary gap of $1 trillion 
C) recessionary gap of $1 trillion 
D) recessionary gap of $500 billion

According to the classical model

A change in tastes for U.S. produced goods will

Keynesian economists argue that

The classical economists argued that planned saving and planned investment will always be equal because of changes in

What effect does a stronger dollar have on aggregate supply? Why?

Suppose the U.S. dollar weakens against the euro (and against other major currencies). We know with certainty that this weakening of the dollar will cause which of the following to occur?

If the U.S. government were to relax its restrictions on offshore oil well drilling and open drilling in Alaskan national parks, the result to aggregate supply would be to

What is Say's law and what does it mean?

After a small hurricane in Florida, unemployment is low as there is a great deal of construction work and businesses run at full capacity. This suggests that

Which of the following statements is NOT true about Say's law?

A recessionary gap occurs when

Keynesian economists argue that

Suppose the U.S. dollar weakens against the euro (and against other major currencies). This weakening of the dollar will cause which of the following to occur?

If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS)curve must be

Which of the following can cause inflation?

The Keynesian contention that the short-run aggregate supply curve is horizontal is based on the assumption that there are

A decrease in aggregate demand will cause

An individual who suffers from money illusion will

The short-run aggregate supply curve would shift and the long-run aggregate supply curve would remain fixed if

-In the above figure, if the relevant aggregate demand curve is AD₂, what type of gap exists and how large is it?

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

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Exam 10: Classical and Keynesian Macro Analyses

According to the classical model

A change in tastes for U.S. produced goods will

Keynesian economists argue that

The classical economists argued that planned saving and planned investment will always be equal because of changes in

What effect does a stronger dollar have on aggregate supply? Why?

Suppose the U.S. dollar weakens against the euro (and against other major currencies). We know with certainty that this weakening of the dollar will cause which of the following to occur?

If the U.S. government were to relax its restrictions on offshore oil well drilling and open drilling in Alaskan national parks, the result to aggregate supply would be to

What is Say's law and what does it mean?

After a small hurricane in Florida, unemployment is low as there is a great deal of construction work and businesses run at full capacity. This suggests that

Which of the following statements is NOT true about Say's law?

A recessionary gap occurs when

Keynesian economists argue that

Suppose the U.S. dollar weakens against the euro (and against other major currencies). This weakening of the dollar will cause which of the following to occur?

If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS)curve must be

Which of the following can cause inflation?

The Keynesian contention that the short-run aggregate supply curve is horizontal is based on the assumption that there are

A decrease in aggregate demand will cause

An individual who suffers from money illusion will

The short-run aggregate supply curve would shift and the long-run aggregate supply curve would remain fixed if

-In the above figure, if the relevant aggregate demand curve is AD₂, what type of gap exists and how large is it?

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