Question 1

All of the following will shift the short-run aggregate supply (SRAS)curve EXCEPT

Accepted Answer

A) a change in the price level. 
B) a change in the price of labor. 
C) a change in the price of a needed raw material. 
D) technological progress. 
A) a change in the price level. 
B) a change in the price of labor. 
C) a change in the price of a needed raw material. 
D) technological progress.

Question 2

Keynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP)to be "too low," then an appropriate policy action would be to

Accepted Answer

A) do nothing, because the economy is self-adjusting. 
B) raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP)with little or no inflationary consequences. 
C) increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP)with little or no inflationary consequences. 
D) reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures. 
A) do nothing, because the economy is self-adjusting. 
B) raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP)with little or no inflationary consequences. 
C) increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP)with little or no inflationary consequences. 
D) reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures.

Question 3

Natural disasters like severe earthquakes are devastating to the economy as well as to the individuals harmed due to

Accepted Answer

A) supply shocks. 
B) demand shocks. 
C) demand-pull inflation. 
D) demand-pull deflation. 
A) supply shocks. 
B) demand shocks. 
C) demand-pull inflation. 
D) demand-pull deflation.

Question 4

The Keynesian short-run aggregate supply curve is horizontal because

Accepted Answer

A) it represents the full employment level of real GDP. 
B) it reflects the absence of money illusion. 
C) it reflects wage and price inflexibility. 
D) it represents Say's law. 
A) it represents the full employment level of real GDP. 
B) it reflects the absence of money illusion. 
C) it reflects wage and price inflexibility. 
D) it represents Say's law.

Question 5

In the classical model, the aggregate supply curve is

Accepted Answer

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

Question 6

The exchange rate last month was $1= 3.2 Swiss francs. This month it is $1 = 3.12 Swiss francs. We can say that the value of the dollar

Accepted Answer

A) fell, causing net exports to increase and aggregate demand to rise. 
B) fell, causing net exports to decrease and aggregate demand to fall. 
C) increased, causing net exports to decrease and aggregate demand to fall. 
D) increased, causing net exports to decrease and aggregate demand to rise. 
A) fell, causing net exports to increase and aggregate demand to rise. 
B) fell, causing net exports to decrease and aggregate demand to fall. 
C) increased, causing net exports to decrease and aggregate demand to fall. 
D) increased, causing net exports to decrease and aggregate demand to rise.

Question 7

-Refer to the above figure. Suppose the economy had been at point A and now is at B. What could have caused the movement to B?

Accepted Answer

A) Unusually good weather causes the wheat crop to be larger than normal. 
B) Government spending increased causing aggregate demand to increase. 
C) Winter storms cause factories in the north to be shut down for several weeks. 
D) Both the labor force and the population increased. 
A) Unusually good weather causes the wheat crop to be larger than normal. 
B) Government spending increased causing aggregate demand to increase. 
C) Winter storms cause factories in the north to be shut down for several weeks. 
D) Both the labor force and the population increased.

Question 8

-Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have caused the move to the current equilibrium?

Accepted Answer

A) Decreases in the price level caused short-run aggregate supply to fall. 
B) Input prices must have increased, causing long-run aggregate supply to increase. 
C) Aggregate demand must have decreased. 
D) A temporary reduction in production due to bad weather. 
A) Decreases in the price level caused short-run aggregate supply to fall. 
B) Input prices must have increased, causing long-run aggregate supply to increase. 
C) Aggregate demand must have decreased. 
D) A temporary reduction in production due to bad weather.

Question 9

In the classical view, if desired saving exceeds desired investment

Accepted Answer

A) government spending must fall. 
B) government spending must rise. 
C) the interest rate would decline. 
D) the interest rate would increase. 
A) government spending must fall. 
B) government spending must rise. 
C) the interest rate would decline. 
D) the interest rate would increase.

Question 10

As real GDP per year increases along the short-run aggregate supply (SRAS)curve, the SRAS curve

Accepted Answer

A) becomes increasingly steep. 
B) begins to level out. 
C) shifts inward. 
D) does not change. 
A) becomes increasingly steep. 
B) begins to level out. 
C) shifts inward. 
D) does not change.

Question 11

The Keynesian short-run aggregate supply curve

Accepted Answer

A) is horizontal. 
B) is vertical. 
C) reflects the fact that real GDP is supply-determined. 
D) reflects the fact that real GDP does not vary with changes in aggregate demand. 
A) is horizontal. 
B) is vertical. 
C) reflects the fact that real GDP is supply-determined. 
D) reflects the fact that real GDP does not vary with changes in aggregate demand.

Question 12

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

Accepted Answer

A) Government intervention is necessary for economic stability. 
B) No one buyer or seller of a good or service can affect the price of the good or service. 
C) People are motivated by self-interest. 
D) People are not fooled by the money illusion. 
A) Government intervention is necessary for economic stability. 
B) No one buyer or seller of a good or service can affect the price of the good or service. 
C) People are motivated by self-interest. 
D) People are not fooled by the money illusion.

