Question 1

Unlike the classical economists,Keynes asserted that

Accepted Answer

A)  The economy was inherently unstable.
B)  Laissez faire policies would lead to macro equilibrium.
C)  Prices and wages were flexible.
D)  Markets would naturally self-adjust.

Question 2

Both Keynesian and monetarist theories emphasize the potential of aggregate demand shifts to alter macro outcomes.

Accepted Answer

A) True 
 B)False

Question 3

A decline in total real output for two or more consecutive quarters is referred to as

Accepted Answer

A)  Laissez faire.
B)  A recession.
C)  A growth recession.
D)  Say's Law.

Question 4

1,then aggregate demand is A) AD2,and the equilibrium output level is Q2. B) AD2,and the equilibrium output level is Q1. C) AD1,and the equilibrium output level is Q3. D) AD1,and the equilibrium output level is Q2." class="answers-bank-image d-inline" rel="preload" > Using Figure 8.5,if the equilibrium price level is P1,then aggregate demand is

Accepted Answer

A)  AD2,and the equilibrium output level is Q2.
B)  AD2,and the equilibrium output level is Q1.
C)  AD1,and the equilibrium output level is Q3.
D)  AD1,and the equilibrium output level is Q2.

Question 5

According to Keynesian theory,the correct fiscal policy to stimulate the economy would be to

Accepted Answer

A)  Raise taxes to increase aggregate demand.
B)  Increase the money supply to increase aggregate supply.
C)  Increase government expenditures to increase aggregate demand.
D)  Lower taxes to increase aggregate supply.

Question 6

Internal market forces include

Accepted Answer

A)  Wars,natural disasters,and trade disruptions.
B)  Tax policy,government spending,and availability of money.
C)  Population growth,spending behavior,and invention.
D)  External shocks and policy levers.

Question 7

Determinants of macro performance work on macro outcomes through

Accepted Answer

A)  Aggregate supply and demand.
B)  International balances.
C)  External shocks.
D)  Internal market forces.

Question 8

According to Keynes,when the economy falters,the government should do any of the following except

Accepted Answer

A)  Practice a laissez faire policy approach.
B)  Provide more dollars for unemployment benefits.
C)  Make more money available.
D)  Buy more output.

Question 9

Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 120 at the end of the year,the real value of your savings is closest to

Accepted Answer

A)  $1,667.
B)  $1,880.
C)  $2,120.
D)  $2,400.

Question 10

Individual employment and training programs are levers most likely to be advocated by

Accepted Answer

A)  Classical economists.
B)  Monetarists.
C)  Keynesians.
D)  Supply-side economists.

Question 11

In the absence of external shocks or government policy,an economy would

Accepted Answer

A)  Still experience business cycle fluctuations because of internal market forces.
B)  Not experience business cycle fluctuations.
C)  Not be able to expand production and output.
D)  None of the choices are correct.

Question 12

Equilibrium is unique;it is the only price-output combination that is mutually compatible with aggregate supply and demand.

Accepted Answer

A) True 
 B)False

Question 13

What is the real balances effect,and how does it explain the shape of the aggregate demand curve?

Accepted Answer

The real balances effect has to do with ...

Question 14

An economic expansion refers to an increase in the volume of goods and services produced.

Accepted Answer

A) True 
 B)False

Question 15

Keynes argued that policy levers were both effective and necessary.

Accepted Answer

A) True 
 B)False

Question 16

Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 115 at the end of the year,the real value of your savings is closest to

Accepted Answer

A)  $870.
B)  $885.
C)  $1,115.
D)  $1,150.

Question 17

According to the profit effect,

Accepted Answer

A)  Some costs do not rise when average prices rise.
B)  The aggregate supply curve is vertical in the short run.
C)  The aggregate supply curve has a negative slope.
D)  All costs rise when average prices rise.

Question 18

Business cycles result from recurrent shifts of the aggregate supply and demand curves.

Accepted Answer

A) True 
 B)False

Question 19

When the AS curve is vertical,fiscal policy will be

Accepted Answer

A)  Ineffective against both inflation and unemployment.
B)  Effective against inflation but not unemployment.
C)  Effective against unemployment but not inflation.
D)  Effective against both inflation and unemployment.

Question 20

Changes in the availability of money have little impact on the macro performance of the economy.

Accepted Answer

A) True 
 B)False

Exam 8: The Business Cycle

Using Figure 8.5,if the equilibrium price level is P1,then aggregate demand is

Correct AnswerverifiedShow Answer

Business cycles result from recurrent shifts of the aggregate supply and demand curves.

Correct AnswerverifiedShow Answer

Both Keynesian and monetarist theories emphasize the potential of aggregate demand shifts to alter macro outcomes.

Correct AnswerverifiedShow Answer

Determinants of macro performance work on macro outcomes through

Correct AnswerverifiedShow Answer

Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 120 at the end of the year,the real value of your savings is closest to

Correct AnswerverifiedShow Answer

Keynes argued that policy levers were both effective and necessary.

Correct AnswerverifiedShow Answer

Individual employment and training programs are levers most likely to be advocated by

Correct AnswerverifiedShow Answer

Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 115 at the end of the year,the real value of your savings is closest to

Correct AnswerverifiedShow Answer

According to Keynesian theory,the correct fiscal policy to stimulate the economy would be to

Correct AnswerverifiedShow Answer

An economic expansion refers to an increase in the volume of goods and services produced.

Correct AnswerverifiedShow Answer

According to the profit effect,

Correct AnswerverifiedShow Answer

Internal market forces include

Correct AnswerverifiedShow Answer

What is the real balances effect,and how does it explain the shape of the aggregate demand curve?

Correct AnswerverifiedThe real balances effect has to do with ...View AnswerShow Answer

Unlike the classical economists,Keynes asserted that

Correct AnswerverifiedShow Answer

A decline in total real output for two or more consecutive quarters is referred to as

Correct AnswerverifiedShow Answer

In the absence of external shocks or government policy,an economy would

Correct AnswerverifiedShow Answer

When the AS curve is vertical,fiscal policy will be

Correct AnswerverifiedShow Answer

Changes in the availability of money have little impact on the macro performance of the economy.

Correct AnswerverifiedShow Answer

Equilibrium is unique;it is the only price-output combination that is mutually compatible with aggregate supply and demand.

Correct AnswerverifiedShow Answer

According to Keynes,when the economy falters,the government should do any of the following except

Correct AnswerverifiedShow Answer

Using Figure 8.5,if the equilibrium price level is P₁,then aggregate demand is

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The real balances effect has to do with ...
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