Download Classical economists assume that ______.

1
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Classical economists assume that _________.
A
Wages, prices, and interest rates are all flexible.
B
The economy works on full-employment equilibrium.
C
Supply creates its own demand.
D
All of these answers
2
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Assume the economy is at full potential output. If the aggregate demand curve
shifts to the left, what will happen?
A
Output will fall slightly and prices will fall dramatically
B
Output will fall dramatically and prices will fall slightly
C
Output will increase slightly and prices will increase
dramatically
D
Output will increase dramatically and prices will increase
slightly
3
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Which of the following statements about the fiscal multiplier effect is NOT true?
A
The multiplier effect can cause crowding out
B
The multiplier effect is influenced by spending
C
The multiplier effect is only influenced by government
spending
D
The multiplier effect can increase negative externalities
4
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Which of the following is NOT part of the equation for aggregate expenditure?
A
Net exports
B
Government expenditure
C
Investment
D
Cost
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According to Hume, in the short run, an increase in the money supply will
________, and in the long run, an increase in the money supply will _________.
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A
do nothing; decrease production
B
increase production; do nothing
C
do nothing; increase production
D
decrease production; do nothing
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Classical economists assume that _________.
A
money affects only price and wage levels
B
All of these answers
C
real and nominal variables can be analyzed separately
D
real GDP can be determined without knowing the money
supply or rate of inflation
7
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Why do Chicago School economists differ from Keynesian School economists?
Each school holds differing opinions on _____.
A
the role of governments and markets
B
the derivation of supply and demand
C
how taxation affects households
D
the causes of the Great Depression
8
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Suppose a government provided stimulus money to businesses in order to reverse
an economic downturn. This action most closely aligns with which of the following
economic schools of thought?
A
Keynesian school
B
Rational expectations school
C
Austrian school
D
Classical school
9
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Assume the economy is producing at potential output. Consumer preferences
change and aggregate demand falls. What would you expect to happen?
A
Prices will fall significantly and output will fall slightly
B
Prices will increase significantly and output will fall slightly
C
Prices will fall slightly and output will fall significantly
D
Prices will increase slightly and output will fall slightly
10
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Which of the following could shift aggregate demand to the left?
A
An exogenous increase in intended inventory investment
B
An exogenous increase in the nominal money supply
C
An exogenous increase in taxes levied
D
An exogenous increase in transfer payments from the
government
11
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Which of the following factors would lead to a shift in the aggregate demand
curve?
A
A cut in personal income tax
B
Increased defense spending
C
High consumer confidence
D
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All of these answers
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Which of the following is NOT one of the demand sources incorporated when
calculating aggregate demand?
A
Investment
B
Government Spending
C
Savings
D
Consumption
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Of the factors which contribute to the downward slope of the aggregate demand
curve, which is best described as the incorporation of nominal exchange rates into
the IS-LM model?
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A
Aggregate Supply Effect
B
Mundell-Fleming Exchange Rate Effect
C
Pigou's Wealth Effect
D
Keynes' Interest Rate Effect
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What is the typical shape of a short-run aggregate supply curve?
A
Downward sloping
B
Upward sloping
C
Horizontal
D
Vertical
15
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What factors are fixed in the short run?
A
Prices, wages, and capital
B
Prices, wages, capital, and labor
C
Prices and wages
D
Capital and labor
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Which of the following explains why the long run aggregate supply curve must be
vertical?
A
In the long run, firms have already made their decisions
about optimal production and do not vary
B
In the long run, the factors that affect the production
function do not influence GDP growth
C
Long run analysis assumes wages and prices are fixes,
which implies one level of efficient output
D
Long run analysis assumes all inputs are used optimally,
which implies one level of efficient output
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Which of the following is a real-world interpretation of the vertical long run
aggregate supply curve?
A
In the long run, GDP will respond to changes in the price
level but not changes in inputs
B
The long-run level of potential GDP is not affected by
changes in demand or prices
C
All of these answers
D
In the long run, GDP will grow at a constant, unchanging
rate
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What does the model of long run aggregate supply assume about labor?
A
The labor market is always in equilibrium and the entire
population is employed
B
The labor market is always in equilibrium and everyone in
the workforce is employed
C
Wages are sticky and minimum wage regulations exist
D
Wages are sticky but no minimum wage regulations exist
19
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Which of the following changes in the labor market will shift the long run aggregate
supply curve?
A
A change in the number of available workers or labor hours
B
A change in the number of available workers or wage rate
C
A change in the labor market from full employment to lessthan-full employment
D
A change in the number of labor hours or wage rate
20
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What is one reason the government may invest in technological progress that will
be shared freely, producing no profit?
A
An improvement in technology shifts supply to the left,
increasing GDP
B
An improvement in technology shifts supply to the right,
increasing GDP
C
Technological progress leads to higher employment and
prices
D
Technological progress leads to lower employment and
prices
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What will happen if available capital increases?
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A
The supply curve will shift to the left, prices will rise, and
quantity will fall
B
The supply curve will shift to the left, prices will drop, and
quantity will increase
C
The supply curve will shift to the right, prices will drop, and
quantity will increase
D
The supply curve will shift to the right, prices will rise, and
quantity will fall
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Which of the following statements about aggregate supply is NOT true?
A
Long-run aggregate supply considers the production of the
economy and natural production level.
B
Aggregate supply is the relationship between the price level
and production of the economy.
C
Long-run aggregate supply is graphed vertically.
D
Short-run aggregate supply is graphed as a downward
sloping curve.
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Which of the following factors does NOT cause the short-run aggregate supply
curve to shift?
A
Taxes and subsides
B
Prices of raw materials
C
Changes in quality of labor
D
Quantity that stays the same
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Which of the factors may vary when building a long run supply curve?
A
Labor only
B
Capital, labor, and technology
C
Capital and technology
Technology only
D
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What could cause the aggregate demand curve to shift to the left in the short run?
A
Households anticipate their income will decrease in the
future so they reduce consumption today.
B
The government increases its consumption
C
General price levels fall
D
Households decrease their savings today
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Which of the following statements about the shift in aggregate supply is NOT true?
A
In the long-run, only capital, labor, and technology affect
the aggregate supply curve.
B
In the short-run, there is only one fixed factor of production,
usually capital.
C
Aggregate supply is the total supply of goods and services
produced in an economy
D
There are three ranges in aggregate supply curve including:
Keynesian, Classical, and Intermediate.