Question 1

Assume the economy is currently in equilibrium.Use the following information to calculate the total value of injections   Total injections are

Accepted Answer

A)  $10.7 trillion 
B)  $5.1 trillion 
C)  $5.9 trillion 
D)  $5.7 trillion 
E)  $5.3 trillion 
A)  $10.7 trillion 
B)  $5.1 trillion 
C)  $5.9 trillion 
D)  $5.7 trillion 
E)  $5.3 trillion

Question 2

Diminishing returns to labor occur for two primary reasons: 1)as we keep adding new workers,it becomes increasingly difficult to obtain productivity gains through additional specialization;and 2)each additional worker we add has less land and capital to work with.

Accepted Answer

A) True 
 B)False

Question 3

Suppose there are no firms,only the government and households.What would be the result if for some reason the supply of saving at every interest rate suddenly fell?

Accepted Answer

A)  Interest rates would fall and the level of saving would fall. 
B)  Interest rates would fall and the level of saving would not change. 
C)  Interest rates would rise and the level of saving would not change. 
D)  Interest rates would rise and the level of saving would fall. 
E)  Interest rates would not change and the level of saving would fall. 
A)  Interest rates would fall and the level of saving would fall. 
B)  Interest rates would fall and the level of saving would not change. 
C)  Interest rates would rise and the level of saving would not change. 
D)  Interest rates would rise and the level of saving would fall. 
E)  Interest rates would not change and the level of saving would fall.

Question 4

In the classical model,the government needs to worry about total spending.

Accepted Answer

A) True 
 B)False

Question 5

What major historical event led to the most significant challenge to classical economic thinking?

Accepted Answer

A)  The war on poverty 
B)  The American Revolution 
C)  World War II 
D)  The Great Depression 
E)  The oil shocks of the 1970s 
A)  The war on poverty 
B)  The American Revolution 
C)  World War II 
D)  The Great Depression 
E)  The oil shocks of the 1970s

Question 6

-Refer to Figure 8-4.Based on these graphs,what is the total quantity of loanable funds demanded at an interest rate of 5 percent?

Accepted Answer

A)  $0.8 trillion 
B)  $1.0 trillion 
C)  $1.4 trillion 
D)  $1.8 trillion 
E)  $2.2 trillion 
A)  $0.8 trillion 
B)  $1.0 trillion 
C)  $1.4 trillion 
D)  $1.8 trillion 
E)  $2.2 trillion

Question 7

According to Say's Law,in the aggregate

Accepted Answer

A)  demand creates its own supply 
B)  the production of output will generate exactly enough income to purchase what has been produced 
C)  the economy is incapable of producing output fast enough to ensure full employment 
D)  full employment cannot be sustained without government action 
E)  consumer saving prevents the economy from reaching full employment 
A)  demand creates its own supply 
B)  the production of output will generate exactly enough income to purchase what has been produced 
C)  the economy is incapable of producing output fast enough to ensure full employment 
D)  full employment cannot be sustained without government action 
E)  consumer saving prevents the economy from reaching full employment

Question 8

Which of the following is a leakages from the circular flow?

Accepted Answer

A)  Household saving and government spending 
B)  Business investment and household saving 
C)  Net taxes and household saving 
D)  Government spending and business investment 
E)  Net taxes and government spending 
A)  Household saving and government spending 
B)  Business investment and household saving 
C)  Net taxes and household saving 
D)  Government spending and business investment 
E)  Net taxes and government spending

Question 9

Assuming the economy was in equilibrium,use the following information to calculate the total value of leakages.   Total leakages are

Accepted Answer

A)  $2.5 trillion 
B)  $2.7 trillion 
C)  $3.0 trillion 
D)  $5.2 trillion 
E)  $5.7 trillion 
A)  $2.5 trillion 
B)  $2.7 trillion 
C)  $3.0 trillion 
D)  $5.2 trillion 
E)  $5.7 trillion

Question 10

A key assumption of the classical model is that

Accepted Answer

A)  government intervention is important to get markets to clear 
B)  prices adjust until quantity supplied equals quantity demanded 
C)  markets never clear in the long run 
D)  demand adjusts in order to meet supply 
E)  prices remain constant and supply and demand adjust 
A)  government intervention is important to get markets to clear 
B)  prices adjust until quantity supplied equals quantity demanded 
C)  markets never clear in the long run 
D)  demand adjusts in order to meet supply 
E)  prices remain constant and supply and demand adjust

Question 11

Classical economists believed that production could be stuck below its full employment level for a long period of time.

Accepted Answer

A) True 
 B)False

Question 12

Assume the economy is currently in equilibrium.Use the following information to calculate the total value of leakages   Total injections are

Accepted Answer

A)  $10.7 trillion 
B)  $5.1 trillion 
C)  $5.9 trillion 
D)  $5.7 trillion 
E)  $5.3 trillion 
A)  $10.7 trillion 
B)  $5.1 trillion 
C)  $5.9 trillion 
D)  $5.7 trillion 
E)  $5.3 trillion

Question 13

The labor demand curve slopes

Accepted Answer

A)  upward to illustrate that the more productive the worker,the higher the real wage the employer is willing to pay that worker 
B)  upward to illustrate that the higher the wage rate,the fewer workers are demanded 
C)  upward or downward in direct proportion to the rate of inflation 
D)  downward to illustrate that the lower the real wage,the more workers employers are willing to hire 
E)  downward to illustrate that the availability of workers is directly proportional to the real wage 
A)  upward to illustrate that the more productive the worker,the higher the real wage the employer is willing to pay that worker 
B)  upward to illustrate that the higher the wage rate,the fewer workers are demanded 
C)  upward or downward in direct proportion to the rate of inflation 
D)  downward to illustrate that the lower the real wage,the more workers employers are willing to hire 
E)  downward to illustrate that the availability of workers is directly proportional to the real wage

