Question 1

According to Keynesian economics,if there are unutilized resources in the economy and aggregate demand increases,

Accepted Answer

A) real GDP will rise and price level will remain constant. 
B) real GDP will fall and price level will remain constant. 
C) real GDP will rise and price level will rise. 
D) real GDP will rise and price level will fall. 
A) real GDP will rise and price level will remain constant. 
B) real GDP will fall and price level will remain constant. 
C) real GDP will rise and price level will rise. 
D) real GDP will rise and price level will fall.

Question 2

According to Keynes,wages are inflexible because

Accepted Answer

A) of the minimum wage set by government. 
B) of unions and long-term contracts. 
C) workers do not behave in their own self-interest. 
D) the economy is never in the long run. 
A) of the minimum wage set by government. 
B) of unions and long-term contracts. 
C) workers do not behave in their own self-interest. 
D) the economy is never in the long run.

Question 3

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 4

Given the assumptions of the classical model,

Accepted Answer

A) the economy will often experience recessions and expansions. 
B) expansion will be the normal condition,but recessions will often be severe and require government intervention. 
C) the macroeconomy is erratic,and problems will often be increased over time. 
D) the market is a self-correcting mechanism. 
A) the economy will often experience recessions and expansions. 
B) expansion will be the normal condition,but recessions will often be severe and require government intervention. 
C) the macroeconomy is erratic,and problems will often be increased over time. 
D) the market is a self-correcting mechanism.

Question 5

When the value of the dollar decreases,the net effect on the economy

Accepted Answer

A) will be an increase in short-run aggregate supply and a decrease in aggregate demand. 
B) will be decrease in short-run aggregate supply and an increase in aggregate demand. 
C) will be an increase in both aggregate demand and aggregate supply. 
D) will be a decrease in both aggregate demand and aggregate supply. 
A) will be an increase in short-run aggregate supply and a decrease in aggregate demand. 
B) will be decrease in short-run aggregate supply and an increase in aggregate demand. 
C) will be an increase in both aggregate demand and aggregate supply. 
D) will be a decrease in both aggregate demand and aggregate supply.

Question 6

If the economy is near full capacity,the effect of a negative aggregate demand shock is to

Accepted Answer

A) increase the level of aggregate demand. 
B) cause the price level to fall. 
C) increase the firm's cost of producing at every level of output. 
D) increase the level of employment. 
A) increase the level of aggregate demand. 
B) cause the price level to fall. 
C) increase the firm's cost of producing at every level of output. 
D) increase the level of employment.

Question 7

A short-lived increase in oil prices caused by destruction of oil-producing and oil-refining facilities by a large hurricane will

Accepted Answer

A) shift the SRAS curve to the right. 
B) shift the LRAS curve to the right. 
C) shift the SRAS curve to the left. 
D) shift the AD curve to the right. 
A) shift the SRAS curve to the right. 
B) shift the LRAS curve to the right. 
C) shift the SRAS curve to the left. 
D) shift the AD curve to the right.

Question 8

The full-employment rate of output can

Accepted Answer

A) be surpassed in the long run only if input prices are flexible. 
B) not be surpassed in either the short run or the long run. 
C) be surpassed only when firms are not yet producing at full capacity. 
D) be surpassed only in the short run. 
A) be surpassed in the long run only if input prices are flexible. 
B) not be surpassed in either the short run or the long run. 
C) be surpassed only when firms are not yet producing at full capacity. 
D) be surpassed only in the short run.

Question 9

According to Keynesian economics,if there are unutilized resources in the economy and aggregate demand decreases,

Accepted Answer

A) real GDP will rise and price level will remain constant. 
B) real GDP will fall and price level will remain constant. 
C) real GDP will rise and price level will rise. 
D) real GDP will rise and price level will fall. 
A) real GDP will rise and price level will remain constant. 
B) real GDP will fall and price level will remain constant. 
C) real GDP will rise and price level will rise. 
D) real GDP will rise and price level will fall.

Question 10

All the following are assumptions of the classical model EXCEPT

Accepted Answer

A) pure competition exists. 
B) buyers and sellers react to nominal money prices rather than to relative prices. 
C) people are motivated by self-interest. 
D) wages and prices are flexible. 
A) pure competition exists. 
B) buyers and sellers react to nominal money prices rather than to relative prices. 
C) people are motivated by self-interest. 
D) wages and prices are flexible.

Question 11

-In the above figure,if the relevant aggregate demand curve is AD2,what type of gap exists and how large is it?

Accepted Answer

A) inflationary gap of $500 billion 
B) inflationary gap of $1 trillion 
C) recessionary gap of $1 trillion 
D) recessionary gap of $500 billion 
A) inflationary gap of $500 billion 
B) inflationary gap of $1 trillion 
C) recessionary gap of $1 trillion 
D) recessionary gap of $500 billion

Question 12

In the classical model,a shift to the right in aggregate demand would result in

Accepted Answer

A) a permanent increase in unemployment. 
B) a permanent increase in real incomes. 
C) an increase in the price level. 
D) a permanent shift past full employment. 
A) a permanent increase in unemployment. 
B) a permanent increase in real incomes. 
C) an increase in the price level. 
D) a permanent shift past full employment.

