Question 1

Say's law states that

Accepted Answer

A) supply creates its own demand. 
B) supply and demand are never equal. 
C) demand may be greater than supply. 
D) supply will usually be greater than demand. 
A) supply creates its own demand. 
B) supply and demand are never equal. 
C) demand may be greater than supply. 
D) supply will usually be greater than demand.

Question 2

-Consider the above figure.If the aggregate demand fell from AD1 to AD2,our nation would be experiencing

Accepted Answer

A) an inflationary gap. 
B) a recessionary gap. 
C) overemployment. 
D) rising prices. 
A) an inflationary gap. 
B) a recessionary gap. 
C) overemployment. 
D) rising prices.

Question 3

The equilibrating force in the credit market in the classical model is

Accepted Answer

A) the interest rate. 
B) the price level. 
C) full employment. 
D) fiscal policy. 
A) the interest rate. 
B) the price level. 
C) full employment. 
D) fiscal policy.

Question 4

According to classical theory,any changes in aggregate demand will

Accepted Answer

A) lead to changes in the price level. 
B) lead to changes in real Gross Domestic Product (GDP),but not in the price level. 
C) lead to changes in both real Gross Domestic Product (GDP)and the price level. 
D) have no affect on prices or real Gross Domestic Product (GDP). 
A) lead to changes in the price level. 
B) lead to changes in real Gross Domestic Product (GDP),but not in the price level. 
C) lead to changes in both real Gross Domestic Product (GDP)and the price level. 
D) have no affect on prices or real Gross Domestic Product (GDP).

Question 5

Other things being equal,if input prices rise in a country,then there would be

Accepted Answer

A) cost-push inflation. 
B) demand-pull inflation. 
C) cost-push deflation. 
D) more production and a lower price level. 
A) cost-push inflation. 
B) demand-pull inflation. 
C) cost-push deflation. 
D) more production and a lower price level.

Question 6

The net effect of a stronger dollar on real GDP is

Accepted Answer

A) an increase in real GDP. 
B) a decrease in real GDP. 
C) an increase in the price level. 
D) dependent on whether the increase in aggregate supply is more or less than the decrease in aggregate demand. 
A) an increase in real GDP. 
B) a decrease in real GDP. 
C) an increase in the price level. 
D) dependent on whether the increase in aggregate supply is more or less than the decrease in aggregate demand.

Question 7

In the classical model,

Accepted Answer

A) unemployment will never exist since workers will be willing to accept lower wages and will then be able to find work. 
B) unemployment will never exist because employers will be willing to pay the wage rate demanded by the workers. 
C) wages will go up but never go down. 
D) full employment will never be reached. 
A) unemployment will never exist since workers will be willing to accept lower wages and will then be able to find work. 
B) unemployment will never exist because employers will be willing to pay the wage rate demanded by the workers. 
C) wages will go up but never go down. 
D) full employment will never be reached.

Question 8

Keynes argued that because of sticky prices and wages,

Accepted Answer

A) the short-run aggregate supply curve could be horizontal. 
B) the short-run aggregate supply curve is probably vertical. 
C) the long-run aggregate supply curve slopes downward. 
D) the aggregate demand curve is vertical. 
A) the short-run aggregate supply curve could be horizontal. 
B) the short-run aggregate supply curve is probably vertical. 
C) the long-run aggregate supply curve slopes downward. 
D) the aggregate demand curve is vertical.

Question 9

If the price level should increase in the near term due to decreases in the short-run aggregate supply,the result would be

Accepted Answer

A) demand-pull inflation. 
B) demand-pull recession. 
C) cost-push inflation. 
D) cost-pull expansion. 
A) demand-pull inflation. 
B) demand-pull recession. 
C) cost-push inflation. 
D) cost-pull expansion.

Question 10

Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?

