Question 1

All of the following were classical economists EXCEPT

Accepted Answer

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

Question 2

"Supply creates its own demand" is known as

Accepted Answer

A) Keynes' Rule. 
B) the circular flow. 
C) Smith's law. 
D) Say's law. 
A) Keynes' Rule. 
B) the circular flow. 
C) Smith's law. 
D) Say's law.

Question 3

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 5 percent and the overall price level rises by 4 percent. 
B) An individual is willing to work more hours when the nominal wage rises by 5% and the overall price level rises by 7 percent. 
C) An individual will neither increase nor decrease the number of hours she is willing to work when the nominal wage rises by 5 percent and the overall price level rises by 5 percent. 
D) none of the above. 
A) An individual is willing to work more hours when the nominal wage rises by 5 percent and the overall price level rises by 4 percent. 
B) An individual is willing to work more hours when the nominal wage rises by 5% and the overall price level rises by 7 percent. 
C) An individual will neither increase nor decrease the number of hours she is willing to work when the nominal wage rises by 5 percent and the overall price level rises by 5 percent. 
D) none of the above.

Question 4

Which of the following would increase aggregate supply?

Accepted Answer

A) increased training and education 
B) a reduction in input prices 
C) a discovery of new raw materials 
D) all of the above 
A) increased training and education 
B) a reduction in input prices 
C) a discovery of new raw materials 
D) all of the above

Question 5

According to the above figure,what will the price level be in the new long-run equilibrium?

Accepted Answer

A) 115 
B) 110 
C) 100 
D) Less than 100 
A) 115 
B) 110 
C) 100 
D) Less than 100

Question 6

-Refer to the above figure.Assume that B is the current long-run aggregate supply (LRAS)curve and that E is the current short-run aggregate supply (SRAS)curve.If a new discovery of large oil fields in Florida led to an increase in the nation's productive capacities,then we could expect the LRAS curve and the SRAS curve to

Accepted Answer

A) remain B and E. 
B) move to A and D. 
C) move to C and F. 
D) move to A and F. 
A) remain B and E. 
B) move to A and D. 
C) move to C and F. 
D) move to A and F.

Question 7

The simplified Keynesian model

Accepted Answer

A) holds the price level constant. 
B) holds real GDP constant. 
C) assumes investment and saving are always equal. 
D) assumes unemployment is unrelated to real GDP. 
A) holds the price level constant. 
B) holds real GDP constant. 
C) assumes investment and saving are always equal. 
D) assumes unemployment is unrelated to real GDP.

Question 8

-Identify the 3 curves in the above figure.

Accepted Answer

A) (1)is long-run aggregate supply, (2)is short-run aggregate supply, (3)is aggregate demand. 
B) (1)is aggregate demand, (2)is short-run aggregate supply, (3)is long-run aggregate supply. 
C) (1)is short-run aggregate supply, (2)is long-run aggregate supply, (3)is aggregate demand. 
D) (1)is long-run aggregate supply, (2)is aggregate demand, (3)is short-run aggregate supply. 
A) (1)is long-run aggregate supply, (2)is short-run aggregate supply, (3)is aggregate demand. 
B) (1)is aggregate demand, (2)is short-run aggregate supply, (3)is long-run aggregate supply. 
C) (1)is short-run aggregate supply, (2)is long-run aggregate supply, (3)is aggregate demand. 
D) (1)is long-run aggregate supply, (2)is aggregate demand, (3)is short-run aggregate supply.

Question 9

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 10

A short-run equilibrium occurs

Accepted Answer

A) at the intersection of the long-run aggregate supply curve and the aggregate demand curve. 
B) at the intersection of the short-run aggregate supply curve and the long-run aggregate supply curve. 
C) at the intersection of the short-run aggregate supply curve and the aggregate demand curve. 
D) at the real GDP associated with full employment. 
A) at the intersection of the long-run aggregate supply curve and the aggregate demand curve. 
B) at the intersection of the short-run aggregate supply curve and the long-run aggregate supply curve. 
C) at the intersection of the short-run aggregate supply curve and the aggregate demand curve. 
D) at the real GDP associated with full employment.

Question 11

Regarding unemployment,the classical model implies that

Accepted Answer

A) unemployment always exists. 
B) unemployment cannot exist. 
C) voluntary unemployment is zero,but involuntary unemployment often is fairly high. 
D) only voluntary unemployment exists. 
A) unemployment always exists. 
B) unemployment cannot exist. 
C) voluntary unemployment is zero,but involuntary unemployment often is fairly high. 
D) only voluntary unemployment exists.

Question 12

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

Accepted Answer

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

Question 13

The short-run aggregate supply (SRAS)curve represents the relationship between

Accepted Answer

A) the price level and the real Gross Domestic Product (GDP)without full adjustment or full information. 
B) the price level and the real Gross Domestic Product (GDP)without full adjustment but with full information. 
C) the price level and the nominal Gross Domestic Product (GDP). 
D) the decisions of producers and the decisions of consumers. 
A) the price level and the real Gross Domestic Product (GDP)without full adjustment or full information. 
B) the price level and the real Gross Domestic Product (GDP)without full adjustment but with full information. 
C) the price level and the nominal Gross Domestic Product (GDP). 
D) the decisions of producers and the decisions of consumers.

