Question 1

According to the classical model,prices and wages

Accepted Answer

A) are flexible. 
B) must be set by government. 
C) move downward easily,but are "sticky" upward. 
D) move upward easily,but are "sticky" downward. 
A) are flexible. 
B) must be set by government. 
C) move downward easily,but are "sticky" upward. 
D) move upward easily,but are "sticky" downward.

Question 2

In the original Austin Powers,Dr.Evil is cryogenically frozen for thirty years (from the late 1960s to the late 1990s).Upon his return he hatches a plan to extort one million dollars from various world governments.His henchmen are unimpressed.What type(s)of inflation have made Dr.Evil's proposed blackmail amount seem too small?

Accepted Answer

A) cost-push inflation 
B) demand-pull inflation 
C) both cost-price and price-pull inflation 
D) both cost-push and demand-pull inflation 
A) cost-push inflation 
B) demand-pull inflation 
C) both cost-price and price-pull inflation 
D) both cost-push and demand-pull inflation

Question 3

What shape did the short-run aggregate supply curve have during the 1930s,according to Keynes? Explain.

Accepted Answer

Keynes argued the short-run aggregate su

Question 4

-In the above figure,what are the long-run equilibrium price level and real GDP?

Accepted Answer

A) 130 and $12 trillion 
B) 130 and $11.5 trillion 
C) 120 and $11.5 trillion 
D) 120 and $12 trillion 
A) 130 and $12 trillion 
B) 130 and $11.5 trillion 
C) 120 and $11.5 trillion 
D) 120 and $12 trillion

Question 5

Demand-pull inflation occurs

Accepted Answer

A) when the aggregate supply curve shifts to the left,while aggregate demand remains stable. 
B) when the aggregate supply curve shifts to the right,while aggregate demand remains stable. 
C) when the aggregate demand curve shifts to the left,while aggregate supply remains stable. 
D) when the aggregate demand curve shifts to the right,while aggregate supply remains stable. 
A) when the aggregate supply curve shifts to the left,while aggregate demand remains stable. 
B) when the aggregate supply curve shifts to the right,while aggregate demand remains stable. 
C) when the aggregate demand curve shifts to the left,while aggregate supply remains stable. 
D) when the aggregate demand curve shifts to the right,while aggregate supply remains stable.

Question 6

All of the following are assumptions of the classical model EXCEPT

Accepted Answer

A) inflexible wages. 
B) absence of money illusion. 
C) pure competition. 
D) self-interest of economic actors. 
A) inflexible wages. 
B) absence of money illusion. 
C) pure competition. 
D) self-interest of economic actors.

Question 7

-Refer to the above figure.At the initial long-run equilibrium,the price level is ________,and at the new long-run equilibrium,the price level will be ________.

Accepted Answer

A) 20;45 
B) 20;40 
C) 40;45 
D) 20;20 
A) 20;45 
B) 20;40 
C) 40;45 
D) 20;20

Question 8

If the economy is operating at a point at which short-run aggregate supply is horizontal,then

Accepted Answer

A) real GDP cannot expand. 
B) real GDP cannot contract. 
C) increases in aggregate demand do not increase the price level. 
D) then increases in aggregate demand do not increase real GDP. 
A) real GDP cannot expand. 
B) real GDP cannot contract. 
C) increases in aggregate demand do not increase the price level. 
D) then increases in aggregate demand do not increase real GDP.

Question 9

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

Accepted Answer

A) Pure competition. 
B) Wages and prices are flexible. 
C) People are motivated by self-interest. 
D) Wage rigidity. 
A) Pure competition. 
B) Wages and prices are flexible. 
C) People are motivated by self-interest. 
D) Wage rigidity.

Question 10

Individuals will increase their saving as

Accepted Answer

A) the interest rate falls. 
B) business investment falls. 
C) the rate of unemployment increases. 
D) the interest rate increases. 
A) the interest rate falls. 
B) business investment falls. 
C) the rate of unemployment increases. 
D) the interest rate increases.

Question 11

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 12

Which of the following statements is NOT true about Say's law?

Accepted Answer

A) Desired expenditures will equal actual expenditures. 
B) Surpluses will be eliminated by falling prices and shortages will be eliminated by increasing prices. 
C) People produce more goods than they want for their own use only if they seek to trade them for other goods. 
D) Markets would be regularly hit by severe shortages and surpluses. 
A) Desired expenditures will equal actual expenditures. 
B) Surpluses will be eliminated by falling prices and shortages will be eliminated by increasing prices. 
C) People produce more goods than they want for their own use only if they seek to trade them for other goods. 
D) Markets would be regularly hit by severe shortages and surpluses.

Question 13

The aggregate supply curve in the classical model is

Accepted Answer

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

Question 14

Which one of the following statements is true?

