Question 1

In the classical view,if desired saving exceeds desired investment,

Accepted Answer

A) government spending must fall. 
B) government spending must rise. 
C) the interest rate would decline. 
D) the interest rate would increase. 
A) government spending must fall. 
B) government spending must rise. 
C) the interest rate would decline. 
D) the interest rate would increase.

Question 2

In the classical view,flexible wage rates would assure

Accepted Answer

A) low inflation. 
B) high rates of unemployment. 
C) high secular inflation rates. 
D) full employment. 
A) low inflation. 
B) high rates of unemployment. 
C) high secular inflation rates. 
D) full employment.

Question 3

"Supply creates its own demand" implies that

Accepted Answer

A) the very act of supplying a particular level of goods and services necessarily equals the level of goods and services demanded. 
B) the very act of demanding a particular level of goods and services necessarily equals the level of goods and services supplied. 
C) the government will buy up any surplus of goods and services in a country to avoid economic problems. 
D) the very act of supplying a particular level of goods and services will not necessarily equal the level of goods and services demanded. 
A) the very act of supplying a particular level of goods and services necessarily equals the level of goods and services demanded. 
B) the very act of demanding a particular level of goods and services necessarily equals the level of goods and services supplied. 
C) the government will buy up any surplus of goods and services in a country to avoid economic problems. 
D) the very act of supplying a particular level of goods and services will not necessarily equal the level of goods and services demanded.

Question 4

In an economy with no government and no international trade,consumption expenditures will be less than the total value of goods and services when

Accepted Answer

A) investment is zero. 
B) saving is zero. 
C) people save some of their income. 
D) people barter rather than use money in making exchanges. 
A) investment is zero. 
B) saving is zero. 
C) people save some of their income. 
D) people barter rather than use money in making exchanges.

Question 5

-Refer to the above figure.If the aggregate demand curve shifts beyond AD5,which of the following would we NOT expect?

Accepted Answer

A) Strong demand-pull inflation 
B) No increase in real Gross Domestic Product (GDP) 
C) Strong and rapid increases in the price level 
D) Increases in real net domestic product 
A) Strong demand-pull inflation 
B) No increase in real Gross Domestic Product (GDP) 
C) Strong and rapid increases in the price level 
D) Increases in real net domestic product

Question 6

An individual who suffers from money illusion will

Accepted Answer

A) feel that a doubling of prices and income improves his economic position. 
B) concentrate on relative prices. 
C) never be fooled by the impact of price changes on the purchasing power of income. 
D) try to use counterfeit money. 
A) feel that a doubling of prices and income improves his economic position. 
B) concentrate on relative prices. 
C) never be fooled by the impact of price changes on the purchasing power of income. 
D) try to use counterfeit money.

Question 7

-Consider the above figure.If the aggregate demand went from AD2 to AD3,our nation would have gone from

Accepted Answer

A) a recessionary gap to an inflationary gap. 
B) a recessionary gap to full-employment real GDP. 
C) an inflationary gap to full-employment GDP. 
D) full-employment real GDP to an inflationary gap. 
A) a recessionary gap to an inflationary gap. 
B) a recessionary gap to full-employment real GDP. 
C) an inflationary gap to full-employment GDP. 
D) full-employment real GDP to an inflationary gap.

Question 8

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 9

In the Keynesian model which includes the Keynesian short-run aggregate supply curve,

Accepted Answer

A) an increase in aggregate demand would causes the price level to rise,but does not change the level of real GDP. 
B) an increase in aggregate demand causes real GDP to rise without changing the price level. 
C) an increase in aggregate demand changes neither the price level nor the level of real GDP. 
D) an increase in aggregate demand causes real GDP and the price level to decrease. 
A) an increase in aggregate demand would causes the price level to rise,but does not change the level of real GDP. 
B) an increase in aggregate demand causes real GDP to rise without changing the price level. 
C) an increase in aggregate demand changes neither the price level nor the level of real GDP. 
D) an increase in aggregate demand causes real GDP and the price level to decrease.