Question 14

The short-run macro model

Accepted Answer

A)  is an attempt to explain why the economy tends to perform better in the short run than in the long run 
B)  was developed during the Great Depression to explain the economy's continuing poor performance 
C)  lost its popularity during the 1950s 
D)  was developed during the early 19th century 
E)  explains the forces that work to drive the economy to full employment 
A)  is an attempt to explain why the economy tends to perform better in the short run than in the long run 
B)  was developed during the Great Depression to explain the economy's continuing poor performance 
C)  lost its popularity during the 1950s 
D)  was developed during the early 19th century 
E)  explains the forces that work to drive the economy to full employment

Question 15

What is the relationship between the government's budget deficit and its tax revenue?

Accepted Answer

A)  Budget deficit = government spending + tax revenue 
B)  Budget deficit = government spending - tax revenue 
C)  Government spending = budget deficit / tax revenue 
D)  Tax revenue = government spending + budget deficit 
E)  Budget deficit = tax revenue - government spending 
A)  Budget deficit = government spending + tax revenue 
B)  Budget deficit = government spending - tax revenue 
C)  Government spending = budget deficit / tax revenue 
D)  Tax revenue = government spending + budget deficit 
E)  Budget deficit = tax revenue - government spending

Question 16

In the classical long-run model,

Accepted Answer

A)  we focus on labor resources,rather than capital or land 
B)  we study thousands of different resource markets 
C)  we concentrate our attention on three resource markets: land,labor,and capital 
D)  we focus on two markets: households and firms 
E)  the number of variables we include depends upon whether we are focusing on the short run or the long run 
A)  we focus on labor resources,rather than capital or land 
B)  we study thousands of different resource markets 
C)  we concentrate our attention on three resource markets: land,labor,and capital 
D)  we focus on two markets: households and firms 
E)  the number of variables we include depends upon whether we are focusing on the short run or the long run

Question 17

-Refer to Figure 8-1.According to the graph,the equilibrium real hourly wage and quantity of labor employed,respectively,are

Accepted Answer

A)  $10,110 million workers 
B)  $8,130 million workers 
C)  $8,150 million workers 
D)  $6,150 million workers 
E)  $6,130 million workers 
A)  $10,110 million workers 
B)  $8,130 million workers 
C)  $8,150 million workers 
D)  $6,150 million workers 
E)  $6,130 million workers

Question 18

According to classical economics,

Accepted Answer

A)  the economy moves to full employment in the long run 
B)  the economy is always at full employment in the short run 
C)  the economy is rarely at full employment 
D)  business cycles explain long-run fluctuations in the economy 
E)  the economy is at full employment in the short run,but in the long run,business cycle movements lead the economy away from full employment 
A)  the economy moves to full employment in the long run 
B)  the economy is always at full employment in the short run 
C)  the economy is rarely at full employment 
D)  business cycles explain long-run fluctuations in the economy 
E)  the economy is at full employment in the short run,but in the long run,business cycle movements lead the economy away from full employment

Question 19

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,

Accepted Answer

A)  this will lower the wage rate 
B)  the demand for loanable funds will be horizontal 
C)  an increase in government spending will crowd out more than an equal amount of private spending 
D)  an increase in government spending will crowd out an equal amount of private spending 
E)  an increase in government spending will crowd out less than an equal amount of private spending 
A)  this will lower the wage rate 
B)  the demand for loanable funds will be horizontal 
C)  an increase in government spending will crowd out more than an equal amount of private spending 
D)  an increase in government spending will crowd out an equal amount of private spending 
E)  an increase in government spending will crowd out less than an equal amount of private spending

Question 20

Assuming the economy was in equilibrium,use the following information to determine the total amount of funds demanded 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

Exam 20: The Classical Long-Run Model

Assume the economy is currently in equilibrium.Use the following information to calculate the total value of injections Total injections are

Diminishing returns to labor occur for two primary reasons: 1)as we keep adding new workers,it becomes increasingly difficult to obtain productivity gains through additional specialization;and 2)each additional worker we add has less land and capital to work with.

Suppose there are no firms,only the government and households.What would be the result if for some reason the supply of saving at every interest rate suddenly fell?

In the classical model,the government needs to worry about total spending.

What major historical event led to the most significant challenge to classical economic thinking?

-Refer to Figure 8-4.Based on these graphs,what is the total quantity of loanable funds demanded at an interest rate of 5 percent?

According to Say's Law,in the aggregate

Which of the following is a leakages from the circular flow?

Assuming the economy was in equilibrium,use the following information to calculate the total value of leakages. Total leakages are

A key assumption of the classical model is that

Classical economists believed that production could be stuck below its full employment level for a long period of time.

Assume the economy is currently in equilibrium.Use the following information to calculate the total value of leakages Total injections are

The labor demand curve slopes

The short-run macro model

What is the relationship between the government's budget deficit and its tax revenue?

In the classical long-run model,

-Refer to Figure 8-1.According to the graph,the equilibrium real hourly wage and quantity of labor employed,respectively,are

According to classical economics,

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,

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

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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