Question 1

The market clearing assumption is

Accepted Answer

A)  a central assumption of the short-run macro model 
B)  the idea that prices in every market will adjust until quantity supplied and quantity demanded are equal 
C)  the idea that excess supply always leads to an increase in demand 
D)  the idea that markets only work when they are in equilibrium 
E)  believed by most economists today to be an unreasonable assumption 
A)  a central assumption of the short-run macro model 
B)  the idea that prices in every market will adjust until quantity supplied and quantity demanded are equal 
C)  the idea that excess supply always leads to an increase in demand 
D)  the idea that markets only work when they are in equilibrium 
E)  believed by most economists today to be an unreasonable assumption

Question 2

The classical model

Accepted Answer

A)  relies on the equivalency of the labor,capital,and land resource markets 
B)  includes a land market and a labor market 
C)  focuses primarily on capital markets 
D)  focuses primarily on labor markets 
E)  focuses on labor,capital,and land markets 
A)  relies on the equivalency of the labor,capital,and land resource markets 
B)  includes a land market and a labor market 
C)  focuses primarily on capital markets 
D)  focuses primarily on labor markets 
E)  focuses on labor,capital,and land markets

Question 3

Which of the following are examples of leakages?

Accepted Answer

A)  government purchases,net taxes and imports 
B)  government purchases,exports and investment spending 
C)  net taxes,household saving and imports 
D)  net taxes,investment spending and exports 
E)  net exports,investment spending and net taxes 
A)  government purchases,net taxes and imports 
B)  government purchases,exports and investment spending 
C)  net taxes,household saving and imports 
D)  net taxes,investment spending and exports 
E)  net exports,investment spending and net taxes

Question 4

The labor demand curve slopes downward because

Accepted Answer

A)  firms wish to hire fewer workers as the wage rate increases 
B)  households wish to hire fewer workers as the wage rate decreases 
C)  firms wish to hire more workers as the wage rate increases 
D)  firms wish to supply fewer workers as the wage rate increases 
E)  households wish to provide fewer hours of work as the wage rate decreases 
A)  firms wish to hire fewer workers as the wage rate increases 
B)  households wish to hire fewer workers as the wage rate decreases 
C)  firms wish to hire more workers as the wage rate increases 
D)  firms wish to supply fewer workers as the wage rate increases 
E)  households wish to provide fewer hours of work as the wage rate decreases

Question 5

Assuming the economy was in equilibrium,use the following information to determine the amount of funds demanded by the government in the loanable funds market.

Accepted Answer

A)  $0.3 trillion 
B)  $2.2 trillion 
C)  $2.5 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion 
A)  $0.3 trillion 
B)  $2.2 trillion 
C)  $2.5 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion

Question 6

In the classical model,taxes and spending are treated as two separate variables.

Accepted Answer

A) True 
 B)False

Question 7

In the classical model,if government tries to increase employment and output by increasing its own purchases,

Accepted Answer

A)  it will achieve its goal and economic conditions will improve 
B)  it will not attain its objective unless it also decreases taxes 
C)  its actions will cause the interest rate to rise,which will choke off investment spending 
D)  firms will be motivated to increase their output,thereby creating even more jobs 
E)  saving will also increase,as more people are employed 
A)  it will achieve its goal and economic conditions will improve 
B)  it will not attain its objective unless it also decreases taxes 
C)  its actions will cause the interest rate to rise,which will choke off investment spending 
D)  firms will be motivated to increase their output,thereby creating even more jobs 
E)  saving will also increase,as more people are employed

Question 8

Say's law assures us that in the classical model,total spending is always enough to purchase the economy's total output.

Accepted Answer

A) True 
 B)False

Question 9

Factor payments are

Accepted Answer

A)  amounts paid to resource owners for the use of their resource 
B)  amounts paid for goods 
C)  another term for revenues 
D)  the amount households put into savings 
E)  payments made to workers who are employed only part time 
A)  amounts paid to resource owners for the use of their resource 
B)  amounts paid for goods 
C)  another term for revenues 
D)  the amount households put into savings 
E)  payments made to workers who are employed only part time

Question 10

According to the classical model,if there are too many elementary school teachers in the labor market,

Accepted Answer

A)  the government should institute a retraining program to give the unemployed teachers new job skills 
B)  the wages for elementary teachers will fall,eventually causing the number of excess teachers to shrink 
C)  the wage for elementary teachers will increase for those who are employed,but unemployment of teachers will remain high 
D)  this situation provides an example of cyclical unemployment,which often occurs in the long run 
E)  people will quit training to become elementary school teachers and soon there will be a shortage in this labor market 
A)  the government should institute a retraining program to give the unemployed teachers new job skills 
B)  the wages for elementary teachers will fall,eventually causing the number of excess teachers to shrink 
C)  the wage for elementary teachers will increase for those who are employed,but unemployment of teachers will remain high 
D)  this situation provides an example of cyclical unemployment,which often occurs in the long run 
E)  people will quit training to become elementary school teachers and soon there will be a shortage in this labor market

Question 11

If the government increases its spending or reduces its taxes in order to influence the level of economic activity,it is engaging in

Accepted Answer

A)  regulatory policy 
B)  antitrust policy 
C)  monetary policy 
D)  fiscal policy 
E)  supply-management policy 
A)  regulatory policy 
B)  antitrust policy 
C)  monetary policy 
D)  fiscal policy 
E)  supply-management policy

