Question 1

The classical economists held that the economy tends to operate at full employment.

Accepted Answer

A) True 
 B)False

Question 2

New Keynesian economics assumes:

Accepted Answer

A)   wage and prices are inflexible downward.
B)   individual decision making may not result in full employment for an economy.
C)   the economy will not automatically return to full employment once unemployment has occurred.
D)   all of the above.E) A) and B)
F) C) and D)

Question 3

According to Keynes, if the economy is in a recession, the government should:

Accepted Answer

A)   reduce spending to prevent the budget deficit from soaring.
B)   let the free market return the economy to full employment.
C)   raise taxes on corporations and the wealthy.
D)   reduce taxes, increasing purchases of goods and services, and increase transfer payments.E) B) and D)
F) None of the above

Question 4

A typical monetarist would favor:

Accepted Answer

A)   free markets and no control over the money supply.
B)   free markets and proper control over the money supply.
C)   regulated markets and no control over the money supply.
D)   regulated markets and detailed control over the money supply.E) B) and D)
F) C) and D)

Question 5

If, using the Keynesian approach, total output in an economy was $5.25 trillion, total spending was $5.00 trillion, and injections into the spending stream were $3.25 trillion, leakages from the spending stream would equal:

Accepted Answer

A)   $0.25 trillion.
B)   $3.00 trillion.
C)   $3.50 trillion.
D)   $4.00 trillion.E) C) and D)
F) B) and D)

Question 6

-At an output level of $0, total injections are:

Accepted Answer

A)   $0.
B)   $60 billion.
C)   equal to total leakages.
D)   not enough information to answer the question.E) A) and C)
F) B) and C)

Question 7

The basis of the following figure based on the Keynesian approach.
 
-For this economy, the equilibrium level of output is:

Accepted Answer

A)   $1 trillion.
B)   $4 trillion.
C)   $6 trillion.
D)   none of the above.E) None of the above
F) B) and D)

Question 8

Using the Keynesian approach, an economy with $7.5 trillion in total spending and $8.0 trillion in total output is operating where:

Accepted Answer

A)   injections exceed leakages by $500 billion.
B)   leakages exceed injections by $500 billion.
C)   injections plus leakages add up to $500 billion.
D)   injections plus leakages add up to $15.5 trillion.E) None of the above
F) C) and D)

Question 9

If households anticipate that government intervention to stimulate demand will create inflation they will likely attempt to:

Accepted Answer

A)   negotiate higher incomes.
B)   accelerate purchases before prices rise.
C)   negotiate loans before interest rates go up.
D)   all of the above.E) C) and D)
F) B) and D)

Question 10

In the Keynesian model, if total planned spending is _______ than the total output produced, employment and output will _______.

Accepted Answer

A)   less; fall
B)   less; rise
C)   greater; fall
D)   greater; remain unchangedE) A) and B)
F) B) and D)

Question 11

Monetarism is the school of thought that favors:

Accepted Answer

A)   the use of import quotas and tariffs to stabilize the economy.
B)   stabilizing the economy through control of the money supply.
C)   the belief that the economy will operate at full employment if the money supply does not increase from year to year.
D)   having the government monitor the economy and make adjustments where necessary using taxes and government expenditures.E) B) and C)
F) A) and C)

Question 12

The new Keynesian school argues that counting on decreases in prices and wages to remove unemployment may be unwise because:

Accepted Answer

A)   once prices and wages start to fall it is difficult to halt their decline.
B)   there is no proven connection between the behavior of prices and wages.
C)   the economy, if left alone, will automatically move to its full employment level of output.
D)   sellers may find it more profitable to lower their outputs than their prices when demand is weak and unemployment is rising.E) B) and C)
F) All of the above

Question 13

The school of thought that holds that, in the macroeconomy, prices and wages are inflexible, or "sticky,"downward is:

Accepted Answer

A)   classical economics.
B)   new classical economics.
C)   new Keynesian economics.
D)   all of the above.E) B) and D)
F) B) and C)

Question 14

A Keynesian economist would favor stabilizing the economy through:

Accepted Answer

A)   military force.
B)   changes in the level of prices.
C)   changes in taxes and government expenditures.
D)   only private efforts with no government involvement.E) B) and D)
F) C) and D)

Question 15

In the new classical model, the natural rate hypothesis:

Accepted Answer

A)   argues that the economy may not recover to its natural rate of unemployment without government intervention.
B)   indicates that the government will be ineffective in reducing unemployment below its natural rate.
C)   suggests that the long-run supply curve is horizontal.
D)   predicts that an increase in aggregate demand will permanently lead to a lower natural rate of output.E) A) and D)
F) A) and C)

Question 16

Which of the following schools of economic thought would favor active intervention into the macroeconomy through fiscal policy?