Question 13

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

Accepted Answer

In the below figure,the equilibrium befo

Question 14

-Refer to the above figure.Suppose the current aggregate demand is represented by AD2.If aggregate demand falls to line AD3,then

Accepted Answer

A) the new equilibrium will be at j. 
B) the new equilibrium will be at k. 
C) the new equilibrium real Gross Domestic Product (GDP)will be x. 
D) a new price level will be established at a. 
A) the new equilibrium will be at j. 
B) the new equilibrium will be at k. 
C) the new equilibrium real Gross Domestic Product (GDP)will be x. 
D) a new price level will be established at a.

Question 15

A temporary increase in the price of oil would

Accepted Answer

A) increase both short-run and long-run aggregate supply. 
B) increase short-run aggregate supply and decrease long-run aggregate supply. 
C) decrease short-run aggregate supply and leave long-run aggregate supply unchanged. 
D) decrease both short-run and long-run aggregate supply. 
A) increase both short-run and long-run aggregate supply. 
B) increase short-run aggregate supply and decrease long-run aggregate supply. 
C) decrease short-run aggregate supply and leave long-run aggregate supply unchanged. 
D) decrease both short-run and long-run aggregate supply.

Question 16

-Consider the above figure.If the aggregate demand curve rose from AD1 to AD3,our nation would be experiencing

Accepted Answer

A) an inflationary gap. 
B) a recessionary gap. 
C) unemployment. 
D) falling prices. 
A) an inflationary gap. 
B) a recessionary gap. 
C) unemployment. 
D) falling prices.

Question 17

Classical economists tend to

Accepted Answer

A) see unemployment as a persistent economic problem. 
B) believe in Keynesian economics. 
C) reject the equality of savings and investment. 
D) support Say's law. 
A) see unemployment as a persistent economic problem. 
B) believe in Keynesian economics. 
C) reject the equality of savings and investment. 
D) support Say's law.

Question 18

Which of the following will cause an increase in aggregate supply?

Accepted Answer

A) Decreased competition 
B) An increase in the price level 
C) An increase in marginal tax rates 
D) A decrease in input prices 
A) Decreased competition 
B) An increase in the price level 
C) An increase in marginal tax rates 
D) A decrease in input prices

Question 19

The Keynesian short-run aggregate supply curve

Accepted Answer

A) is horizontal. 
B) is vertical. 
C) reflects the fact that real GDP is supply-determined. 
D) reflects the fact that real GDP does not vary with changes in aggregate demand. 
A) is horizontal. 
B) is vertical. 
C) reflects the fact that real GDP is supply-determined. 
D) reflects the fact that real GDP does not vary with changes in aggregate demand.

Question 20

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

Accepted Answer

No.Eventually full employment would be r

According to Keynesian economics,if there are unutilized resources in the economy and aggregate demand increases,

According to Keynes,wages are inflexible because

Keynesian economists argue that

Given the assumptions of the classical model,

When the value of the dollar decreases,the net effect on the economy

If the economy is near full capacity,the effect of a negative aggregate demand shock is to

A short-lived increase in oil prices caused by destruction of oil-producing and oil-refining facilities by a large hurricane will

The full-employment rate of output can

According to Keynesian economics,if there are unutilized resources in the economy and aggregate demand decreases,

All the following are assumptions of the classical model EXCEPT

-In the above figure,if the relevant aggregate demand curve is AD2,what type of gap exists and how large is it?

In the classical model,a shift to the right in aggregate demand would result in

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

-Refer to the above figure.Suppose the current aggregate demand is represented by AD2.If aggregate demand falls to line AD3,then

A temporary increase in the price of oil would

-Consider the above figure.If the aggregate demand curve rose from AD1 to AD3,our nation would be experiencing

Classical economists tend to

Which of the following will cause an increase in aggregate supply?

The Keynesian short-run aggregate supply curve

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

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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 11: Classical and Keynesian Macro Analyses

According to Keynesian economics,if there are unutilized resources in the economy and aggregate demand increases,

According to Keynes,wages are inflexible because

Keynesian economists argue that

Given the assumptions of the classical model,

When the value of the dollar decreases,the net effect on the economy

If the economy is near full capacity,the effect of a negative aggregate demand shock is to

A short-lived increase in oil prices caused by destruction of oil-producing and oil-refining facilities by a large hurricane will

The full-employment rate of output can

According to Keynesian economics,if there are unutilized resources in the economy and aggregate demand decreases,

All the following are assumptions of the classical model EXCEPT

-In the above figure,if the relevant aggregate demand curve is AD2,what type of gap exists and how large is it?

In the classical model,a shift to the right in aggregate demand would result in

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

-Refer to the above figure.Suppose the current aggregate demand is represented by AD2.If aggregate demand falls to line AD3,then

A temporary increase in the price of oil would

-Consider the above figure.If the aggregate demand curve rose from AD1 to AD3,our nation would be experiencing

Classical economists tend to

Which of the following will cause an increase in aggregate supply?

The Keynesian short-run aggregate supply curve

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

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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters