Question 1

The horizontal short-run aggregate supply curve

Accepted Answer

A)  assumes that wages and all other input prices are constant. 
B)  shows that real GDP can be increased only when prices increase. 
C)  assumes that there is full employment in the economy. 
D)  assumes that opportunity cost is constant. 
A)  assumes that wages and all other input prices are constant. 
B)  shows that real GDP can be increased only when prices increase. 
C)  assumes that there is full employment in the economy. 
D)  assumes that opportunity cost is constant.

Question 2

According to Keynes

Accepted Answer

A)  the short-run aggregate supply curve is vertical. 
B)  nominal wages are sticky. 
C)  money illusion does not exist. 
D)  markets are perfectly competitive. 
A)  the short-run aggregate supply curve is vertical. 
B)  nominal wages are sticky. 
C)  money illusion does not exist. 
D)  markets are perfectly competitive.

Question 3

Keynes argued that I. Capitalism did not always lead to full employment.
II) Nominal prices were more important than relative prices.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 4

Which of the following is an example of money illusion?

Accepted Answer

A)  An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 5 percent. 
B)  An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 20 percent. 
C)  An individual will neither increase nor decrease the number of hours she is willing to work when the nominal wage rises by 10 percent and the overall price level rises by 10 percent. 
D)  none of the above 
A)  An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 5 percent. 
B)  An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 20 percent. 
C)  An individual will neither increase nor decrease the number of hours she is willing to work when the nominal wage rises by 10 percent and the overall price level rises by 10 percent. 
D)  none of the above

Question 5

Say's law implies that

Accepted Answer

A)  surpluses never occur. 
B)  surpluses or shortages are possible, but only for a short time. 
C)  shortages is a persistent phenomenon. 
D)  shortages never occur. 
A)  surpluses never occur. 
B)  surpluses or shortages are possible, but only for a short time. 
C)  shortages is a persistent phenomenon. 
D)  shortages never occur.

Question 6

A major hurricane causes production problems in Gulf Coast region of the United States. This would cause

Accepted Answer

A)  the short-run aggregate supply curve to shift to the left, but there would be no effect on the long-run aggregate supply curve. 
B)  the short-run aggregate supply curve to shift to the left, and the long-run aggregate supply curve would shift to the right. 
C)  both the short-run and the long-run aggregate supply curves to shift to the right in equal amounts. 
D)  both the short-run and the long-run aggregate supply curves to shift to the left, but the long-run aggregate supply curve would shift more than the short-run curve. 
A)  the short-run aggregate supply curve to shift to the left, but there would be no effect on the long-run aggregate supply curve. 
B)  the short-run aggregate supply curve to shift to the left, and the long-run aggregate supply curve would shift to the right. 
C)  both the short-run and the long-run aggregate supply curves to shift to the right in equal amounts. 
D)  both the short-run and the long-run aggregate supply curves to shift to the left, but the long-run aggregate supply curve would shift more than the short-run curve.

Question 7

Using a graph, analyze the Great Depression from a Keynesian perspective. What happened to unemployment?

Accepted Answer

In the below figure, the equilibrium bef

Question 8

Which one of the following is TRUE?

Accepted Answer

A)  The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium wage level. 
B)  The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium level of exports. 
C)  The intersection of aggregate demand and aggregate supply identifies an equilibrium level of employment and an equilibrium level of investment. 
D)  The intersection of aggregate demand and aggregate supply identifies an equilibrium price level and an equilibrium level of real GDP. 
A)  The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium wage level. 
B)  The intersection of aggregate demand and aggregate supply identifies an equilibrium interest rate and an equilibrium level of exports. 
C)  The intersection of aggregate demand and aggregate supply identifies an equilibrium level of employment and an equilibrium level of investment. 
D)  The intersection of aggregate demand and aggregate supply identifies an equilibrium price level and an equilibrium level of real GDP.

Question 9

The idea that "supply creates its own demand" is attributed to which of the following economists?

Accepted Answer

A)  Adam Smith 
B)  David Ricardo 
C)  J. B. Say 
D)  John Maynard Keynes 
A)  Adam Smith 
B)  David Ricardo 
C)  J. B. Say 
D)  John Maynard Keynes

Question 10

-Refer to the above figure. An increase in aggregate demand between real Gross Domestic Product (GDP) levels Y0 and Y1

Accepted Answer

A)  would most likely result in some inflation. 
B)  would not increase output since the economy is already working at full capacity. 
C)  would have no effect on the price level. 
D)  would cause price levels to fall. 
A)  would most likely result in some inflation. 
B)  would not increase output since the economy is already working at full capacity. 
C)  would have no effect on the price level. 
D)  would cause price levels to fall.

Question 11

All of the following were classical economists EXCEPT

Accepted Answer

A)  Adam Smith. 
B)  A. C. Pigou. 
C)  David Ricardo. 
D)  Milton Friedman. 
A)  Adam Smith. 
B)  A. C. Pigou. 
C)  David Ricardo. 
D)  Milton Friedman.

