Question 1

All of the following will cause the aggregate supply curve to shift to the right EXCEPT

Accepted Answer

A) discoveries of raw materials. 
B) a reduction in input prices. 
C) an increase in marginal tax rates. 
D) a reduction in international trade barriers. 
A) discoveries of raw materials. 
B) a reduction in input prices. 
C) an increase in marginal tax rates. 
D) a reduction in international trade barriers.

Question 2

An increase in aggregate demand will tend to cause which of the following?

Accepted Answer

A) a deflationary gap 
B) a recessionary gap 
C) cost-push inflation 
D) none of the above 
A) a deflationary gap 
B) a recessionary gap 
C) cost-push inflation 
D) none of the above

Question 3

Which of the 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 4

Leakages in the circular flow model are

Accepted Answer

A) caused by people not acting rational. 
B) possible when unemployment exists. 
C) reflected in the vertical long-run aggregate supply curve. 
D) caused by people saving instead of spending. 
A) caused by people not acting rational. 
B) possible when unemployment exists. 
C) reflected in the vertical long-run aggregate supply curve. 
D) caused by people saving instead of spending.

Question 5

Which one of the following statements is true?

Accepted Answer

A) The classical model cannot explain periods of prolonged unemployment. 
B) The Keynesian model cannot explain periods of prolonged unemployment. 
C) The Keynesian model assumes complete flexibility of wages and prices. 
D) The Keynesian model shows that the level of real GDP is supply-determined. 
A) The classical model cannot explain periods of prolonged unemployment. 
B) The Keynesian model cannot explain periods of prolonged unemployment. 
C) The Keynesian model assumes complete flexibility of wages and prices. 
D) The Keynesian model shows that the level of real GDP is supply-determined.

Question 6

Which of the following will NOT shift the Keynesian short-run aggregate supply curve?

Accepted Answer

A) a change in technology 
B) a change in profit expectations 
C) a change in input prices 
D) a change in the price level 
A) a change in technology 
B) a change in profit expectations 
C) a change in input prices 
D) a change in the price level

Question 7

An individual who is suffering from money illusion is more concerned with

Accepted Answer

A) relative prices than with nominal prices. 
B) relative prices than with real prices. 
C) nominal prices than with relative prices. 
D) real prices than with nominal prices. 
A) relative prices than with nominal prices. 
B) relative prices than with real prices. 
C) nominal prices than with relative prices. 
D) real prices than with nominal prices.

Question 8

Say's law states that

Accepted Answer

A) desired expenditures will equal actual expenditures. 
B) people produce only the goods they want. 
C) demand is always less than supply. 
D) overproduction is never possible because of limited resources. 
A) desired expenditures will equal actual expenditures. 
B) people produce only the goods they want. 
C) demand is always less than supply. 
D) overproduction is never possible because of limited resources.

Question 9

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

Accepted Answer

A) Pure competition exists. 
B) People are motivated by self interest. 
C) Wages and prices are inflexible. 
D) There is no money illusion. 
A) Pure competition exists. 
B) People are motivated by self interest. 
C) Wages and prices are inflexible. 
D) There is no money illusion.

Question 10

The approach to understanding the determination of real GDP and the price level that emphasizes incomplete adjustment in the prices of many goods is

Accepted Answer

A) the classical model. 
B) the Keynesian model. 
C) Say's Law. 
D) the aggregate demand model. 
A) the classical model. 
B) the Keynesian model. 
C) Say's Law. 
D) the aggregate demand model.

Question 11

With respect to unemployment,the classical model states that

Accepted Answer

A) unemployment of any kind cannot exist. 
B) only voluntary unemployment exists. 
C) unemployment fluctuates with the interest rate. 
D) involuntary unemployment will always exceed voluntary unemployment. 
A) unemployment of any kind cannot exist. 
B) only voluntary unemployment exists. 
C) unemployment fluctuates with the interest rate. 
D) involuntary unemployment will always exceed voluntary unemployment.

Question 12

Long-run aggregate supply curve in the classical model

Accepted Answer

A) is the level of real GDP corresponding to 100 percent labor force participation. 
B) is the level of real GDP corresponding to the natural rate of unemployment. 
C) is a downward sloping line. 
D) is determined by the capital stock of the economy,not the labor force. 
A) is the level of real GDP corresponding to 100 percent labor force participation. 
B) is the level of real GDP corresponding to the natural rate of unemployment. 
C) is a downward sloping line. 
D) is determined by the capital stock of the economy,not the labor force.

Question 13

Suppose that last year $1 U.S.exchanged for 1.35 euros.If this year $1 exchanges for 1.25 euros,then we can conclude that

Accepted Answer

A) the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS)curve to shift to the left. 
B) the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS)to shift to the right. 
C) the dollar is stronger this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS)curve to shift to the left. 
D) the dollar is weaker this year than it was last year but this will have no impact on the United States' short-run aggregate supply (SRAS)curve. 
A) the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS)curve to shift to the left. 
B) the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS)to shift to the right. 
C) the dollar is stronger this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS)curve to shift to the left. 
D) the dollar is weaker this year than it was last year but this will have no impact on the United States' short-run aggregate supply (SRAS)curve.

