Question 1

In the classical model,fiscal policy has no demand-side effects on output or employment..

Accepted Answer

A) True 
 B)False

Question 2

In the classical model,markets clear

Accepted Answer

A)  in the short run 
B)  every month 
C)  immediately 
D)  in the long run 
E)  as soon as any shock occurs 
A)  in the short run 
B)  every month 
C)  immediately 
D)  in the long run 
E)  as soon as any shock occurs

Question 3

In the classical model,government purchases or tax cuts are appropriate policies to raise GDP.

Accepted Answer

A) True 
 B)False

Question 4

According to Say's Law,supply creates its own demand.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following groups would be considered suppliers in the labor market?

Accepted Answer

A)  Government agencies 
B)  Firms 
C)  Households 
D)  Stockholders 
E)  Landlords 
A)  Government agencies 
B)  Firms 
C)  Households 
D)  Stockholders 
E)  Landlords

Question 6

In the classical model,

Accepted Answer

A)  markets do not automatically clear. 
B)  business demand for loanable fund exceeds business planned investment spending. 
C)  business demand for loanable fund is equal to business planned investment spending. 
D)  businesses engage in interest-free borrowing. 
E)  the government's demand for funds is downward sloping. 
A)  markets do not automatically clear. 
B)  business demand for loanable fund exceeds business planned investment spending. 
C)  business demand for loanable fund is equal to business planned investment spending. 
D)  businesses engage in interest-free borrowing. 
E)  the government's demand for funds is downward sloping.

Question 7

The relationship between household saving and business investment spending in equilibrium is:
Planned investment = household saving - government spending + taxes

Accepted Answer

A) True 
 B)False

Question 8

What is the full-employment output level?

Accepted Answer

A)  The output level that results when the loanable funds market clears 
B)  The output level that results when the returns to labor are zero 
C)  The output level that results when factories are completely full 
D)  The output level that results when the labor market clears 
E)  The output level that would occur if the output level was positive. 
A)  The output level that results when the loanable funds market clears 
B)  The output level that results when the returns to labor are zero 
C)  The output level that results when factories are completely full 
D)  The output level that results when the labor market clears 
E)  The output level that would occur if the output level was positive.

Question 9

Classical economists believed that the economy would always return to full employment.

Accepted Answer

A) True 
 B)False

Question 10

When represented graphically,the government's demand for funds curve is

Accepted Answer

A)  downward sloping 
B)  upward sloping 
C)  vertical 
D)  initially downward sloping,then upward sloping 
E)  initially rightward sloping,then downward sloping 
A)  downward sloping 
B)  upward sloping 
C)  vertical 
D)  initially downward sloping,then upward sloping 
E)  initially rightward sloping,then downward sloping

Question 11

In the classical model,the loanable funds market will clear when saving

Accepted Answer

A)  equals investment plus government purchases minus net taxes 
B)  equals net taxes 
C)  equals investment 
D)  equals investment plus government purchases 
E)  minus taxes equals investment plus government purchases 
A)  equals investment plus government purchases minus net taxes 
B)  equals net taxes 
C)  equals investment 
D)  equals investment plus government purchases 
E)  minus taxes equals investment plus government purchases

Question 12

When the government is running a budget surplus,

Accepted Answer

A)  the demand for loanable funds includes only business investment spending 
B)  the supply of loanable funds includes only business investment spending 
C)  the loanable funds market cannot be in equilibrium 
D)  the supply of loanable funds includes only household saving 
E)  there will be an excess supply of loanable funds 
A)  the demand for loanable funds includes only business investment spending 
B)  the supply of loanable funds includes only business investment spending 
C)  the loanable funds market cannot be in equilibrium 
D)  the supply of loanable funds includes only household saving 
E)  there will be an excess supply of loanable funds

Question 13

Which of the following events triggered intense debate over the classical model of the economy?

Accepted Answer

A)  The U.S.Civil War 
B)  World War I 
C)  the Baby Boom 
D)  The Great Depression 
E)  World War II 
A)  The U.S.Civil War 
B)  World War I 
C)  the Baby Boom 
D)  The Great Depression 
E)  World War II

Question 14

How do people in a market economy obtain income that is used to buy goods and services?

