Question 1

When stock prices declined during the Great Depression, it caused aggregate demand to decrease because

Accepted Answer

A)   households became more optimistic and increased consumer spending.
B)   household wealth decreased, leading to a decline in consumer spending.
C)   firms' net worth decreased, leading to an increase in investment spending.
D)   the government reduced taxes and increased spending.
E)   the government increased the money supply.

Question 2

Classical economists believe that government intervention in the economy is unnecessary to reach full employment. Explain their reasoning.

Accepted Answer

Classical economists believe that prices...

Question 3

During the Great Depression, thousands of U.S. banks failed. As a result,

Accepted Answer

A)   aggregate demand increased.
B)   long-run aggregate supply increased.
C)   aggregate demand decreased.
D)   short-run aggregate supply increased.
E)   short-run aggregate supply decreased.

Question 4

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because

Accepted Answer

A)   there was a huge discovery of gold in the western United States.
B)   the U.S. government decreased the supply of money.
C)   there was an advancement in technology in manufacturing.
D)   there was an increase in trade with other countries.
E)   the U.S. government decreased taxes.

Question 5

In comparison with other recessions, the Great Depression had

Accepted Answer

A)   much lower rates of unemployment.
B)   much higher levels of consumer sentiment.
C)   much higher international trade.
D)   much larger changes in stock prices.
E)   very small changes in real gross domestic product GDP) .

Question 6

Based on the belief that prices are sticky and inflexible, Keynesian economists conclude that

Accepted Answer

A)   the economy is self-correcting and tends toward full employment.
B)   savings is a crucial component of economic growth.
C)   the long run deserves more focus than the short run.
D)   the economy is not self-correcting and can become stuck below full employment.
E)   government intervention is never necessary to promote full employment.

Question 7

The Great Depression ended in

Accepted Answer

A)   June 2009.
B)   May 1937.
C)   August 1929.
D)   June 1938.
E)   August 2004.

Question 8

Keynesian economists believe that

Accepted Answer

A)   the market tends toward stability and full employment.
B)   the economy needs help in moving back to full employment.
C)   savings is crucial to growth.
D)   prices are flexible.
E)   the long run is more important than the short run.

Question 9

As a result of several factors, aggregate demand decreased during the Great Depression. One factor was an)

Accepted Answer

A)   increase in consumer sentiment.
B)   increase in international trade.
C)   decrease in business tax rates.
D)   decrease in expected income.
E)   increase in the money supply.

Question 10

Which of the following economic statements would a classical economist tend to support?

Accepted Answer

A)   The short run deserves more focus than the long run.
B)   The market tends toward stability and full employment.
C)   Savings is a drain on aggregate demand and can reduce economic growth.
D)   Government intervention is often necessary to stimulate or moderate economic performance.
E)   Prices tend to be rigid and inflexible.

Question 11

When the government raised taxes at the beginning of the Great Depression, it caused aggregate demand to decrease because

Accepted Answer

A)   it caused the stock market to crash, which reduced household wealth.
B)   household disposable income decreased, causing consumer spending to decrease.
C)   it caused high levels of inflation, which reduced the real value of household income.
D)   the money supply increased rapidly, causing interest rates to decrease.
E)   barriers to international trade decreased at the same time.

Question 12

The Great Depression had ________ when compared to the average recession.

Accepted Answer

A)   many more bank failures
B)   very small decreases in real gross domestic product GDP) 
C)   very low tax rates
D)   very stable stock prices
E)   very high international trade

Question 13

Define and relate macroeconomic policy, fiscal policy, and monetary policy.

Accepted Answer

Macroeconomic policy deals with any laws...

Question 14

The Great Recession was similar to other recessions since World War II in that

Accepted Answer

A)   there was extremely high inflation.
B)   real gross domestic product GDP)  initially declined and then recovered sometime later.
C)   real gross domestic product GDP)  increased rapidly and then leveled off.
D)   the rate of unemployment was unchanged.
E)   the trade deficit fell to zero.

Question 15

One of the reasons why the Great Depression was so severe is that

Accepted Answer

A)   stock prices increased during the Great Depression.
B)   the U.S. government increased taxes.
C)   the U.S. government allowed the money supply to increase.
D)   the unemployment rate decreased.
E)   expected income increased.

Question 16

The Great Depression began following a stock market crash and continued as thousands of banks failed; during this time, the government offered little assistance. The government raised taxes and refused to let the money supply increase. Household wealth and expected income both decreased. Using the aggregate demand and aggregate supply model, explain what effect these events had on the economy.

Accepted Answer

A stock market crash caused household we...

Question 17

An institutional breakdown in U.S. financial markets would tend to cause

Accepted Answer

A)   aggregate demand to increase.
B)   long-run aggregate supply to decrease.
C)   short-run aggregate supply to increase.
D)   long-run aggregate supply to increase.
E)   aggregate demand to decrease.

