Question 1

Suppose there are no firms,only the government and households.What would the total demand for funds curve look like in such a world?

Accepted Answer

A)  Downward sloping 
B)  Perfectly horizontal 
C)  Upward sloping 
D)  There would be no such curve 
E)  Perfectly vertical 
A)  Downward sloping 
B)  Perfectly horizontal 
C)  Upward sloping 
D)  There would be no such curve 
E)  Perfectly vertical

Question 2

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

Accepted Answer

A)  the supply of loanable funds will be horizontal 
B)  an increase in government spending will cause the interest rate to rise 
C)  the supply of loanable funds will be vertical 
D)  an increase in government spending will crowd out less than an equal amount of private spending 
E)  a decrease in government spending will crowd out less than an equal amount of private spending 
A)  the supply of loanable funds will be horizontal 
B)  an increase in government spending will cause the interest rate to rise 
C)  the supply of loanable funds will be vertical 
D)  an increase in government spending will crowd out less than an equal amount of private spending 
E)  a decrease in government spending will crowd out less than an equal amount of private spending

Question 3

Which of the following is true for a market that clears?

Accepted Answer

A)  An excess supply of anything traded will lead to a fall in its price. 
B)  An excess demand of anything traded will lead to a fall in its price. 
C)  An excess supply of anything traded will lead to a rise in its price. 
D)  An excess demand of anything traded will not lead to a price change. 
E)  A high price will lead to a high demand. 
A)  An excess supply of anything traded will lead to a fall in its price. 
B)  An excess demand of anything traded will lead to a fall in its price. 
C)  An excess supply of anything traded will lead to a rise in its price. 
D)  An excess demand of anything traded will not lead to a price change. 
E)  A high price will lead to a high demand.

Question 4

According to the classical model,if the government wanted to increase employment,it could do so by increasing its own spending.That would lead firms to produce more output,for which they would need to hire more workers.

Accepted Answer

A) True 
 B)False

Question 5

The labor demand curve shows the

Accepted Answer

A)  number of workers that firms will want to hire at any wage rate 
B)  number of people who will want jobs at any wage rate 
C)  amount of labor that a firm needs to produce a given amount of output 
D)  equilibrium wage rate and number of workers employed 
E)  amount of output workers will be able to buy for a given number of hours worked 
A)  number of workers that firms will want to hire at any wage rate 
B)  number of people who will want jobs at any wage rate 
C)  amount of labor that a firm needs to produce a given amount of output 
D)  equilibrium wage rate and number of workers employed 
E)  amount of output workers will be able to buy for a given number of hours worked

Question 6

Which of the following types of unemployment can the classical model not explain?

Accepted Answer

A)  Structural unemployment 
B)  Cyclical unemployment 
C)  Seasonal unemployment 
D)  Frictional unemployment 
E)  Temporary unemployment 
A)  Structural unemployment 
B)  Cyclical unemployment 
C)  Seasonal unemployment 
D)  Frictional unemployment 
E)  Temporary unemployment

Question 7

The investment demand curve

Accepted Answer

A)  is upward sloping 
B)  is downward sloping 
C)  is horizontal 
D)  begins sloping upward then flattens out 
E)  begins sloping downward,then flattens out 
A)  is upward sloping 
B)  is downward sloping 
C)  is horizontal 
D)  begins sloping upward then flattens out 
E)  begins sloping downward,then flattens out

Question 8

Suppose the current equilibrium real wage is $15 an hour.Which of the following is true?

Accepted Answer

A)  A real wage above $15 an hour would lead to an excess demand for labor 
B)  A real wage above $15 an hour would lead to an excess supply of labor 
C)  The real wage must fall to prevent unemployment 
D)  The real wage must rise to prevent unemployment 
E)  A real wage below $15 an hour would lead to an excess supply of labor 
A)  A real wage above $15 an hour would lead to an excess demand for labor 
B)  A real wage above $15 an hour would lead to an excess supply of labor 
C)  The real wage must fall to prevent unemployment 
D)  The real wage must rise to prevent unemployment 
E)  A real wage below $15 an hour would lead to an excess supply of labor

Question 9

Say's Law

Accepted Answer

A)  is valid only in a simple economy without financial markets 
B)  led economists during the 1920s to encourage the government to adopt flawed economic policies that led to the Great Depression 
C)  assures us that in the aggregate,firms are able to sell their output so that full employment can be sustained 
D)  tells us that in the long run,markets clear 
E)  tell us that firms must carefully monitor consumer spending and saving in order not to produce more than consumers are willing to purchase 
A)  is valid only in a simple economy without financial markets 
B)  led economists during the 1920s to encourage the government to adopt flawed economic policies that led to the Great Depression 
C)  assures us that in the aggregate,firms are able to sell their output so that full employment can be sustained 
D)  tells us that in the long run,markets clear 
E)  tell us that firms must carefully monitor consumer spending and saving in order not to produce more than consumers are willing to purchase

Question 10

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

Accepted Answer

A)  $2.2 trillion 
B)  $2.5 trillion 
C)  $2.7 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion 
A)  $2.2 trillion 
B)  $2.5 trillion 
C)  $2.7 trillion 
D)  $3.0 trillion 
E)  $5.2 trillion

Question 11

In the classical model,the supply of funds to the loanable funds market comes from