Accepted Answer

A) The Keynesian model assumes that people work for motives other than those of earning an income for themselves and supporting a family. 
B) The Keynesian model assumes that nominal wages are inflexible downward. 
C) The Keynesian model assumes that the level of real GDP is inflexible. 
D) The Keynesian model assumes that workers can lose their jobs to foreign competition during economic downturns. 
A) The Keynesian model assumes that people work for motives other than those of earning an income for themselves and supporting a family. 
B) The Keynesian model assumes that nominal wages are inflexible downward. 
C) The Keynesian model assumes that the level of real GDP is inflexible. 
D) The Keynesian model assumes that workers can lose their jobs to foreign competition during economic downturns.

Question 11

According to the classical economists,an economy producing $15 trillion in goods and services

Accepted Answer

A) may be producing too much since the needs of people may not be this great. 
B) simultaneously generates the income necessary to purchase $15 trillion in goods and services. 
C) is supplying $15 trillion in goods and services,but could be demanding more or less than $15 trillion in goods and services for a very long period of time. 
D) could experience a permanent glut if no one has estimated the demand for goods and services in the economy. 
A) may be producing too much since the needs of people may not be this great. 
B) simultaneously generates the income necessary to purchase $15 trillion in goods and services. 
C) is supplying $15 trillion in goods and services,but could be demanding more or less than $15 trillion in goods and services for a very long period of time. 
D) could experience a permanent glut if no one has estimated the demand for goods and services in the economy.

Question 12

Which of the following decreases aggregate supply?

Accepted Answer

A) discoveries of new raw materials 
B) an increase in competition 
C) an increase in training and education 
D) a decrease in labor supply 
A) discoveries of new raw materials 
B) an increase in competition 
C) an increase in training and education 
D) a decrease in labor supply

Question 13

Assume equilibrium real GDP per year is equal to full-employment real GDP.If aggregate demand falls,then

Accepted Answer

A) the price level will increase in the short run and decrease in the long run. 
B) there will be an expansionary gap. 
C) there will be a recessionary gap. 
D) long-run aggregate supply will eventually decrease too. 
A) the price level will increase in the short run and decrease in the long run. 
B) there will be an expansionary gap. 
C) there will be a recessionary gap. 
D) long-run aggregate supply will eventually decrease too.

Question 14

Assume equilibrium real GDP per year is equal to full-employment real GDP.Which of the following will cause a recessionary gap?

Accepted Answer

A) an increase in aggregate demand 
B) a reduction in aggregate demand 
C) a discovery of a new raw material 
D) a temporary reduction in the price of oil 
A) an increase in aggregate demand 
B) a reduction in aggregate demand 
C) a discovery of a new raw material 
D) a temporary reduction in the price of oil

Question 15

The simple Keynesian model assumes that

Accepted Answer

A) gross private domestic investment exceeds net investment by the capital consumption allowance. 
B) prices,especially the price of wages,are "sticky downward." 
C) there will never be any excess capacity in the short run. 
D) aggregate demand will always equal aggregate supply. 
A) gross private domestic investment exceeds net investment by the capital consumption allowance. 
B) prices,especially the price of wages,are "sticky downward." 
C) there will never be any excess capacity in the short run. 
D) aggregate demand will always equal aggregate supply.

Question 16

According to classical economists,when aggregate demand decreases,

Accepted Answer

A) unemployment is reduced,the price level increases,and equilibrium real GDP is reached. 
B) unemployment is reduced,the price level decreases,and equilibrium real GDP is reached. 
C) unemployment temporarily increases,the price level increases,and equilibrium real GDP is reached. 
D) unemployment temporarily increases,the price level decreases,and equilibrium real GDP is reached. 
A) unemployment is reduced,the price level increases,and equilibrium real GDP is reached. 
B) unemployment is reduced,the price level decreases,and equilibrium real GDP is reached. 
C) unemployment temporarily increases,the price level increases,and equilibrium real GDP is reached. 
D) unemployment temporarily increases,the price level decreases,and equilibrium real GDP is reached.