Question 14

According to classical theory,a shift in aggregate demand will affect

Accepted Answer

A) the price level only. 
B) real Gross Domestic Product (GDP)only. 
C) the level of employment only. 
D) both real Gross Domestic Product (GDP)and the level of employment. 
A) the price level only. 
B) real Gross Domestic Product (GDP)only. 
C) the level of employment only. 
D) both real Gross Domestic Product (GDP)and the level of employment.

Question 15

Consider a nation in which most workers are unionized.If all the nation's unions band together and succeed in boosting wages established by long-term labor contracts,then

Accepted Answer

A) there is a leftward shift in just LRAS. 
B) there is a leftward shift in both LRAS and SRAS. 
C) there is a rightward shift in just SRAS. 
D) there is a rightward movement along the SRAS curve. 
A) there is a leftward shift in just LRAS. 
B) there is a leftward shift in both LRAS and SRAS. 
C) there is a rightward shift in just SRAS. 
D) there is a rightward movement along the SRAS curve.

Question 16

The Keynesian short-run aggregate supply curve is demonstrated graphically as a

Accepted Answer

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

Question 17

An inflationary gap is the amount by which

Accepted Answer

A) total planned production exceeds total planned real expenditures in the long run. 
B) the short-run equilibrium level of nominal GDP is above the short-run level of real GDP. 
C) the short-run equilibrium level of nominal GDP is below the short-run level of real GDP. 
D) the short-run equilibrium level of real GDP is above the full-employment level of real GDP. 
A) total planned production exceeds total planned real expenditures in the long run. 
B) the short-run equilibrium level of nominal GDP is above the short-run level of real GDP. 
C) the short-run equilibrium level of nominal GDP is below the short-run level of real GDP. 
D) the short-run equilibrium level of real GDP is above the full-employment level of real GDP.

Question 18

If there is a change in the U.S.endowment of factors of production,then there would be

Accepted Answer

A) a shift in just LRAS. 
B) a shift in both LRAS and SRAS. 
C) shifts in just SRAS. 
D) a movement along the SRAS curve. 
A) a shift in just LRAS. 
B) a shift in both LRAS and SRAS. 
C) shifts in just SRAS. 
D) a movement along the SRAS curve.

Question 19

Why is wage and price flexibility an important assumption of the classical model?

Accepted Answer

A) Flexible wages and prices guarantee that there will be no scarcity. 
B) Flexible wages and prices allow business firms to fool their workers through the money illusion. 
C) Flexible wages and prices allow business firms to fool their customers through the money illusion. 
D) Flexible wages and prices allow markets to reach equilibrium. 
A) Flexible wages and prices guarantee that there will be no scarcity. 
B) Flexible wages and prices allow business firms to fool their workers through the money illusion. 
C) Flexible wages and prices allow business firms to fool their customers through the money illusion. 
D) Flexible wages and prices allow markets to reach equilibrium.

Question 20

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

Accepted Answer

A) Pure competition exists. 
B) Wages and prices are flexible. 
C) Government spending is necessary to achieve economic stability. 
D) People are motivated by self-interest. 
A) Pure competition exists. 
B) Wages and prices are flexible. 
C) Government spending is necessary to achieve economic stability. 
D) People are motivated by self-interest.

All of the following will cause the aggregate supply curve to shift to the right EXCEPT

An increase in aggregate demand will tend to cause which of the following?

Which of the 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?

Leakages in the circular flow model are

Which one of the following statements is true?

Which of the following will NOT shift the Keynesian short-run aggregate supply curve?

An individual who is suffering from money illusion is more concerned with

Say's law states that

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

The approach to understanding the determination of real GDP and the price level that emphasizes incomplete adjustment in the prices of many goods is

With respect to unemployment,the classical model states that

Long-run aggregate supply curve in the classical model

Suppose that last year $1 U.S.exchanged for 1.35 euros.If this year $1 exchanges for 1.25 euros,then we can conclude that

According to classical theory,a shift in aggregate demand will affect

Consider a nation in which most workers are unionized.If all the nation's unions band together and succeed in boosting wages established by long-term labor contracts,then

The Keynesian short-run aggregate supply curve is demonstrated graphically as a

An inflationary gap is the amount by which

If there is a change in the U.S.endowment of factors of production,then there would be

Why is wage and price flexibility an important assumption of the classical model?

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

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 will cause the aggregate supply curve to shift to the right EXCEPT

An increase in aggregate demand will tend to cause which of the following?

Which of the 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?

Leakages in the circular flow model are

Which one of the following statements is true?

Which of the following will NOT shift the Keynesian short-run aggregate supply curve?

An individual who is suffering from money illusion is more concerned with

Say's law states that

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

The approach to understanding the determination of real GDP and the price level that emphasizes incomplete adjustment in the prices of many goods is

With respect to unemployment,the classical model states that

Long-run aggregate supply curve in the classical model

Suppose that last year $1 U.S.exchanged for 1.35 euros.If this year $1 exchanges for 1.25 euros,then we can conclude that

According to classical theory,a shift in aggregate demand will affect

Consider a nation in which most workers are unionized.If all the nation's unions band together and succeed in boosting wages established by long-term labor contracts,then

The Keynesian short-run aggregate supply curve is demonstrated graphically as a

An inflationary gap is the amount by which

If there is a change in the U.S.endowment of factors of production,then there would be

Why is wage and price flexibility an important assumption of the classical model?

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

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