Deck 13: A Walk Through the Twentieth Century and Beyond

Question 1

What do Keynesians believe?

A)Saving depends on the level of the interest rate.
B)Saving depends on the level of income.
C)Investment is stable.
D)Government policies should be neutral.

Answer 1

Saving depends on the level of income.

Question 2

Which of the following do neoclassical economists believe?

A)That,in equilibrium,the leakage of savings from the circular flow would always be matched by an equal amount of investment
B)That if savings exceed investment,the interest rate will fall
C)That surplus output would lead to a fall in prices
D)All of the above

Answer 2

All of the above

Question 3

All of the following,except one,are pillars on which neoclassical theory is built.Which is the exception?

A)The flexibility of production
B)The validity of Say's Law
C)The flexibility of prices
D)The flexibility of interest rates
E)The flexibility of wages

Answer 3

The flexibility of production

Question 4

Which of the following best describes the federal government's annual budgets for the last eighteen years?

A)There were budget surpluses for the first several years,then budget deficits for several more,followed by two years of surpluses.
B)There were budget deficits for the first couple of years,then budget surpluses for several more,followed by several years of deficits.
C)There were budget deficits for all of the years.
D)There were budget surpluses for all of the years.

Question 5

Which of the following best explains the ups and downs of the Canadian dollar in the last several years?

A)They are caused by changes in productivity and wage rates within Canada
B)They are the result of differences in inflation rates in Canada compared to those in the United States
C)They are the result of changes in commodity prices and long-term investment by Canadians to foreign nations
D)They are the result of changes in commodity prices and long-term investment by foreigners into Canada

Question 6

What ensures the equality of savings and investment,according to neoclassical theory?

A)Flexible prices
B)Flexible interest rates
C)Flexible wages
D)Say's Law

Question 7

What characterized the decades of the 1950s and 1960s?

A)Low growth and high unemployment
B)Low unemployment and high inflation
C)Stagflation
D)Economic stability with reasonably low unemployment and inflation

Question 8

According to supply-siders,what is one of the keys to curbing stagflation?

A)Increasing the money supply and cutting government spending
B)Using income policies to increase productivity
C)Shifting the AD curve to the right
D)Convincing people to buy domestic rather than foreign-produced goods
E)Lowering taxes

Question 9

What was the supply-side diagnosis of stagflation?

A)It was triggered by the high price of imported oil and accentuated by declining productivity rates.
B)It was triggered by the stock market crash and accentuated by the low price of imported oil.
C)It was triggered by the stock market crash and accentuated by declining productivity rates.
D)It was triggered by the stock market crash and accentuated by the high price of imported oil.

Question 10

What is the essential difference between Keynesian and neoclassical views of macroeconomy?

A)The Keynesian view is that the economy is capable of automatically adjusting to economic changes because of the flexibility of wages,prices,and interest rates,while the neoclassical view is that the economy could get stuck in a recessionary gap because of their inflexibility.
B)The neoclassical view is that the economy can automatically adjust to economic changes because of the flexibility of wages,prices,and interest rates,while the Keynesian view is that the economy could get stuck in a recessionary gap because of their inflexibility.
C)While both views agree on the automatic adjustment ability of the economy,the Keynesian view sees wages as flexible,but the neoclassical view does not.
D)While both views agree on the automatic adjustment ability of the economy,the neoclassical view sees wages as flexible,but the Keynesians do not.

Question 11

With which of the following events are derivatives,hedge funds,and sub-prime mortgages all associated?

A)The Great Depression
B)The post-World War II economic boom period
C)The financial crisis of 2008-2010
D)The stagflation years of the 1970s

Question 12

Which school of thought believed that long-run equilibrium occurs automatically and is the normal state of affairs in a market economy?

A)Keynesians
B)Neoclassicists
C)Supply-siders
D)Symbolic analysts

Question 13

According to Keynes,what determines interest rates?

A)The level of saving
B)The level of investment
C)The velocity of money
D)Both saving and investment
E)The interaction of the demand and supply of money

Question 14

How is a historical look at the macroeconomy of Canada beneficial?