Accepted Answer

A) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that domestic workers are harmed by imports. 
B) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that there is no correlation between the level of real GDP and the employment level. 
C) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that increases in aggregate demand can boost output in the short term. 
D) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that increases in aggregate demand will increase the price level,but will leave real GDP unaffected in the short term. 
A) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that domestic workers are harmed by imports. 
B) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that there is no correlation between the level of real GDP and the employment level. 
C) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that increases in aggregate demand can boost output in the short term. 
D) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that increases in aggregate demand will increase the price level,but will leave real GDP unaffected in the short term.

Question 15

-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?

Accepted Answer

A) Decreases in the price level caused short-run aggregate supply to fall. 
B) Input prices must have increased,causing long-run aggregate supply to increase. 
C) Aggregate demand must have decreased. 
D) A temporary reduction in production due to bad weather. 
A) Decreases in the price level caused short-run aggregate supply to fall. 
B) Input prices must have increased,causing long-run aggregate supply to increase. 
C) Aggregate demand must have decreased. 
D) A temporary reduction in production due to bad weather.

Question 16

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 17

Cost-push inflation can be shown on an aggregate supply aggregate demand diagram as

Accepted Answer

A) a rightward shift of the aggregate supply curve with no change in aggregate demand. 
B) a rightward shift in the aggregate demand curve with no change in aggregate supply. 
C) a leftward shift in the aggregate demand curve with no change in aggregate supply. 
D) a leftward shift in the aggregate supply curve with no change in aggregate demand. 
A) a rightward shift of the aggregate supply curve with no change in aggregate demand. 
B) a rightward shift in the aggregate demand curve with no change in aggregate supply. 
C) a leftward shift in the aggregate demand curve with no change in aggregate supply. 
D) a leftward shift in the aggregate supply curve with no change in aggregate demand.

Question 18

At higher rates of interest,

Accepted Answer

A) households save less because it is more expensive to save. 
B) households save more because they get a greater return on their savings. 
C) businesses demand more investment because future profitability is likely to be greater. 
D) businesses demand more investment because there are more funds available to invest. 
A) households save less because it is more expensive to save. 
B) households save more because they get a greater return on their savings. 
C) businesses demand more investment because future profitability is likely to be greater. 
D) businesses demand more investment because there are more funds available to invest.

Question 19

Demand-pull inflation is

Accepted Answer

A) inflation caused by increases in aggregate demand that generate an even larger increase in aggregate supply. 
B) inflation caused by increases in aggregate demand that are not matched by increases in aggregate supply. 
C) inflation caused by reductions in short-run aggregate supply. 
D) inflation caused by reductions in long-run aggregate supply. 
A) inflation caused by increases in aggregate demand that generate an even larger increase in aggregate supply. 
B) inflation caused by increases in aggregate demand that are not matched by increases in aggregate supply. 
C) inflation caused by reductions in short-run aggregate supply. 
D) inflation caused by reductions in long-run aggregate supply.

Question 20

Which statement best characterizes the classical economists' view of saving and investment?

Accepted Answer

A) Saving equals investment 
B) Saving exceeds investment 
C) Saving is less than investment 
D) Saving and investment are not related to one another 
A) Saving equals investment 
B) Saving exceeds investment 
C) Saving is less than investment 
D) Saving and investment are not related to one another

According to the classical model,prices and wages

What shape did the short-run aggregate supply curve have during the 1930s,according to Keynes? Explain.

-In the above figure,what are the long-run equilibrium price level and real GDP?

Demand-pull inflation occurs

All of the following are assumptions of the classical model EXCEPT

-Refer to the above figure.At the initial long-run equilibrium,the price level is ,and at the new long-run equilibrium,the price level will be .

If the economy is operating at a point at which short-run aggregate supply is horizontal,then

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

Individuals will increase their saving as

Say's law says that

Which of the following statements is NOT true about Say's law?

The aggregate supply curve in the classical model is

Which one of the following statements is true?

-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?

The horizontal short-run aggregate supply curve

Cost-push inflation can be shown on an aggregate supply aggregate demand diagram as

At higher rates of interest,

Demand-pull inflation is

Which statement best characterizes the classical economists' view of saving and investment?

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

Exam 11: Classical and Keynesian Macro Analyses

According to the classical model,prices and wages

What shape did the short-run aggregate supply curve have during the 1930s,according to Keynes? Explain.

-In the above figure,what are the long-run equilibrium price level and real GDP?

Demand-pull inflation occurs

All of the following are assumptions of the classical model EXCEPT

-Refer to the above figure.At the initial long-run equilibrium,the price level is ________,and at the new long-run equilibrium,the price level will be ________.

If the economy is operating at a point at which short-run aggregate supply is horizontal,then

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

Individuals will increase their saving as

Say's law says that

Which of the following statements is NOT true about Say's law?

The aggregate supply curve in the classical model is

Which one of the following statements is true?

-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?

The horizontal short-run aggregate supply curve

Cost-push inflation can be shown on an aggregate supply aggregate demand diagram as

At higher rates of interest,

Demand-pull inflation is

Which statement best characterizes the classical economists' view of saving and investment?

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

-Refer to the above figure.At the initial long-run equilibrium,the price level is ,and at the new long-run equilibrium,the price level will be .