Accepted Answer

A)  Supplying labor and other resources to firms 
B)  Trading goods and services in a barter system 
C)  Selling goods and services to each other 
D)  None of the above 
E)  b and c 
A)  Supplying labor and other resources to firms 
B)  Trading goods and services in a barter system 
C)  Selling goods and services to each other 
D)  None of the above 
E)  b and c

Question 15

The classical model

Accepted Answer

A)  is another name for the short-run macro model 
B)  was developed to explain the long period of poor economic performance during the Great Depression 
C)  is an attempt to explain why the economy tends to perform rather well over long periods of time 
D)  is believed by most economists to be a better explanatory model for short-term,rather than long-term,economic performance 
E)  was not really accepted as a legitimate economic theory until the 1950s 
A)  is another name for the short-run macro model 
B)  was developed to explain the long period of poor economic performance during the Great Depression 
C)  is an attempt to explain why the economy tends to perform rather well over long periods of time 
D)  is believed by most economists to be a better explanatory model for short-term,rather than long-term,economic performance 
E)  was not really accepted as a legitimate economic theory until the 1950s

Question 16

The supply of labor

Accepted Answer

A)  varies inversely with the price level 
B)  does not vary with the real wage rate 
C)  does not vary with the price level 
D)  varies directly with the price level 
E)  varies inversely with the nominal wage rate 
A)  varies inversely with the price level 
B)  does not vary with the real wage rate 
C)  does not vary with the price level 
D)  varies directly with the price level 
E)  varies inversely with the nominal wage rate

Question 17

Diminishing marginal returns means that aggregate production function is

Accepted Answer

A)  linear 
B)  downward sloping 
C)  upward sloping 
D)  concave 
E)  convex 
A)  linear 
B)  downward sloping 
C)  upward sloping 
D)  concave 
E)  convex

Question 18

Which of the following does not usually occur when there is an increase in government spending?

Accepted Answer

A)  Government purchases crowd out private-sector spending. 
B)  Total spending decreases. 
C)  The interest rate increases. 
D)  Investment spending declines. 
E)  Household saving increases. 
A)  Government purchases crowd out private-sector spending. 
B)  Total spending decreases. 
C)  The interest rate increases. 
D)  Investment spending declines. 
E)  Household saving increases.

Question 19

A country's total output,or real GDP,is determined only by its aggregate production function.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is a definition of economic fluctuations?

Accepted Answer

A)  Movements in prices around their long-run trend 
B)  Shifts in the long-run trend of output 
C)  Movements of the real wage over the long run 
D)  Shifts in the long-run trend of prices 
E)  Movements in output around its long-run trend 
A)  Movements in prices around their long-run trend 
B)  Shifts in the long-run trend of output 
C)  Movements of the real wage over the long run 
D)  Shifts in the long-run trend of prices 
E)  Movements in output around its long-run trend

Exam 20: The Classical Long-Run Model

In the classical model,fiscal policy has no demand-side effects on output or employment..

In the classical model,markets clear

In the classical model,government purchases or tax cuts are appropriate policies to raise GDP.

According to Say's Law,supply creates its own demand.

Which of the following groups would be considered suppliers in the labor market?

In the classical model,

The relationship between household saving and business investment spending in equilibrium is: Planned investment = household saving - government spending + taxes

What is the full-employment output level?

Classical economists believed that the economy would always return to full employment.

When represented graphically,the government's demand for funds curve is

In the classical model,the loanable funds market will clear when saving

When the government is running a budget surplus,

Which of the following events triggered intense debate over the classical model of the economy?

How do people in a market economy obtain income that is used to buy goods and services?

The classical model

The supply of labor

Diminishing marginal returns means that aggregate production function is

Which of the following does not usually occur when there is an increase in government spending?

A country's total output,or real GDP,is determined only by its aggregate production function.

Which of the following is a definition of economic fluctuations?

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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