Question 1

There is a distinction between the long-run aggregate supply (LRAS)  curve and the short-run aggregate supply (SRAS)  curve. In the long run

Accepted Answer

A)   technology is fixed, but not in the short run.
B)   the price level is constant in the long run, but fluctuates in the short run.
C)   the aggregate supply curve is horizontal, while in the short run it is upward sloping.
D)   all adjustments to changes in the price level have been made, but in the short run all changes in the price level do not occur.

Question 2

According to the classical model, desired saving is

Accepted Answer

A)   a function of real GDP.
B)   equal to desired investment.
C)   identical to the demand for saving at each level of real GDP.
D)   affected by the money illusion at low income levels.

Question 3

A temporary increase in the price of oil would

Accepted Answer

A)   increase both short-run and long-run aggregate supply.
B)   increase short-run aggregate supply and decrease long-run aggregate supply.
C)   decrease short-run aggregate supply and leave long-run aggregate supply unchanged.
D)   decrease both short-run and long-run aggregate supply.

Question 4

If equilibrium level of real Gross Domestic Product (GDP)  is greater than the full-employment real Gross Domestic Product (GDP)  consistent with the position of the economy's long-run aggregate supply (LRAS)  curve, then the difference between full-employment real Gross Domestic Product (GDP)  and current equilibrium real Gross Domestic Product (GDP)  is

Accepted Answer

A)   an aggregate demand shock.
B)   the level of output consistent with natural unemployment.
C)   a recessionary gap.
D)   an inflationary gap.

Question 5

According to Keynes, the "stickiness" of wage rates could best be explained by

Accepted Answer

A)   minimum wage laws.
B)   unions and long-term labor contracts.
C)   short-term labor contracts.
D)   government interference.

Question 6

Individuals will increase their saving as

Accepted Answer

A)   the interest rate falls.
B)   business investment falls.
C)   the rate of inflation increases.
D)   the interest rate increases.

Question 7

According to the classical theory, the aggregate supply curve is

Accepted Answer

A)   downward sloping.
B)   horizontal.
C)   upward sloping.
D)   vertical.

Question 8

Which of the following is NOT a reason why real GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis?

Accepted Answer

A)   In the short run, existing workers can work more hours.
B)   Prices and wages are flexible, allowing for needed adjustments.
C)   The existing capital stock can be used more intensively.
D)   Higher prices induce firms to hire more workers.

Question 9

Say's law explains

Accepted Answer

A)   how long-term real Gross Domestic Product (GDP)  stability is achieved in the classical model.
B)   how long-run real Gross Domestic Product (GDP)  stability is achieved in the Keynesian model.
C)   how the economy can go into recession.
D)   why economies experience business cycles.

Question 10

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.

Question 11

Refer to the above figure. Suppose the current aggregate demand is represented by AD2. If aggregate demand falls to line AD3, then

Accepted Answer

A)   the new equilibrium will be at j.
B)   the new equilibrium will be at k.
C)   the new equilibrium real Gross Domestic Product (GDP)  will be x.
D)   a new price level will be established at a.

Question 12

A short-lived increase in oil prices caused by destruction of oil-producing and oil-refining facilities by a large hurricane will

Accepted Answer

A)   shift the SRAS curve to the right.
B)   shift the LRAS curve to the right.
C)   shift the SRAS curve to the left.
D)   shift the AD curve to the right.

Question 13

In the above figure, the economy would most likely move from AD1 to AD2 because of

Accepted Answer

A)   an aggregate supply shock.
B)   an aggregate demand shock.
C)   a recession.
D)   a depression.

Question 14

A change in tastes for U.S. produced goods will

Accepted Answer

A)   shift both the aggregate demand curve and the long-run aggregate supply curve.
B)   shift the aggregate demand curve.
C)   shift the short-run aggregate supply curve.
D)   shift the long-run aggregate supply curve.

Question 15

-The three curves in the above figure are

Accepted Answer

A)   (1)  the long-run aggregate supply curve, (2)  the aggregate demand curve, and (3)  the short-run aggregate supply curve.
B)   (1)  the long-run aggregate supply curve, (2)  the short-run aggregate supply curve, and (3)  the aggregate demand curve.
C)   (1)  the short-run aggregate supply curve, (2)  the aggregate demand curve, and (3)  the long-run aggregate supply curve.
D)   (1)  the aggregate supply curve, (2)  the short-run aggregate demand curve, and (3)  the long-run aggregate demand curve.

