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

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Question 41

Multiple Choice

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Classical economists believe that prices are completely flexible, from which they conclude that:

A) the economy can become stuck at high levels of unemployment for long periods of time.
B) the economy is self-correcting in response to shocks.
C) the government will need to intervene in the economy frequently.
D) the best type of economy is centrally planned and run by the state.
E) the economy will experience wild swings in output and employment.

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Question 42

Multiple Choice

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

A) the U.S. government increased the money supply.
B) stock prices increased dramatically.
C) the U.S. government increased taxes.
D) there was a gradual decline in the U.S. population.
E) more Americans attended college than in the past.

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Question 43

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

The Great Depression actually consisted of two separate recessions. The "second wave" of the Great Depression began in _________ and lasted for _________.

A decline in U.S. wealth would tend to cause:

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

When considering how the economy works, classical economists hold that:

During the Great Recession, U.S. household wealth declined, leading to a decrease in aggregate demand. Which pair of factors contributed to this decline in wealth?

During the Great Recession, a major financial crisis followed the collapse of housing prices, which led to:

Use the following graph to answer the next questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased, with no change in short-run aggregate supply (SRAS) . -The decline in housing prices contributed to the Great Recession, as depicted in the graph, in that:

The Great Recession is characterized by a decrease in aggregate demand. __________ would have caused such a decrease.

Use the following graph to answer the next questions. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS) . -During the Great Depression, the aggregate price level and real gross domestic product (GDP) both decreased, as depicted in the graph. Unemployment increased to record levels. Which of following best explains why this happened?

Which of the following policy statements would a Keynesian economist tend to support?

The Great Recession lasted longer and was deeper than the average recession, in part, because:

Keynesian economists believe that savings is a drain on demand because:

The Great Recession lasted for:

Use the following graph to answer the next questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased, with no change in short-run aggregate supply (SRAS) . -In the graph, we see that long-run aggregate supply decreased during the Great Recession. This was due to a decline in housing prices and the subsequent financial crisis. Why did these factors cause long-run aggregate supply to decrease?

The Great Depression is characterized by a decrease in aggregate demand. Of the following factors, which would have caused aggregate demand to decrease?

When describing how the economy works, classical economists claim that:

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