Accepted Answer

A)   The classical school.
B)   The Keynesian school.
C)   The monetarist school.
D)   The new classical school.E) A) and D)
F) B) and C)

Question 17

Which of the following statements about aggregate demand and supply in the new classical model is FALSE?

Accepted Answer

A)   In the short run there can be an increase in aggregate demand without an increase in the general level of prices.
B)   In the long run there can be an increase in aggregate demand without an increase in the general level of prices.
C)   In the short run there can be an increase in the general level of prices when there is no change in aggregate supply.
D)   In the long run there can be an increase in the general level of prices when there is no change in aggregate supply.E) B) and C)
F) A) and C)

Question 18

-At an output level of $400 billion:

Accepted Answer

A)   leakages exceed injections by $20 billion.
B)   injections exceed leakages by $20 billion.
C)   leakages plus injections total $780 billion.
D)   the economy is operating below its equilibrium level of output.E) A) and B)
F) A) and D)

Question 19

The monetarist school advocates:

Accepted Answer

A)   reducing taxes and increasing regulation.
B)   free markets and a return to the gold standard.
C)   a welfare state and government ownership of the means of production.
D)   free markets, limited government intervention, and control over the money supply.E) None of the above
F) A) and D)

Question 20

The economist that revolutionized economic thinking by focusing on the role of total spending in determining the level of output and employment was John Maynard Keynes.

Accepted Answer

A) True 
 B)False

Exam 9: Macroeconomic Viewpoints and Models

New Keynesian economics assumes:

Correct AnswerverifiedShow Answer

If, using the Keynesian approach, total output in an economy was $5.25 trillion, total spending was $5.00 trillion, and injections into the spending stream were $3.25 trillion, leakages from the spending stream would equal:

Correct AnswerverifiedShow Answer

A Keynesian economist would favor stabilizing the economy through:

Correct AnswerverifiedShow Answer

Which of the following statements about aggregate demand and supply in the new classical model is FALSE?

Correct AnswerverifiedShow Answer

-At an output level of $400 billion:

Correct AnswerverifiedShow Answer

The school of thought that holds that, in the macroeconomy, prices and wages are inflexible, or "sticky,"downward is:

Correct AnswerverifiedShow Answer

The classical economists held that the economy tends to operate at full employment.

Correct AnswerverifiedShow Answer

-At an output level of $0, total injections are:

Correct AnswerverifiedShow Answer

If households anticipate that government intervention to stimulate demand will create inflation they will likely attempt to:

Correct AnswerverifiedShow Answer

Using the Keynesian approach, an economy with $7.5 trillion in total spending and $8.0 trillion in total output is operating where:

Correct AnswerverifiedShow Answer

A typical monetarist would favor:

Correct AnswerverifiedShow Answer

The new Keynesian school argues that counting on decreases in prices and wages to remove unemployment may be unwise because:

Correct AnswerverifiedShow Answer

In the new classical model, the natural rate hypothesis:

Correct AnswerverifiedShow Answer

The economist that revolutionized economic thinking by focusing on the role of total spending in determining the level of output and employment was John Maynard Keynes.

Correct AnswerverifiedShow Answer

The monetarist school advocates:

Correct AnswerverifiedShow Answer

In the Keynesian model, if total planned spending is _______ than the total output produced, employment and output will _______.

Correct AnswerverifiedShow Answer

The basis of the following figure based on the Keynesian approach. -For this economy, the equilibrium level of output is:

Correct AnswerverifiedShow Answer

Monetarism is the school of thought that favors:

Correct AnswerverifiedShow Answer

According to Keynes, if the economy is in a recession, the government should:

Correct AnswerverifiedShow Answer

Which of the following schools of economic thought would favor active intervention into the macroeconomy through fiscal policy?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the Keynesian model, if total planned spending is _ than the total output produced, employment and output will _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified