Download Worksheet 3, chapter 9

POP QUIZ WORKSHEET 3: CHAPTER 9
NAME: __________________________________
1. Which of the following statements is true?
a. Activist economists are economists who believe that the government can create and
implement policy proposals that can positively affect the economy.
b. Laissez-faire economists generally favor government intervention in the economy.
c. Classical economists are sometimes referred to as activist economists, whereas
Keynesian economists are often referred to as laissez-faire economists.
d. Most economists are either committed Classical or committed Keynesian
economists.
2. According to Keynesian economics:
a. savings always equal investment.
b. there is a difference between equilibrium income and potential income: the
economy could be in equilibrium well above the full employment potential.
c. market forces that are supposed to bring the economy back to long-run potential
work fast and are strong enough to get the economy out of a recession.
d. the key determinant to the level of economic activity is potential income.
3. What directly shifts the long-run AD curve?
a. Sudden changes in C, I, or X – M caused by monetary or fiscal policy.
b. Increase in input prices.
c. Decreases in input prices.
d. Technological innovation.
4. Regarding the AS/AD model, which of the following is false?
a. It is an historical model because it starts at a point in time, and tells one what will
happen when shocks hit the economy.
b. The SAS curve specifies how changes in aggregate demand will affect real output
and the price level.
c. The AD curve slopes downward because of substitution effects.
d. The SAS curve illustrates that as the economy’s real output expands and
unemployment falls, the price level typically rises.
5. The amplification of initial changes in expenditures is called:
a. The wealth effect.
b. The interest rate effect.
c. The international effect.
d. The multiplier effect.
9. If an economy is in a recessionary gap:
a. the LAS curve will shift in to eliminate the gap.
b. the SAS curve will shift down to eliminate the pap.
c. the AD curve will shift in to eliminate the gap.
d. the economy is stuck in an inflation in the long run.
10. If an economy is at equilibrium at potential output and the AD curve shifts out, the
economy will be in:
a. an inflationary gap and eventually the SAS curve will shift down.
b. a recessionary gap and the LAS curve will shift in.
c. a recessionary gap and the LAS curve will shift down.
d. an inflationary gap and eventually the SAS curve will shift up.