Question 17

Suppose Paris thinks a 5 percent increase in her hourly wage as an incentive to work more hours while the price level also increases by 5 percent.Paris is said to be suffering from

Accepted Answer

A) money illusion. 
B) rationality. 
C) irrationality. 
D) the effects of competition. 
A) money illusion. 
B) rationality. 
C) irrationality. 
D) the effects of competition.

Question 18

Which of the following is NOT true according to Say's law?

Accepted Answer

A) Supply creates its own demand. 
B) No overproduction is possible in a market economy in the long run. 
C) Desired expenditures will always be higher than actual expenditures. 
D) Producing goods and services generates the means and the willingness to purchase other goods and services. 
A) Supply creates its own demand. 
B) No overproduction is possible in a market economy in the long run. 
C) Desired expenditures will always be higher than actual expenditures. 
D) Producing goods and services generates the means and the willingness to purchase other goods and services.

Question 19

A stronger U.S.dollar leads to ________ in SRAS and ________ in AD simultaneously.

Accepted Answer

A) a leftward shift ;a rightward shift 
B) a rightward shift;a leftward shift 
C) a rightward shift;a rightward shift 
D) a leftward shift;a leftward shift 
A) a leftward shift ;a rightward shift 
B) a rightward shift;a leftward shift 
C) a rightward shift;a rightward shift 
D) a leftward shift;a leftward shift

Question 20

"Supply creates its own demand" is known as

Accepted Answer

A) Smith's law. 
B) Say's law. 
C) the circular flow. 
D) the Ricardian dilemma. 
A) Smith's law. 
B) Say's law. 
C) the circular flow. 
D) the Ricardian dilemma.

Say's law states that

-Consider the above figure.If the aggregate demand fell from AD1 to AD2,our nation would be experiencing

The equilibrating force in the credit market in the classical model is

According to classical theory,any changes in aggregate demand will

Other things being equal,if input prices rise in a country,then there would be

The net effect of a stronger dollar on real GDP is

In the classical model,

Keynes argued that because of sticky prices and wages,

If the price level should increase in the near term due to decreases in the short-run aggregate supply,the result would be

Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?

According to the classical economists,an economy producing $15 trillion in goods and services

Which of the following decreases aggregate supply?

Assume equilibrium real GDP per year is equal to full-employment real GDP.If aggregate demand falls,then

Assume equilibrium real GDP per year is equal to full-employment real GDP.Which of the following will cause a recessionary gap?

The simple Keynesian model assumes that

According to classical economists,when aggregate demand decreases,

Suppose Paris thinks a 5 percent increase in her hourly wage as an incentive to work more hours while the price level also increases by 5 percent.Paris is said to be suffering from

Which of the following is NOT true according to Say's law?

A stronger U.S.dollar leads to in SRAS and in AD simultaneously.

"Supply creates its own demand" is known as

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

Say's law states that

-Consider the above figure.If the aggregate demand fell from AD1 to AD2,our nation would be experiencing

The equilibrating force in the credit market in the classical model is

According to classical theory,any changes in aggregate demand will

Other things being equal,if input prices rise in a country,then there would be

The net effect of a stronger dollar on real GDP is

In the classical model,

Keynes argued that because of sticky prices and wages,

If the price level should increase in the near term due to decreases in the short-run aggregate supply,the result would be

Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?

According to the classical economists,an economy producing $15 trillion in goods and services

Which of the following decreases aggregate supply?

Assume equilibrium real GDP per year is equal to full-employment real GDP.If aggregate demand falls,then

Assume equilibrium real GDP per year is equal to full-employment real GDP.Which of the following will cause a recessionary gap?

The simple Keynesian model assumes that

According to classical economists,when aggregate demand decreases,

Suppose Paris thinks a 5 percent increase in her hourly wage as an incentive to work more hours while the price level also increases by 5 percent.Paris is said to be suffering from

Which of the following is NOT true according to Say's law?

A stronger U.S.dollar leads to ________ in SRAS and ________ in AD simultaneously.

"Supply creates its own demand" is known as

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

A stronger U.S.dollar leads to in SRAS and in AD simultaneously.