Question 14

The horizontal portion of the short-run aggregate supply curve in which there is excessive unemployment and unused capacity in the economy is

Accepted Answer

A) Say's law. 
B) the classical short-run aggregate supply curve. 
C) the Keynesian short-run aggregate supply curve. 
D) exists when prices are flexible. 
A) Say's law. 
B) the classical short-run aggregate supply curve. 
C) the Keynesian short-run aggregate supply curve. 
D) exists when prices are flexible.

Question 15

What effect does a stronger dollar have on aggregate supply? Why?

Accepted Answer

A stronger dollar means that U.S.residen

Question 16

In the classical model,an increase in aggregate demand will lead to an increase in wage rates while a decrease in aggregate demand will

Accepted Answer

A) leave wages unchanged since workers will not take a cut in pay. 
B) decrease wages. 
C) increase wages since business will be desperate for labor. 
D) change the price of capital. 
A) leave wages unchanged since workers will not take a cut in pay. 
B) decrease wages. 
C) increase wages since business will be desperate for labor. 
D) change the price of capital.

Question 17

If your income and the price level both rise by 5 percent,and you think you now have more real income,you are suffering from

Accepted Answer

A) diminishing marginal expectations. 
B) leakages. 
C) injections. 
D) money illusion. 
A) diminishing marginal expectations. 
B) leakages. 
C) injections. 
D) money illusion.

Question 18

According to the Keynesian model,the short-run aggregate supply (SRAS)curve is horizontal when

Accepted Answer

A) real Gross Domestic Product (GDP)is at full capacity but prices are not flexible. 
B) there are no unemployed resources and wages do not change when prices change. 
C) prices react to an aggregate demand shock but real Gross Domestic Product (GDP)does not. 
D) there are unemployed resources and prices do not fall when aggregate demand falls. 
A) real Gross Domestic Product (GDP)is at full capacity but prices are not flexible. 
B) there are no unemployed resources and wages do not change when prices change. 
C) prices react to an aggregate demand shock but real Gross Domestic Product (GDP)does not. 
D) there are unemployed resources and prices do not fall when aggregate demand falls.

Question 19

Which one of the following statements is NOT true?

Accepted Answer

A) The classical model assumes that people suffer from money illusion. 
B) The classical model assumes that people are motivated by self-interest. 
C) The classical model assumes that pure competition exists. 
D) The classical model assumes that no single seller of a commodity can affect its price. 
A) The classical model assumes that people suffer from money illusion. 
B) The classical model assumes that people are motivated by self-interest. 
C) The classical model assumes that pure competition exists. 
D) The classical model assumes that no single seller of a commodity can affect its price.

Question 20

-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.

All of the following were classical economists EXCEPT

"Supply creates its own demand" is known as

Which of the following is an example of money illusion?

Which of the following would increase aggregate supply?

According to the above figure,what will the price level be in the new long-run equilibrium?

The simplified Keynesian model

-Identify the 3 curves in the above figure.

In the classical model,a change in aggregate demand

A short-run equilibrium occurs

Regarding unemployment,the classical model implies that

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

The short-run aggregate supply (SRAS)curve represents the relationship between

The horizontal portion of the short-run aggregate supply curve in which there is excessive unemployment and unused capacity in the economy is

What effect does a stronger dollar have on aggregate supply? Why?

In the classical model,an increase in aggregate demand will lead to an increase in wage rates while a decrease in aggregate demand will

If your income and the price level both rise by 5 percent,and you think you now have more real income,you are suffering from

According to the Keynesian model,the short-run aggregate supply (SRAS)curve is horizontal when

Which one of the following statements is NOT true?

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

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

All of the following were classical economists EXCEPT

"Supply creates its own demand" is known as

Which of the following is an example of money illusion?

Which of the following would increase aggregate supply?

According to the above figure,what will the price level be in the new long-run equilibrium?

The simplified Keynesian model

-Identify the 3 curves in the above figure.

In the classical model,a change in aggregate demand

A short-run equilibrium occurs

Regarding unemployment,the classical model implies that

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

The short-run aggregate supply (SRAS)curve represents the relationship between

The horizontal portion of the short-run aggregate supply curve in which there is excessive unemployment and unused capacity in the economy is

What effect does a stronger dollar have on aggregate supply? Why?

In the classical model,an increase in aggregate demand will lead to an increase in wage rates while a decrease in aggregate demand will

If your income and the price level both rise by 5 percent,and you think you now have more real income,you are suffering from

According to the Keynesian model,the short-run aggregate supply (SRAS)curve is horizontal when

Which one of the following statements is NOT true?

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

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