Question 10

In the classical model,what happens to the level of real GDP if aggregate demand increases?

Accepted Answer

A) Real GDP increases. 
B) Real GDP decreases. 
C) Real GDP would increase at first,then decrease. 
D) Real GDP would remain the same,at equilibrium. 
A) Real GDP increases. 
B) Real GDP decreases. 
C) Real GDP would increase at first,then decrease. 
D) Real GDP would remain the same,at equilibrium.

Question 11

Classical economists argued that

Accepted Answer

A) there would always be an excess of saving over investment. 
B) workers had money illusion. 
C) excess savings would create unemployment. 
D) a flexible interest rate would make saving equal to investment. 
A) there would always be an excess of saving over investment. 
B) workers had money illusion. 
C) excess savings would create unemployment. 
D) a flexible interest rate would make saving equal to investment.

Question 12

The classical economists argued that planned saving and planned investment will always be equal because of changes in

Accepted Answer

A) the level of real disposable income. 
B) the interest rate. 
C) the price level. 
D) wages. 
A) the level of real disposable income. 
B) the interest rate. 
C) the price level. 
D) wages.

Question 13

The classical economists assumed that

Accepted Answer

A) monopoly was widespread in the economy. 
B) government intervention in the economic system was necessary and helpful. 
C) wages and prices were inflexible,especially downward. 
D) wages and prices were flexible. 
A) monopoly was widespread in the economy. 
B) government intervention in the economic system was necessary and helpful. 
C) wages and prices were inflexible,especially downward. 
D) wages and prices were flexible.

Question 14

If we observe an increase in real GDP and an increase in the price level after an increase in aggregate demand,we can conclude that

Accepted Answer

A) the aggregate supply curve is upward sloping. 
B) the aggregate supply curve is horizontal. 
C) the aggregate supply curve is vertical. 
D) the economy is now at full employment. 
A) the aggregate supply curve is upward sloping. 
B) the aggregate supply curve is horizontal. 
C) the aggregate supply curve is vertical. 
D) the economy is now at full employment.

Question 15

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

Accepted Answer

A) Wages and prices are flexible. 
B) People are motivated by self-interest. 
C) Money illusion exists. 
D) Pure competition exists. 
A) Wages and prices are flexible. 
B) People are motivated by self-interest. 
C) Money illusion exists. 
D) Pure competition exists.

Question 16

The short-run aggregate supply curve would shift and the long-run aggregate supply curve would remain fixed if

Accepted Answer

A) there was a temporary shock to aggregate demand. 
B) there was a temporary shock that influenced the supply side. 
C) there was a permanent increase in aggregate demand along with a permanent decrease in aggregate supply. 
D) there was a permanent increase in aggregate demand. 
A) there was a temporary shock to aggregate demand. 
B) there was a temporary shock that influenced the supply side. 
C) there was a permanent increase in aggregate demand along with a permanent decrease in aggregate supply. 
D) there was a permanent increase in aggregate demand.

Question 17

-Refer to the above figure.Which point or points represent(s)a short-run equilibrium?

Accepted Answer

A) A only 
B) B only 
C) C only 
D) both A and B 
A) A only 
B) B only 
C) C only 
D) both A and B

Question 18

-Refer to the above figure.Assume that B is the current long-run aggregate supply (LRAS)curve and E is the current short-run aggregate supply (SRAS)curve.If a 90-day embargo of oil from the Middle East to the United States were announced,and if after that 90-day period oil prices were expected to return to normal pre-embargo prices,then you would expect

Accepted Answer

A) the LRAS and the SRAS to remain at B and E,respectively. 
B) the LRAS to remain at B,but the SRAS to shift to D. 
C) the LRAS to remain at B,but the SRAS to shift to F. 
D) the LRAS to shift to C,and the SRAS to shift to F. 
A) the LRAS and the SRAS to remain at B and E,respectively. 
B) the LRAS to remain at B,but the SRAS to shift to D. 
C) the LRAS to remain at B,but the SRAS to shift to F. 
D) the LRAS to shift to C,and the SRAS to shift to F.

