Exam 11: Classical and Keynesian Macro Analyses

A recessionary gap is the amount by which

Which of the following is NOT an assumption of the classical model?

An economy in long-run equilibrium experiences an increase in aggregate demand. According to the classical model,

Suppose the U.S. dollar weakens against the euro (and against other major currencies). This weakening of the dollar will cause which of the following to occur?

Suppose aggregate demand is increasing over time. Would the modern Keynesian model assume that the price level would always be constant? Explain.

The Keynesian short-run aggregate supply (SRAS) curve is

Demand-pull inflation is caused by

Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have caused the move to the current equilibrium?

All of the following are assumptions of the classical model EXCEPT

If we observe an increase in real GDP and an increase in the price level after an increase in aggregate demand, we can conclude that

A key assumption in the classical model is

If your income and the price level both double, and you think you now have more real income, you are suffering from

The short-run aggregate supply curve is a relationship between

In the modern Keynesian model, over much of its range the short-run aggregate supply (SRAS) curve is

An inflationary gap occurs when

Demand-pull inflation occurs

The gap that exists when equilibrium real Gross Domestic Product (GDP) is less than full employment real Gross Domestic Product (GDP) is called a(n)

Refer to the above figure. Suppose the economy is at E originally, when the dollar increases in value. Which aggregate supply curve applies if the value of real GDP increases?

To explain the existence of excess capacity, Keynes argued that

Suppose we observe rising nominal GDP, a rising price level, and constant unemployment as a result of an increase in aggregate demand. We would conclude that the aggregate supply curve is