Question 18

During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because

Accepted Answer

A)   the stock market declined in value by one-third.
B)   there was a decline in the U.S. population.
C)   there was an increase in expected income.
D)   the U.S. government restricted trade with other countries.
E)   there was an increase in housing prices.

Question 19

If you asked a classical economist which economic time frame he or she prioritized, how might he or she respond?

Accepted Answer

A)   "Prices tend to be sticky when supply or demand changes."
B)   "Savings is a drain on aggregate demand."
C)   "The economy tends toward instability and cyclical unemployment."
D)   "The long run is key."
E)   "The short run is key."

Question 20

During the Great Recession, the U.S. ________ curve shifted to the ________.

Accepted Answer

A)   aggregate demand; right
B)   short-run aggregate supply; right
C)   long-run aggregate supply; left
D)   long-run aggregate supply; right
E)   production possibilities; right

Exam 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

If you asked a classical economist which economic time frame he or she prioritized, how might he or she respond?

Correct Answer
verified

Based on the belief that prices are sticky and inflexible, Keynesian economists conclude that

Correct Answer
verified

During the Great Depression, thousands of U.S. banks failed. As a result,

Correct Answer
verified

When the government raised taxes at the beginning of the Great Depression, it caused aggregate demand to decrease because

Correct Answer
verified

During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because

Correct Answer
verified

In comparison with other recessions, the Great Depression had

Correct Answer
verified

Correct Answer
verified
A stock market crash caused household we...
View Answer

The Great Recession was similar to other recessions since World War II in that

Correct Answer
verified

Keynesian economists believe that

Correct Answer
verified

During the Great Recession, the U.S. curve shifted to the .

Correct Answer
verified

When stock prices declined during the Great Depression, it caused aggregate demand to decrease because

Correct Answer
verified

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because

Correct Answer
verified

Which of the following economic statements would a classical economist tend to support?

Correct Answer
verified

One of the reasons why the Great Depression was so severe is that

Correct Answer
verified

Classical economists believe that government intervention in the economy is unnecessary to reach full employment. Explain their reasoning.

Correct Answer
verified
Classical economists believe that prices...
View Answer

Define and relate macroeconomic policy, fiscal policy, and monetary policy.

Correct Answer
verified
Macroeconomic policy deals with any laws...
View Answer

As a result of several factors, aggregate demand decreased during the Great Depression. One factor was an)

Correct Answer
verified

The Great Depression had ________ when compared to the average recession.

Correct Answer
verified

An institutional breakdown in U.S. financial markets would tend to cause

Correct Answer
verified

The Great Depression ended in

Correct Answer
verified

Exam 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

If you asked a classical economist which economic time frame he or she prioritized, how might he or she respond?

Correct AnswerverifiedShow Answer

Based on the belief that prices are sticky and inflexible, Keynesian economists conclude that

Correct AnswerverifiedShow Answer

During the Great Depression, thousands of U.S. banks failed. As a result,

Correct AnswerverifiedShow Answer

When the government raised taxes at the beginning of the Great Depression, it caused aggregate demand to decrease because

Correct AnswerverifiedShow Answer

During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because

Correct AnswerverifiedShow Answer

In comparison with other recessions, the Great Depression had

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA stock market crash caused household we...View AnswerShow Answer

The Great Recession was similar to other recessions since World War II in that

Correct AnswerverifiedShow Answer

Keynesian economists believe that

Correct AnswerverifiedShow Answer

During the Great Recession, the U.S. ________ curve shifted to the ________.

Correct AnswerverifiedShow Answer

When stock prices declined during the Great Depression, it caused aggregate demand to decrease because

Correct AnswerverifiedShow Answer

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because

Correct AnswerverifiedShow Answer

Which of the following economic statements would a classical economist tend to support?

Correct AnswerverifiedShow Answer

One of the reasons why the Great Depression was so severe is that

Correct AnswerverifiedShow Answer

Classical economists believe that government intervention in the economy is unnecessary to reach full employment. Explain their reasoning.

Correct AnswerverifiedClassical economists believe that prices...View AnswerShow Answer

Define and relate macroeconomic policy, fiscal policy, and monetary policy.

Correct AnswerverifiedMacroeconomic policy deals with any laws...View AnswerShow Answer

As a result of several factors, aggregate demand decreased during the Great Depression. One factor was an)

Correct AnswerverifiedShow Answer

The Great Depression had ________ when compared to the average recession.

Correct AnswerverifiedShow Answer

An institutional breakdown in U.S. financial markets would tend to cause

Correct AnswerverifiedShow Answer

The Great Depression ended in

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A stock market crash caused household we...
View Answer

Correct Answer
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Correct Answer
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During the Great Recession, the U.S. curve shifted to the .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Classical economists believe that prices...
View Answer

Correct Answer
verified
Macroeconomic policy deals with any laws...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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