Question 16

In the classical model, a rightward shift in the aggregate demand curve will, in the long run,

Accepted Answer

A)   increase real GDP and the price level.
B)   increase real GDP and will not change the price level.
C)   decrease real GDP and will not change the price level.
D)   not change real GDP and will increase the price level.

Question 17

In an economic downturn, sticky wages and prices reduce the economy's speed of adjustment because

Accepted Answer

A)   businesses are unable to adjust quickly to changes in aggregate demand.
B)   they cause deflation.
C)   hyperinflation will likely occur.
D)   union workers would likely quit and look for work elsewhere.

Question 18

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.

Question 19

According to classical economists, the credit market reaches an equilibrium when

Accepted Answer

A)   planned investment equals government expenditures.
B)   desired investment equals planned investment.
C)   desired investment equals planned changes in aggregate supply.
D)   desired investment equals desired saving.

Question 20

Refer to the above figure. Which point or points represent(s)  a short-run equilibrium?

Accepted Answer

A)   A only
B)   B only
C)   C only
D)   both A and B

Exam 11: Classical and Keynesian Macro Analyses

In the above figure, the economy would most likely move from AD1 to AD2 because of

Correct Answer
verified

In the classical model, a rightward shift in the aggregate demand curve will, in the long run,

Correct Answer
verified

There is a distinction between the long-run aggregate supply (LRAS) curve and the short-run aggregate supply (SRAS) curve. In the long run

Correct Answer
verified

Refer to the above figure. Suppose the current aggregate demand is represented by AD2. If aggregate demand falls to line AD3, then

Correct Answer
verified

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

Correct Answer
verified

In an economic downturn, sticky wages and prices reduce the economy's speed of adjustment because

Correct Answer
verified

A temporary increase in the price of oil would

Correct Answer
verified

According to Keynes, the "stickiness" of wage rates could best be explained by

Correct Answer
verified

Individuals will increase their saving as

Correct Answer
verified

According to the classical theory, the aggregate supply curve is

Correct Answer
verified

A change in tastes for U.S. produced goods will

Correct Answer
verified

According to classical economists, the credit market reaches an equilibrium when

Correct Answer
verified

Say's law explains

Correct Answer
verified

Refer to the above figure. Which point or points represent(s) a short-run equilibrium?

Correct Answer
verified

In the classical model,

Correct Answer
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According to the classical model, desired saving is

Correct Answer
verified

Correct Answer
verified

A short-lived increase in oil prices caused by destruction of oil-producing and oil-refining facilities by a large hurricane will

Correct Answer
verified

Which of the following is NOT a reason why real GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis?

Correct Answer
verified

-The three curves in the above figure are

Correct Answer
verified

Exam 11: Classical and Keynesian Macro Analyses

In the above figure, the economy would most likely move from AD1 to AD2 because of

Correct AnswerverifiedShow Answer

In the classical model, a rightward shift in the aggregate demand curve will, in the long run,

Correct AnswerverifiedShow Answer

There is a distinction between the long-run aggregate supply (LRAS) curve and the short-run aggregate supply (SRAS) curve. In the long run

Correct AnswerverifiedShow Answer

Refer to the above figure. Suppose the current aggregate demand is represented by AD2. If aggregate demand falls to line AD3, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In an economic downturn, sticky wages and prices reduce the economy's speed of adjustment because

Correct AnswerverifiedShow Answer

A temporary increase in the price of oil would

Correct AnswerverifiedShow Answer

According to Keynes, the "stickiness" of wage rates could best be explained by

Correct AnswerverifiedShow Answer

Individuals will increase their saving as

Correct AnswerverifiedShow Answer

According to the classical theory, the aggregate supply curve is

Correct AnswerverifiedShow Answer

A change in tastes for U.S. produced goods will

Correct AnswerverifiedShow Answer

According to classical economists, the credit market reaches an equilibrium when

Correct AnswerverifiedShow Answer

Say's law explains

Correct AnswerverifiedShow Answer

Refer to the above figure. Which point or points represent(s) a short-run equilibrium?

Correct AnswerverifiedShow Answer

In the classical model,

Correct AnswerverifiedShow Answer

According to the classical model, desired saving is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A short-lived increase in oil prices caused by destruction of oil-producing and oil-refining facilities by a large hurricane will

Correct AnswerverifiedShow Answer

Which of the following is NOT a reason why real GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis?

Correct AnswerverifiedShow Answer

-The three curves in the above figure are

Correct AnswerverifiedShow Answer

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