A)It assures us that the real issues of the day do not change.
B)It enables us to realize that the views of economists about the issues of the day are very similar over time.
C)It helps us to identify the relationship between economic events and changes in macroeconomic theory.
D)It establishes the unchanging nature of macroeconomic theory.

Question 15

According to neoclassical economists,what would happen if total spending was less than total output?

A)Product prices would rise,but wage rates would fall.
B)Product prices would fall,but wage rates would rise.
C)Nominal GDP would rise,but real GDP would remain constant.
D)Both product prices and wage rates would fall.
E)Both product prices and wage rates would rise.

Question 16

Which one of the following does not explain why Canada survived the financial crisis so much better than did the United States.

A)Canada's banking regulations limit the amount of leverage and securitization possible.
B)Canada's Financial Consumer Agency restricted sub-prime lending.
C)Canadians never got caught up in the ideology that denies any need for regulation of the banking system.
D)House prices in Canada did not increase.

Question 17

Which of the following is a statement of Say's Law?

A)Demand creates its own supply.
B)Supply creates its own demand.
C)The costs of production decrease as output increases.
D)The costs of production increase as output increases

Question 18

What characterized the decade of the 1970s in Canada?

A)Prosperity and strong economic growth
B)Stagflation
C)Economic recovery from the 1960s depression
D)Low unemployment and high inflation

Question 19

When did the Great Depression occur?

A)At the beginning of the twentieth century
B)In the seven years following World War I
C)During the decade of the 1930s
D)In the five years following World War II

Question 20

A major shift in perceptions about the role of government occurred during which of the following periods in history?

A)Immediately following WW II
B)In the middle of the Great Depression
C)Just prior to World War I
D)In the 1990s

Question 21

According to neoclassical theory,the aggregate supply curve is horizontal at the prevailing price level.

Question 22

Explain why the supply of loanable funds is an upward sloping curve.(Why is there a graph here? It's not part of the question or answer. )

Question 23

Explain how a surplus in the labour market is eliminated.

Question 24

Neoclassical economists believe that market economies can achieve full employment through self-adjustment.

Question 25

Why is unemployment voluntary,according to neoclassical theory?

Question 26

Which of the following statements correctly describes the economic conditions in Canada between 2012 and 2016?
A.Lackluster growth,slow decline in the unemployment rate,and a collapse in oil prices.
B.Lackluster growth,slow increases in the unemployment rate,and a collapse in oil prices.
C.Strong growth,sizable increases in the unemployment rate,and a collapse in oil prices.
D.Strong growth,sizable increases in the unemployment rate,and a surge in oil prices.

Question 27

One of the major criticisms of the supply-side emphasis on using tax cuts to stimulate the economy is that such cuts affect aggregate demand more than aggregate supply.

Question 28

According to Keynesian theory,a change in aggregate demand might have little or no effect on the price level.

Question 29

The following data shows the labour demand and supply for the economy of Aimeng:

a)What is the equilibrium wage rate,and how many workers would be employed?
b)Suppose the wage rate is $\times$ 300,how many workers would be employed?
c)Suppose the wage rate is $\times$ 900,how many workers would be employed? How many would be unemployed?

Question 30

What did supply-siders see as a solution for the economic problems of the 1970s and 1980s? Explain.

Question 31

According to neoclassical theory,an increase in the level of saving will cause the rate of interest to fall.

Question 32

How did the supply-siders explain the high inflation and high unemployment rates of the 1970s?

Question 33

Sub-prime mortgages and derivatives are associated with stagflation.

Question 34

Say's Law suggests that supply creates its own demand.

Question 35

The external value of the Canadian dollar has been remarkably stable for several decades.

Question 36

Why are wages and prices sticky,according to Keynes?

Question 37

Aggregate demand policies are effective in curing the problems of stagflation.

Question 38

What is the difference between demand side policies and supply side policies?

Question 39

What is the significance of Keynesian economics?

Question 40

Which of the following economic issues were emerging and gaining intense controversy in North America and Europe between 2012-2016?
A.Globalization and income inequality.
B.Globalization and the re-emergence of fixed exchange rates.
C.Currency devaluations and income inequality.
D.Trickle-down economics and industrialization.

