Exam 11: Classical and Keynesian Macro Analyses

Saving is a leakage from the circular flow. Why didn't the classical economists think saving might cause consumption expenditures to fall short of total output?

The concept that producing goods and services generates the means and the willingness to purchase other goods and services is

Leakages in the circular flow model are

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

Some economists believe that a positive aggregate demand shock to an economy with large amounts of excess capacity and unemployment does not necessarily cause an increase in prices. Economists who adhere to this belief are followers of

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

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 would increase aggregate supply?

A stronger dollar leads to cheaper input prices for U.S. firms because

The horizontal short-run aggregate supply curve

Suppose that last year $1 U.S. exchanged for 1.35 euros. If this year $1 exchanges for 1.25 euros, then we can conclude that

If the full-employment level of real GDP is greater than the equilibrium level of real GDP, the nation would be experiencing a(n)

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

In the classical model, what happens to the level of real GDP if aggregate demand increases?

According to Keynes,

What is true when the credit market is in equilibrium?

Suppose the economy in the diagram below is in long-run equilibrium. If government spending decreases and causes a movement from point A to point B in the diagram below, what are the short-run effects? Explain fully.

-Which point or points on the above figure illustrate a short-run equilibrium?

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

According to Keynes, wages are inflexible because