Question 12

The demand for loanable funds curve is downward sloping because

Accepted Answer

A)  as the interest rate falls business firms demand fewer loanable funds 
B)  as the interest rate falls business firms demand more loanable funds 
C)  as the interest rate rises business firms demand more loanable funds 
D)  as the interest rate rises,the government demands more loanable funds 
E)  as the interest rate rises,the government demands fewer loanable funds 
A)  as the interest rate falls business firms demand fewer loanable funds 
B)  as the interest rate falls business firms demand more loanable funds 
C)  as the interest rate rises business firms demand more loanable funds 
D)  as the interest rate rises,the government demands more loanable funds 
E)  as the interest rate rises,the government demands fewer loanable funds

Question 13

Because markets may not clear for several months or even several years,the classical model

Accepted Answer

A)  is no longer considered valuable by mainstream economists 
B)  has no value when explaining a situation where excess supply exists 
C)  is irrelevant to any discussion of a market in which excess demand exists 
D)  does a better job of explaining short-term fluctuations than long-run growth 
E)  does a better job of explaining long-run growth than short-run fluctuations 
A)  is no longer considered valuable by mainstream economists 
B)  has no value when explaining a situation where excess supply exists 
C)  is irrelevant to any discussion of a market in which excess demand exists 
D)  does a better job of explaining short-term fluctuations than long-run growth 
E)  does a better job of explaining long-run growth than short-run fluctuations

Question 14

The terms "long-run view" and "classical view" can be used interchangeably.

Accepted Answer

A) True 
 B)False

Question 15

As long as the loanable funds market clears,Say's law holds..

Accepted Answer

A) True 
 B)False

Question 16

The aggregate production function is the relationship between the

Accepted Answer

A)  total cost of labor and the quantity of output in the economy 
B)  total cost of labor and the total real cost of inputs 
C)  quantity of labor employed in the economy and the total quantity of output produced 
D)  cost of labor and the supply of labor 
E)  quantity of labor and the quantity of capital 
A)  total cost of labor and the quantity of output in the economy 
B)  total cost of labor and the total real cost of inputs 
C)  quantity of labor employed in the economy and the total quantity of output produced 
D)  cost of labor and the supply of labor 
E)  quantity of labor and the quantity of capital

Question 17

The labor supply curve shows

Accepted Answer

A)  how much output a firm will supply with a given amount of labor 
B)  how much labor a firm will want to hire at each wage rate 
C)  how much output people will want to buy if they supply a given amount of labor 
D)  how much labor a firm will need with a given amount of machinery and equipment 
E)  how many people will want jobs at each wage rate 
A)  how much output a firm will supply with a given amount of labor 
B)  how much labor a firm will want to hire at each wage rate 
C)  how much output people will want to buy if they supply a given amount of labor 
D)  how much labor a firm will need with a given amount of machinery and equipment 
E)  how many people will want jobs at each wage rate

Question 18

If the interest rate rises,the

Accepted Answer

A)  quantity of loanable funds demanded by firms decreases 
B)  quantity of loanable funds demanded by government decreases 
C)  quantity of loanable funds demanded by firms increases 
D)  quantity of loanable funds demanded by government increases 
E)  demand for loanable funds curve shifts to the right 
A)  quantity of loanable funds demanded by firms decreases 
B)  quantity of loanable funds demanded by government decreases 
C)  quantity of loanable funds demanded by firms increases 
D)  quantity of loanable funds demanded by government increases 
E)  demand for loanable funds curve shifts to the right

Question 19

John Maynard Keynes was the author of

Accepted Answer

A)  An Economic History of the Great Depression. 
B)  The General Theory of Employment,Interest,and Money. 
C)  The Wealth of Nations. 
D)  The Principles of Political Economy and Taxation. 
E)  Macroeconomic Policy. 
A)  An Economic History of the Great Depression. 
B)  The General Theory of Employment,Interest,and Money. 
C)  The Wealth of Nations. 
D)  The Principles of Political Economy and Taxation. 
E)  Macroeconomic Policy.

Question 20

In the classical model,fiscal policy is both ineffective and unnecessary.

Accepted Answer

A) True 
 B)False

Exam 20: The Classical Long-Run Model

The market clearing assumption is

The classical model

Which of the following are examples of leakages?

The labor demand curve slopes downward because

Assuming the economy was in equilibrium,use the following information to determine the amount of funds demanded by the government in the loanable funds market.

In the classical model,taxes and spending are treated as two separate variables.

In the classical model,if government tries to increase employment and output by increasing its own purchases,

Say's law assures us that in the classical model,total spending is always enough to purchase the economy's total output.

Factor payments are

According to the classical model,if there are too many elementary school teachers in the labor market,

If the government increases its spending or reduces its taxes in order to influence the level of economic activity,it is engaging in

The demand for loanable funds curve is downward sloping because

Because markets may not clear for several months or even several years,the classical model

The terms "long-run view" and "classical view" can be used interchangeably.

As long as the loanable funds market clears,Say's law holds..

The aggregate production function is the relationship between the

The labor supply curve shows

If the interest rate rises,the

John Maynard Keynes was the author of

In the classical model,fiscal policy is both ineffective and unnecessary.

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Price Level and Inflation

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-Run Macro Model

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

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