Question 13

-Refer to the above figure. If the aggregate demand curve shifts beyond AD₅, then the economy will experience

Accepted Answer

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

Question 14

According to the classical economists, actual real GDP

Accepted Answer

A) always equals actual aggregate income. 
B) sometimes equals actual aggregate income. 
C) never equals actual aggregate income. 
D) is not related to aggregate income. 
A) always equals actual aggregate income. 
B) sometimes equals actual aggregate income. 
C) never equals actual aggregate income. 
D) is not related to aggregate income.

Question 15

Using a graph, show the effects of a weaker dollar on the economy. Explain.

Accepted Answer

The original equilibrium is where AD₁ in

Question 16

The Keynesian short-run aggregate supply curve is demonstrated graphically as a

Accepted Answer

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

Question 17

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

Accepted Answer

A) Pure competition exists. 
B) Wages and prices are flexible. 
C) Government spending is necessary to achieve economic stability. 
D) People are motivated by self-interest. 
A) Pure competition exists. 
B) Wages and prices are flexible. 
C) Government spending is necessary to achieve economic stability. 
D) People are motivated by self-interest.

Question 18

Equilibrium real GDP rises after the dollar strengthened. From this, we can conclude that

Accepted Answer

A) the increase in aggregate demand was greater than the decrease in aggregate supply. 
B) the decrease in aggregate demand was less than the increase in aggregate supply. 
C) the decrease in aggregate demand was more than the increase in aggregate supply. 
D) the increase in aggregate demand was less than the decrease in aggregate supply. 
A) the increase in aggregate demand was greater than the decrease in aggregate supply. 
B) the decrease in aggregate demand was less than the increase in aggregate supply. 
C) the decrease in aggregate demand was more than the increase in aggregate supply. 
D) the increase in aggregate demand was less than the decrease in aggregate supply.

Question 19

Inflation that is caused by an increase in aggregate demand without any change in aggregate supply is called

Accepted Answer

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

Question 20

According to Keynesian economics, if there are unutilized resources in the economy and aggregate demand decreases

Accepted Answer

A) real GDP will rise and price level will remain constant. 
B) real GDP will fall and price level will remain constant. 
C) real GDP will rise and price level will rise. 
D) real GDP will rise and price level will fall. 
A) real GDP will rise and price level will remain constant. 
B) real GDP will fall and price level will remain constant. 
C) real GDP will rise and price level will rise. 
D) real GDP will rise and price level will fall.

All of the following will shift the short-run aggregate supply (SRAS)curve EXCEPT

Keynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP)to be "too low," then an appropriate policy action would be to

Natural disasters like severe earthquakes are devastating to the economy as well as to the individuals harmed due to

The Keynesian short-run aggregate supply curve is horizontal because

In the classical model, the aggregate supply curve is

The exchange rate last month was $1= 3.2 Swiss francs. This month it is $1 = 3.12 Swiss francs. We can say that the value of the dollar

-Refer to the above figure. Suppose the economy had been at point A and now is at B. What could have caused the movement to B?

-Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have caused the move to the current equilibrium?

In the classical view, if desired saving exceeds desired investment

As real GDP per year increases along the short-run aggregate supply (SRAS)curve, the SRAS curve

The Keynesian short-run aggregate supply curve

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

-Refer to the above figure. If the aggregate demand curve shifts beyond AD₅, then the economy will experience

According to the classical economists, actual real GDP

Using a graph, show the effects of a weaker dollar on the economy. Explain.

The Keynesian short-run aggregate supply curve is demonstrated graphically as a

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

Equilibrium real GDP rises after the dollar strengthened. From this, we can conclude that

Inflation that is caused by an increase in aggregate demand without any change in aggregate supply is called

According to Keynesian economics, if there are unutilized resources in the economy and aggregate demand decreases

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

All of the following will shift the short-run aggregate supply (SRAS)curve EXCEPT

Keynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP)to be "too low," then an appropriate policy action would be to

Natural disasters like severe earthquakes are devastating to the economy as well as to the individuals harmed due to

The Keynesian short-run aggregate supply curve is horizontal because

In the classical model, the aggregate supply curve is

The exchange rate last month was $1= 3.2 Swiss francs. This month it is $1 = 3.12 Swiss francs. We can say that the value of the dollar

-Refer to the above figure. Suppose the economy had been at point A and now is at B. What could have caused the movement to B?

-Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have caused the move to the current equilibrium?

In the classical view, if desired saving exceeds desired investment

As real GDP per year increases along the short-run aggregate supply (SRAS)curve, the SRAS curve

The Keynesian short-run aggregate supply curve

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

-Refer to the above figure. If the aggregate demand curve shifts beyond AD₅, then the economy will experience

According to the classical economists, actual real GDP

Using a graph, show the effects of a weaker dollar on the economy. Explain.

The Keynesian short-run aggregate supply curve is demonstrated graphically as a

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

Equilibrium real GDP rises after the dollar strengthened. From this, we can conclude that

Inflation that is caused by an increase in aggregate demand without any change in aggregate supply is called

According to Keynesian economics, if there are unutilized resources in the economy and aggregate demand decreases

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