Accepted Answer

A)  household saving and the government's budget surplus,if any 
B)  net taxes 
C)  household saving and the government budget deficit,if any 
D)  planned investment 
E)  total income 
A)  household saving and the government's budget surplus,if any 
B)  net taxes 
C)  household saving and the government budget deficit,if any 
D)  planned investment 
E)  total income

Question 12

Total spending will equal total output

Accepted Answer

A)  after inventory adjustments 
B)  only when total leakages are equal to total injections 
C)  by the end of every year 
D)  only when the sum of saving and investment equals the sum of net taxes and government expenditures 
E)  saving is equal to net taxes 
A)  after inventory adjustments 
B)  only when total leakages are equal to total injections 
C)  by the end of every year 
D)  only when the sum of saving and investment equals the sum of net taxes and government expenditures 
E)  saving is equal to net taxes

Question 13

A critical assumption in the classical model is that markets are always clear.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is more of a short-run than a long-run goal?

Accepted Answer

A)  Increasing the capital stock 
B)  Encouraging investment in human capital 
C)  Moderating economic fluctuations 
D)  Stimulating economic growth 
E)  Increasing private investment 
A)  Increasing the capital stock 
B)  Encouraging investment in human capital 
C)  Moderating economic fluctuations 
D)  Stimulating economic growth 
E)  Increasing private investment

Question 15

Which of the following markets must clear if injections from the income-spending stream are to equal leakages from the stream?

Accepted Answer

A)  The resource market 
B)  The labor market 
C)  The goods market 
D)  The aggregate market 
E)  The loanable funds market 
A)  The resource market 
B)  The labor market 
C)  The goods market 
D)  The aggregate market 
E)  The loanable funds market

Question 16

The aggregate production function shows

Accepted Answer

A)  the total output the economy can produce with different quantities of labor and technology,holding land and capital constant 
B)  the total output the economy can produce with different quantities of land and labor,holding capital and technology constant 
C)  the total output the economy can produce with different quantities of labor,holding land,capital and technology constant 
D)  the total output the economy can produce with different quantities of labor and capital,holding land and technology constant 
E)  the total output the economy can produce with different quantities of technology,holding land,labor and capital constant 
A)  the total output the economy can produce with different quantities of labor and technology,holding land and capital constant 
B)  the total output the economy can produce with different quantities of land and labor,holding capital and technology constant 
C)  the total output the economy can produce with different quantities of labor,holding land,capital and technology constant 
D)  the total output the economy can produce with different quantities of labor and capital,holding land and technology constant 
E)  the total output the economy can produce with different quantities of technology,holding land,labor and capital constant

Question 17

The supply of loanable funds curve

Accepted Answer

A)  is upward sloping 
B)  is downward sloping 
C)  is horizontal 
D)  begins sloping upward,then levels off 
E)  may slope either upward or downward,depending upon the interest rate 
A)  is upward sloping 
B)  is downward sloping 
C)  is horizontal 
D)  begins sloping upward,then levels off 
E)  may slope either upward or downward,depending upon the interest rate

Question 18

If the labor supply and demand curves cross at a wage of $20,

Accepted Answer

A)  a wage rate of $10 per hour would lead to an excess demand for labor 
B)  a wage rate of $10 per hour would lead to an excess supply of labor 
C)  that wage causes a high rate of cyclical unemployment 
D)  employees are overpaid 
E)  a wage rate of $10 per hour would mean there is a significant amount of structural unemployment 
A)  a wage rate of $10 per hour would lead to an excess demand for labor 
B)  a wage rate of $10 per hour would lead to an excess supply of labor 
C)  that wage causes a high rate of cyclical unemployment 
D)  employees are overpaid 
E)  a wage rate of $10 per hour would mean there is a significant amount of structural unemployment

Question 19

In the classical view,all markets clear,except the labor market.

Accepted Answer

A) True 
 B)False

Question 20

The desire for goods and services is

Accepted Answer

A)  created by a market economy 
B)  the ultimate explanation for all production 
C)  why it is so difficult to explain how our economy works 
D)  the cause of inflation 
E)  what causes the market wage for labor to continually increase 
A)  created by a market economy 
B)  the ultimate explanation for all production 
C)  why it is so difficult to explain how our economy works 
D)  the cause of inflation 
E)  what causes the market wage for labor to continually increase

Exam 20: The Classical Long-Run Model

Suppose there are no firms,only the government and households.What would the total demand for funds curve look like in such a world?

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

Which of the following is true for a market that clears?

According to the classical model,if the government wanted to increase employment,it could do so by increasing its own spending.That would lead firms to produce more output,for which they would need to hire more workers.

The labor demand curve shows the

Which of the following types of unemployment can the classical model not explain?

The investment demand curve

Suppose the current equilibrium real wage is $15 an hour.Which of the following is true?

Say's Law

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

In the classical model,the supply of funds to the loanable funds market comes from

Total spending will equal total output

A critical assumption in the classical model is that markets are always clear.

Which of the following is more of a short-run than a long-run goal?

Which of the following markets must clear if injections from the income-spending stream are to equal leakages from the stream?

The aggregate production function shows

The supply of loanable funds curve

If the labor supply and demand curves cross at a wage of $20,

In the classical view,all markets clear,except the labor market.

The desire for goods and services is

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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