Question 19

A reduction in nominal wages will cause which of the following?

Accepted Answer

A) a movement along the short-run aggregate supply curve 
B) a shift of both the short-run and long-run aggregate supply curves 
C) a rightward shift in the short-run aggregate supply curve 
D) a leftward shift in the short-run aggregate supply curve to shift to the left 
A) a movement along the short-run aggregate supply curve 
B) a shift of both the short-run and long-run aggregate supply curves 
C) a rightward shift in the short-run aggregate supply curve 
D) a leftward shift in the short-run aggregate supply curve to shift to the left

Question 20

There is a distinction between the long-run aggregate supply (LRAS)curve and the short-run aggregate supply (SRAS)curve.In the long run,

Accepted Answer

A) technology is fixed,but not in the short run. 
B) the price level is constant in the long run,but fluctuates in the short run. 
C) the aggregate supply curve is horizontal,while in the short run it is upward sloping. 
D) all adjustments to changes in the price level have been made,but in the short run all changes in the price level do not occur. 
A) technology is fixed,but not in the short run. 
B) the price level is constant in the long run,but fluctuates in the short run. 
C) the aggregate supply curve is horizontal,while in the short run it is upward sloping. 
D) all adjustments to changes in the price level have been made,but in the short run all changes in the price level do not occur.

In the classical view,if desired saving exceeds desired investment,

In the classical view,flexible wage rates would assure

"Supply creates its own demand" implies that

In an economy with no government and no international trade,consumption expenditures will be less than the total value of goods and services when

-Refer to the above figure.If the aggregate demand curve shifts beyond AD5,which of the following would we NOT expect?

An individual who suffers from money illusion will

-Consider the above figure.If the aggregate demand went from AD2 to AD3,our nation would have gone from

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?

In the Keynesian model which includes the Keynesian short-run aggregate supply curve,

In the classical model,what happens to the level of real GDP if aggregate demand increases?

Classical economists argued that

The classical economists argued that planned saving and planned investment will always be equal because of changes in

The classical economists assumed that

If we observe an increase in real GDP and an increase in the price level after an increase in aggregate demand,we can conclude that

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

The short-run aggregate supply curve would shift and the long-run aggregate supply curve would remain fixed if

-Refer to the above figure.Which point or points represent(s)a short-run equilibrium?

A reduction in nominal wages will cause which of the following?

There is a distinction between the long-run aggregate supply (LRAS)curve and the short-run aggregate supply (SRAS)curve.In the long run,

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

In the classical view,if desired saving exceeds desired investment,

In the classical view,flexible wage rates would assure

"Supply creates its own demand" implies that

In an economy with no government and no international trade,consumption expenditures will be less than the total value of goods and services when

-Refer to the above figure.If the aggregate demand curve shifts beyond AD5,which of the following would we NOT expect?

An individual who suffers from money illusion will

-Consider the above figure.If the aggregate demand went from AD2 to AD3,our nation would have gone from

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?

In the Keynesian model which includes the Keynesian short-run aggregate supply curve,

In the classical model,what happens to the level of real GDP if aggregate demand increases?

Classical economists argued that

The classical economists argued that planned saving and planned investment will always be equal because of changes in

The classical economists assumed that

If we observe an increase in real GDP and an increase in the price level after an increase in aggregate demand,we can conclude that

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

The short-run aggregate supply curve would shift and the long-run aggregate supply curve would remain fixed if

-Refer to the above figure.Which point or points represent(s)a short-run equilibrium?

A reduction in nominal wages will cause which of the following?

There is a distinction between the long-run aggregate supply (LRAS)curve and the short-run aggregate supply (SRAS)curve.In the long run,

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