Question 12

Say's law says that

Accepted Answer

A)  consumption is greater than supply. 
B)  desired expenditures always equal actual expenditures. 
C)  people produce the goods they consume. 
D)  people consume the goods they produce. 
A)  consumption is greater than supply. 
B)  desired expenditures always equal actual expenditures. 
C)  people produce the goods they consume. 
D)  people consume the goods they produce.

Question 13

According to Keynes, once a system attains an economy-wide equilibrium

Accepted Answer

A)  there may or may not be excess productive capacity. 
B)  planned consumption will be zero. 
C)  planned investment will be zero. 
D)  the economy will be at full productive capacity. 
A)  there may or may not be excess productive capacity. 
B)  planned consumption will be zero. 
C)  planned investment will be zero. 
D)  the economy will be at full productive capacity.

Question 14

In a classical model

Accepted Answer

A)  equilibrium real GDP is supply determined. 
B)  equilibrium real GDP is determined by the government. 
C)  equilibrium real GDP is determined by both aggregate supply and aggregate demand. 
D)  equilibrium real GDP is neither determined by aggregate supply nor by aggregate demand. 
A)  equilibrium real GDP is supply determined. 
B)  equilibrium real GDP is determined by the government. 
C)  equilibrium real GDP is determined by both aggregate supply and aggregate demand. 
D)  equilibrium real GDP is neither determined by aggregate supply nor by aggregate demand.

Question 15

Keynes argued that an economy could be in equilibrium when the economy was

Accepted Answer

A)  operating at maximum potential capacity. 
B)  operating with some unutilized productive capacity. 
C)  trying to operate at some output level beyond its potential capacity. 
D)  operating either at full productive capacity or at less than full capacity. 
A)  operating at maximum potential capacity. 
B)  operating with some unutilized productive capacity. 
C)  trying to operate at some output level beyond its potential capacity. 
D)  operating either at full productive capacity or at less than full capacity.

Question 16

A depreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

Accepted Answer

A)  decreases, decreases 
B)  increases, increases 
C)  increases, decreases 
D)  decreases, increases 
A)  decreases, decreases 
B)  increases, increases 
C)  increases, decreases 
D)  decreases, increases

Question 17

One possible result of a fall in aggregate demand coupled with a stable short-run aggregate supply is

Accepted Answer

A)  a recession. 
B)  an increase in employment levels. 
C)  an economic expansion. 
D)  a rise in the stock market. 
A)  a recession. 
B)  an increase in employment levels. 
C)  an economic expansion. 
D)  a rise in the stock market.

Question 18

Which of the following is NOT true according to Say's law?

Accepted Answer

A)  Supply creates its own demand. 
B)  No overproduction is possible in a market economy in the long run. 
C)  Desired expenditures will always be higher than actual expenditures. 
D)  Producing goods and services generates the means and the willingness to purchase other goods and services. 
A)  Supply creates its own demand. 
B)  No overproduction is possible in a market economy in the long run. 
C)  Desired expenditures will always be higher than actual expenditures. 
D)  Producing goods and services generates the means and the willingness to purchase other goods and services.

Question 19

Which of the following statements is correct? I. If other factors are held constant, the level of employment in the economy determines real Gross Domestic Product (GDP).
II) According to classical economists, only voluntary unemployment exists in the long run.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 20

Which of the following is NOT a key assumption of the classical model?

Accepted Answer

A)  There is a single monopoly seller in many markets for goods and services. 
B)  People cannot be fooled by money illusion. 
C)  People are motivated by self-interest. 
D)  Wages and prices are flexible. 
A)  There is a single monopoly seller in many markets for goods and services. 
B)  People cannot be fooled by money illusion. 
C)  People are motivated by self-interest. 
D)  Wages and prices are flexible.

Exam 11: Classical and Keynesian Macro Analyses

The horizontal short-run aggregate supply curve

According to Keynes

Keynes argued that I. Capitalism did not always lead to full employment. II) Nominal prices were more important than relative prices.

Which of the following is an example of money illusion?

Say's law implies that

A major hurricane causes production problems in Gulf Coast region of the United States. This would cause

Using a graph, analyze the Great Depression from a Keynesian perspective. What happened to unemployment?

Which one of the following is TRUE?

The idea that "supply creates its own demand" is attributed to which of the following economists?

-Refer to the above figure. An increase in aggregate demand between real Gross Domestic Product (GDP) levels Y0 and Y1

All of the following were classical economists EXCEPT

Say's law says that

According to Keynes, once a system attains an economy-wide equilibrium

In a classical model

Keynes argued that an economy could be in equilibrium when the economy was

A depreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

One possible result of a fall in aggregate demand coupled with a stable short-run aggregate supply is

Which of the following is NOT true according to Say's law?

Which of the following statements is correct? I. If other factors are held constant, the level of employment in the economy determines real Gross Domestic Product (GDP). II) According to classical economists, only voluntary unemployment exists in the long run.

Which of the following is NOT a key assumption of the classical model?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

A depreciation of the U.S. dollar the price of U.S. imports, and the price of U.S. exports.