Question 41

What policy approaches were used during post World War II to stabilize the economy?

Question 42

What is the essential difference between the Keynesian and the Neoclassical views about the macroeconomy?

Question 43

According to Keynes,how does an economy recover from a recession?

Question 44

Explain why the value of the Canadian dollar in terms of the U.S.dollar was low during the 1990s?

Question 45

Explain the basis of the neoclassical economists argument that long-lasting recessions were impossible.

Question 46

Identify which of the following policy actions would be advocated by Keynesians and which would be advocated by Supply-siders.
a)Privatizing the telecommunication industry.
b)Constructing a national highway.
c)Deregulating the financial industry.
d)Increasing health spending.

Question 47

According to the neoclassical economists,what two things could cause an increase in interest rates?

Question 48

The Great Depression led to the development of Keynesian economics.
What does this approach argue?

Question 49

Why did post-World War I boom not last?

Question 50

According to Neoclassical theory,if the demand for loanable funds by firms were to increase,what will cause the quantity supplied to also increase?

Question 51

Create a graph illustrating labour unemployment.Explain how unemployment occurs.
Unemployment is a result of the prevailing wage rate being above equilibrium.

Question 52

Explain Keynes's approach to how equality of savings and investment in the economy is brought about.

Question 53

Explain the foundation of Keynes's disagreement with neoclassical economists with respect to the inflexibility of prices.

Question 54

Explain why Canada had mainly budget deficits between 1970s and 1990s.

Question 55

Neo-classical economists argued that any unemployment which did occur was strictly temporary.What was the basis of this argument?

Question 56

Neoclassical economists believed that market economies were self-adjusting and concluded that prolonged recessions were an impossibility.What is the basis of this argument?

Question 57

What was the conclusion of the 19^th century-neoclassical economists in regards to changing demand patterns and temporary shortages of specific goods?

Question 58

According to Neoclassicist economists,what are the four pillars upon which the macroeconomy operates?

Question 59

According to neoclassical theory,why is involuntary unemployment impossible?

Question 60

According to Say's Law,states that supply creates its own demand.
What does this mean?

Question 61

Define 'derivative'.

Question 62

Explain the development of innovations in the financial securities market that greatly increased investor interest in the housing market.

Question 63

There were two distinctive approaches with respect to priorities for meeting economic goals while in the recovery phase of the financial crisis.What were these priorities? Provide examples of countries which adopted each approach.

Question 64

According to the neoclassical economists,what would happen if production exceeded total spending in an economy?

Question 65

Keynes did not agree with neoclassical theory about prices and wages being flexible,nor did he believe that their adjustment would guarantee full employment.Why is this?

Question 66

In the decade of the 1990s several significant events occurred.What were these events which changed the world and provided evidence of the predominance of the market system?

Question 67

Define 'hedge fund'

Question 68

The response of the US and Canada to budget deficits that had arisen from stimulative policies were different from those of European countries.Explain the differences.

Question 69

During the Great Depression,several changes in the economic performance occurred.What were these changes?

Question 70

Define 'investment bank'

Question 71

During the Great Depression,what were Keynes's major concerns?

Question 72

An inevitable result of recession is a budget deficit.Explain the reason a deficit occurs.

Question 73

Define 'sub-prime mortgage'

Question 74

What are the key aspects of Keynesian economics?

Question 75

According to neo-classical economists,if prices are truly flexible,what determines aggregate supply?

Question 76

What is a 'restraint program'?

Question 77

Define Say's Law.

Question 78

The abandonment of stimulus packages was advocated in favour of policies for reducing Deficits (thus rejecting Keynesian theory).Explain the arguments for the new approach.

Question 79

By June 2010,the effects of stimulative policies showed countries were coming out of recession.However,there were other concerns regarding the impact of the policies.What was the major concern?

Question 80

Examine the graph below and answer the questions which follow.
a)What problem does the policy approach seek to address?
b)What might have cause of the shifting of the AS curve?
c)What might happen as a result of the shift?