Question 1

Compare the effects of an increase in aggregate demand when the price level is fixed versus when it can change.

Accepted Answer

@#IMG-DLM& The above figure shows the effects. An

Question 2

The Keynesian short-run aggregate supply curve

Accepted Answer

A)  is horizontal. 
B)  is vertical. 
C)  is downward sloping. 
D)  is upward sloping. 
A)  is horizontal. 
B)  is vertical. 
C)  is downward sloping. 
D)  is upward sloping.

Question 3

The short-run and long-run aggregate supply curves remain stable, and a decrease in aggregate demand occurs. What is the result in the short run?

Accepted Answer

A)  An increase in the price level and real GDP will occur. 
B)  A period of expansion and a rise in the unemployment rate could occur. 
C)  A period of recession and a rise in the unemployment rate could occur. 
D)  The price level will fall but real GDP will remain the same. 
A)  An increase in the price level and real GDP will occur. 
B)  A period of expansion and a rise in the unemployment rate could occur. 
C)  A period of recession and a rise in the unemployment rate could occur. 
D)  The price level will fall but real GDP will remain the same.

Question 4

Other things being equal, if energy prices rise in a country, then there would be

Accepted Answer

A)  cost-push inflation. 
B)  demand-pull inflation. 
C)  cost-push deflation. 
D)  more production and a lower price level. 
A)  cost-push inflation. 
B)  demand-pull inflation. 
C)  cost-push deflation. 
D)  more production and a lower price level.

Question 5

The significant increases in oil prices during the late 2000s was an example of

Accepted Answer

A)  an aggregate demand shock that increased the price level and increased the rate of growth of real Gross Domestic Product (GDP). 
B)  an aggregate demand shock that reduced the price level and reduced the rate of growth of real Gross Domestic Product (GDP). 
C)  an aggregate supply shock that increased the price level and reduced the rate of growth of real Gross Domestic Product (GDP). 
D)  an aggregate supply shock that reduced the price level and increased the rate of growth of real Gross Domestic Product (GDP). 
A)  an aggregate demand shock that increased the price level and increased the rate of growth of real Gross Domestic Product (GDP). 
B)  an aggregate demand shock that reduced the price level and reduced the rate of growth of real Gross Domestic Product (GDP). 
C)  an aggregate supply shock that increased the price level and reduced the rate of growth of real Gross Domestic Product (GDP). 
D)  an aggregate supply shock that reduced the price level and increased the rate of growth of real Gross Domestic Product (GDP).

Question 6

Keynesian economists argue that

Accepted Answer

A)  the natural rate of unemployment is below the actual rate. 
B)  unemployment is a long-lasting phenomenon in the economy. 
C)  unemployment only exists during periods of war in the economy. 
D)  the natural rate of unemployment is zero. 
A)  the natural rate of unemployment is below the actual rate. 
B)  unemployment is a long-lasting phenomenon in the economy. 
C)  unemployment only exists during periods of war in the economy. 
D)  the natural rate of unemployment is zero.

Question 7

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

Accepted Answer

A)  The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the right. 
B)  The aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the right. 
C)  The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the left. 
D)  the aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the left. 
A)  The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the right. 
B)  The aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the right. 
C)  The aggregate demand curve will shift to the right and the short-run aggregate supply will shift to the left. 
D)  the aggregate demand curve will shift to the left and the short-run aggregate supply will shift to the left.

Question 8

A weaker U.S. dollar in world exchange markets means that

Accepted Answer

A)  a dollar buys more units of foreign currency than it could before. 
B)  a dollar buys less units of foreign currency than it could before. 
C)  a dollar buys the same amount of foreign currency than it could before, with gold backing up the value of the dollar. 
D)  foreigners buy the dollars that they have. 
A)  a dollar buys more units of foreign currency than it could before. 
B)  a dollar buys less units of foreign currency than it could before. 
C)  a dollar buys the same amount of foreign currency than it could before, with gold backing up the value of the dollar. 
D)  foreigners buy the dollars that they have.

Question 9

Refer to the above figure. If the aggregate demand curve shifts beyond AD5, then the economy will experience

Accepted Answer

A)  demand-pull inflation. 
B)  cost-push inflation. 
C)  structural inflation. 
D)  stagflation. 
A)  demand-pull inflation. 
B)  cost-push inflation. 
C)  structural inflation. 
D)  stagflation.

Question 10

If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS) curve must be

Accepted Answer

A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping. 
A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping.

Question 11

The Keynesian portion of the short-run aggregate supply (SRAS) curve implies

Accepted Answer

A)  an upward slope. 
B)  the price level does not change. 
C)  a downward slope. 
D)  flexible prices and wages. 
A)  an upward slope. 
B)  the price level does not change. 
C)  a downward slope. 
D)  flexible prices and wages.

Question 12

In the classical model, the aggregate supply curve is

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Question 13

Which of the following is a basic difference between the classical model and the Keynesian model in which the Keynesian short-run aggregate supply curve exists?

