Question 1

The aggregate supply curve will be horizontal if

Accepted Answer

A)  there is no cyclical unemployment.
B)  the economy is operating with considerable idle capacity.
C)  the economy is close to full employment.
D)  the economy is producing real GDP in excess of its potential.E) A) and D)
F) A) and C)

Question 2

If aggregate production in the economy exceeds aggregate purchases

Accepted Answer

A)  firms are producing more during the year than they are selling.
B)  unintended inventory investment is negative.
C)  the economy is operating at a real GDP greater than equilibrium GDP.
D)  saving must be negative.
E)  the economy is in equilibrium.F) All of the above
G) B) and C)

Question 3

When the price level falls

Accepted Answer

A)  aggregate demand shifts to the left.
B)  all prices of individual goods and services decrease.
C)  aggregate demand shifts to the right.
D)  aggregate quantity demanded increases.
E)  the interest rate will increasE.F) A) and E)
G) C) and D)

Question 4

If aggregate demand increases and as a result equilibrium real GDP and employment increase but the price level remains unchanged,we can assume that the aggregate demand curve

Accepted Answer

A)  is vertical.
B)  is horizontal.
C)  intersects a vertical segment of the aggregate supply curve.
D)  intersects a horizontal segment of the aggregate supply curve.
E)  intersects an upward-sloping segment of the aggregate supply curvE.F) A) and E)
G) D) and E)

Question 5

According to Keynes,output is demand determined.This means that

Accepted Answer

A)  the production of output creates the demand for the output.
B)  the demand for money causes businesses to produce goods and services.
C)  business will try to produce as much output as it can with the labor force fully employed.
D)  the output that business chooses to produce will be determined by the demand for output.E) B) and C)
F) None of the above

Question 6

The line segment RS describes the region where

Accepted Answer

A)  increases in output do not cause higher prices because of a large portion of unemployed resources.
B)  prices and output increase together.
C)  increases in prices do not generate any increase in output.
D)  increases in prices cause decreases in output.E) A) and C)
F) All of the above

Question 7

Under what condition will a decrease in aggregate demand result in no decline in the price level?

Accepted Answer

A)  The aggregate demand curve intersects a downward-sloping segment of the aggregate supply curve.
B)  The aggregate demand curve intersects an upward-sloping segment of the aggregate supply curve.
C)  The aggregate demand curve intersects a vertical segment of the aggregate supply curve.
D)  The aggregate demand curve is upward sloping.
E)  The aggregate demand curve intersects a horizontal segment of the aggregate supply curvE.F) B) and D)
G) A) and B)

Question 8

Keynes thought that the major economic reason for the Great Depression was

Accepted Answer

A)  the existence of labor unions.
B)  a lack of investment due to poor profit expectations.
C)  the existence of monopolies.
D)  high interest rates.E) A) and C)
F) B) and C)

Question 9

If the economy is in the vertical portion of the AS curve,what will be the effect on an increase in the price level on the level of employment?

Accepted Answer

A)  There will be substantial increase in employment
B)  There will be a less than proportional increase in employment
C)  There will be no change in employment
D)  Cannot be predicted from the information givenE) B) and D)
F) B) and C)

Question 10

Keynes believed

Accepted Answer

A)  everything produced in an economy is purchased.
B)  the interest rate was more important than the expected rate of profit in determining the level of investment in an economy.
C)  our economy always tends toward full employment.
D)  aggregate supply was more important than aggregate demand in the short run.
E)  None of the choices were believed by Keynes.F) All of the above
G) A) and E)

Question 11

The long-run aggregate supply curve is

Accepted Answer

A)  upward sloping.
B)  horizontal.
C)  downward sloping.
D)  vertical.E) A) and D)
F) None of the above

Question 12

If an economy is currently operating at its full employment level of real GDP,an increase in aggregate demand will ____.

Accepted Answer

raise the ...

Question 13

According to Keynesian economists,the key limitation on business production,and therefore on employment,is the

Accepted Answer

A)  demand for output produced by business.
B)  rate of growth of the money supply.
C)  price of raw materials.
D)  level of the wage rate for skilled labor.
E)  the level of taxes on incomes and profits.F) C) and E)
G) A) and B)

Question 14

The real wealth effect provides a partial explanation for why the aggregate demand curve slopes downward.Which of the following statements best explains the real wealth effect?

Accepted Answer

A)  At a lower price level domestically produced items are relatively less expensive than foreign goods and therefore are in greater demand.
B)  At a lower price level the real interest rate tends to be lower,and thus the quantity of investment goods demanded is larger.
C)  At a lower price level consumers will buy less because of a reduction in the real money supply.
D)  At a lower price level the purchasing power of accumulated savings is larger,and thus consumers will purchase more goods.E) B) and D)
F) None of the above

Question 15

A self-regulating market

Accepted Answer

A)  eliminates shortages or surpluses through price changes.
B)  can eliminate shortages quickly,but eliminates surpluses slowly.
C)  renders Say's law invalid.
D)  occurs only in labor markets.
E)  occurs only in credit markets.F) A) and B)
G) B) and C)

Question 16

Which one of the following does NOT explain why the aggregate demand curve is downward sloping?

Accepted Answer

A)  The real balances effect
B)  The entropy effect
C)  The foreign purchases effect
D)  The interest rate effectE) None of the above
F) All of the above

Question 17

The centerpiece of classical economics is ____.

Accepted Answer

The answer of The centerpiece of classical economics is ____....

Question 18

When we draw an aggregate demand curve,what do we put on the vertical axis?

Accepted Answer

A)  The total quantity of goods and services demanded
B)  The full employment output
C)  The quantity of money
D)  The price levelE) A) and B)
F) A) and C)

Question 19

The aggregate supply curve shows

Accepted Answer

A)  how the cost of living is related to the sum of consumption,investment,and government spending.
B)  how demand for final products is related to the price level.
C)  how production in the economy is related to the price level.
D)  None of the choices are shown by the aggregate supply curve.E) None of the above
F) C) and D)

Question 20

-Which of the segments of the aggregate supply curve is called the Keynesian region?

Accepted Answer

A)  QR
B)  RS
C)  ST
D)  QRS
E)  RSTF) D) and E)
G) None of the above

Exam 11: Classical and Keynesian Economics

The aggregate supply curve will be horizontal if

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Keynes believed

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If aggregate demand increases and as a result equilibrium real GDP and employment increase but the price level remains unchanged,we can assume that the aggregate demand curve

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A self-regulating market

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Which one of the following does NOT explain why the aggregate demand curve is downward sloping?

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The long-run aggregate supply curve is

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Keynes thought that the major economic reason for the Great Depression was

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When the price level falls

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The real wealth effect provides a partial explanation for why the aggregate demand curve slopes downward.Which of the following statements best explains the real wealth effect?

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Under what condition will a decrease in aggregate demand result in no decline in the price level?

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The aggregate supply curve shows

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If an economy is currently operating at its full employment level of real GDP,an increase in aggregate demand will ____.

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When we draw an aggregate demand curve,what do we put on the vertical axis?

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If the economy is in the vertical portion of the AS curve,what will be the effect on an increase in the price level on the level of employment?

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If aggregate production in the economy exceeds aggregate purchases

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According to Keynes,output is demand determined.This means that

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According to Keynesian economists,the key limitation on business production,and therefore on employment,is the

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-Which of the segments of the aggregate supply curve is called the Keynesian region?

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The line segment RS describes the region where

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The centerpiece of classical economics is ____.

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