Accepted Answer

A)  The classical model assumes that the long run aggregate supply curve is vertical, while the Keynesian model assumes the long run aggregate supply curve is horizontal. 
B)  The classical model assumes that the position of the long run aggregate supply curve is determined by full employment, while the Keynesian model assumes that the long run aggregate supply curve will be to the left of full employment. 
C)  The classical model assumes that the level of real GDP is supply determined, while the Keynesian model assumes that it is demand determined. 
D)  The classical model uses real GDP, while the Keynesian model uses nominal GDP. 
A)  The classical model assumes that the long run aggregate supply curve is vertical, while the Keynesian model assumes the long run aggregate supply curve is horizontal. 
B)  The classical model assumes that the position of the long run aggregate supply curve is determined by full employment, while the Keynesian model assumes that the long run aggregate supply curve will be to the left of full employment. 
C)  The classical model assumes that the level of real GDP is supply determined, while the Keynesian model assumes that it is demand determined. 
D)  The classical model uses real GDP, while the Keynesian model uses nominal GDP.

Question 14

In the classical model, a change in aggregate demand

Accepted Answer

A)  causes a change in long-run real GDP but not in the price level. 
B)  causes a change in the price level but not in the long-run real GDP. 
C)  causes changes in both the long-run real GDP and in the price level. 
D)  has no effect on either real GDP or the price level. 
A)  causes a change in long-run real GDP but not in the price level. 
B)  causes a change in the price level but not in the long-run real GDP. 
C)  causes changes in both the long-run real GDP and in the price level. 
D)  has no effect on either real GDP or the price level.

Question 15

Keynesian economists argue that

Accepted Answer

A)  prices and wages are flexible. 
B)  prices and wages must be set by government. 
C)  prices and wages are subject to downward "stickiness." 
D)  prices and wages depend on minimum wage law. 
A)  prices and wages are flexible. 
B)  prices and wages must be set by government. 
C)  prices and wages are subject to downward "stickiness." 
D)  prices and wages depend on minimum wage law.

Question 16

Which of the following causes a rightward shift of the short-run aggregate supply (SRAS) curve?

Accepted Answer

A)  an increase in the wage rate 
B)  an increase in firms' production without adding inputs 
C)  a reduction in the price of a raw material 
D)  an increase in the overall price level 
A)  an increase in the wage rate 
B)  an increase in firms' production without adding inputs 
C)  a reduction in the price of a raw material 
D)  an increase in the overall price level

Question 17

Saving represents

Accepted Answer

A)  a source of funds for business investment. 
B)  a normal part of the circular flow of income and output. 
C)  an injection to the circular flow of income and output. 
D)  a counter-example to Say's law that the classical economists never considered. 
A)  a source of funds for business investment. 
B)  a normal part of the circular flow of income and output. 
C)  an injection to the circular flow of income and output. 
D)  a counter-example to Say's law that the classical economists never considered.

Question 18

-Refer to the above figure. Which of the graphs is consistent with the Keynesian short-run aggregate supply curve?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D

Question 19

In the classical model, an increase in aggregate demand will cause

Accepted Answer

A)  an increase in actual output, or Gross Domestic Product (GDP). 
B)  a decrease in actual output, or Gross Domestic Product (GDP). 
C)  an increase in price level. 
D)  a decrease in price level. 
A)  an increase in actual output, or Gross Domestic Product (GDP). 
B)  a decrease in actual output, or Gross Domestic Product (GDP). 
C)  an increase in price level. 
D)  a decrease in price level.

Question 20

The discovery of new oil deposits will cause

Accepted Answer

A)  the long-run aggregate supply curve to shift to the right and the short-run aggregate supply curve to shift to the left. 
B)  the long-run aggregate supply curve to shift to the right, but not the short-run aggregate supply. 
C)  the short-run aggregate supply curve to shift to the right, but not the long-run aggregate supply curve. 
D)  both the long-run and the short-run aggregate supply curves to shift to the right. 
A)  the long-run aggregate supply curve to shift to the right and the short-run aggregate supply curve to shift to the left. 
B)  the long-run aggregate supply curve to shift to the right, but not the short-run aggregate supply. 
C)  the short-run aggregate supply curve to shift to the right, but not the long-run aggregate supply curve. 
D)  both the long-run and the short-run aggregate supply curves to shift to the right.

Exam 11: Classical and Keynesian Macro Analyses

Compare the effects of an increase in aggregate demand when the price level is fixed versus when it can change.

The Keynesian short-run aggregate supply curve

The short-run and long-run aggregate supply curves remain stable, and a decrease in aggregate demand occurs. What is the result in the short run?

Other things being equal, if energy prices rise in a country, then there would be

The significant increases in oil prices during the late 2000s was an example of

Keynesian economists argue that

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

A weaker U.S. dollar in world exchange markets means that

Refer to the above figure. If the aggregate demand curve shifts beyond AD5, then the economy will experience

If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS) curve must be

The Keynesian portion of the short-run aggregate supply (SRAS) curve implies

In the classical model, the aggregate supply curve is

Which of the following is a basic difference between the classical model and the Keynesian model in which the Keynesian short-run aggregate supply curve exists?

In the classical model, a change in aggregate demand

Keynesian economists argue that

Which of the following causes a rightward shift of the short-run aggregate supply (SRAS) curve?

Saving represents

-Refer to the above figure. Which of the graphs is consistent with the Keynesian short-run aggregate supply curve?

In the classical model, an increase in aggregate demand will cause

The discovery of new oil deposits will cause

The Nature of Economics

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