Question 1

Which of the following best describes the aggregate production function if output is measured on the vertical axis and the number of workers employed is measured on the horizontal axis? The curve is

Accepted Answer

A)   downward sloping and becomes flatter as the number of workers employed increases
B)   downward sloping and becomes steeper as the number of workers employed increases
C)   downward sloping with the same slope throughout
D)   upward sloping and becomes steeper as the number of workers employed increases
E)   upward sloping and becomes flatter as the number of workers employed increasesF) A) and C)
G) All of the above

Question 2

The Classical model

Accepted Answer

A)   is now discredited
B)   was developed by John Maynard Keynes
C)   has been completely displaced by the short-run macro model
D)   helps us to understand the performance of the economy in the long run
E)   is most useful in helping us to predict when an economic downturn will occurF) All of the above
G) A) and E)

Question 3

Which of the following is the formula for the government's budget deficit?

Accepted Answer

A)   S - G
B)   G -T
C)   C + I + G
D)   S + I
E)   I + GF) A) and E)
G) B) and D)

Question 4

The desire for goods and services is

Accepted Answer

A)   created by a market economy
B)   the ultimate explanation for all production
C)   why it is so difficult to explain how our economy works
D)   the cause of inflation
E)   what causes the market wage for labor to continually increaseF) A) and E)
G) A) and B)

Question 5

Which of the following is a leakages from the circular flow?

Accepted Answer

A)   Household saving and government spending
B)   Business investment and household saving
C)   Net taxes and household saving
D)   Government spending and business investment
E)   Net taxes and government spendingF) A) and B)
G) C) and E)

Question 6

Which concept springs to mind when thinking of the classical model?.

Accepted Answer

A)   Inflation.
B)   Population growth.
C)   Markets clear.
D)   The microeconomy.
E)   Money supply.F) A) and B)
G) B) and E)

Question 7

The market clearing assumption is

Accepted Answer

A)   a central assumption of the short-run macro model
B)   the idea that prices in every market will adjust until quantity supplied and quantity demanded are equal
C)   the idea that excess supply always leads to an increase in demand
D)   the idea that markets only work when they are in equilibrium
E)   believed by most economists today to be an unreasonable assumptionF) C) and D)
G) All of the above

Question 8

What is the price of funds in the loanable funds market?

Accepted Answer

A)   The real wage rate
B)   The Consumer Price Index
C)   The interest rate
D)   The profit rate
E)   The GDP price indexF) All of the above
G) None of the above

Question 9

-Refer to Figure 8-4.Based on these graphs,what is the total quantity of loanable funds demanded at an interest rate of 5 percent?

Accepted Answer

A)   $0.8 trillion
B)   $1.0 trillion
C)   $1.4 trillion
D)   $1.8 trillion
E)   $2.2 trillionF) A) and E)
G) A) and B)

Question 10

One reason why economists often appear to disagree when asked about the impact of some bad economic news is that

Accepted Answer

A)   they do not understand the economy very well
B)   economics is a very difficult science,and so there are many incorrect economic projections being made
C)   economists rarely disagree;people just think they are disagreeing because they do not understand the language of economics
D)   economists often appear to be disagreeing when one is talking about long-run impact while the other is referring to short-run impacts
E)   economists are by nature competitive individuals and they often disagreeF) A) and B)
G) A) and D)

Question 11

According to Say's Law,in the aggregate

Accepted Answer

A)   demand creates its own supply
B)   the production of output will generate exactly enough income to purchase what has been produced
C)   the economy is incapable of producing output fast enough to ensure full employment
D)   full employment cannot be sustained without government action
E)   consumer saving prevents the economy from reaching full employmentF) B) and C)
G) A) and E)

Question 12

Assuming the economy was in equilibrium,use the following information to calculate the total value of leakages.
  Consumption Spending $3.5 tillian  Net Taxes $2.7 tillian  Hausehold Seving $2.5 tillian  Avestment Spenfing $2.2 tillian  Gavernment purchases $3.0 trillian \begin{array} { | l | l | } \hline 	ext { Consumption Spending } & \$ 3.5 	ext { tillian } \\hline 	ext { Net Taxes } & \$ 2.7 	ext { tillian } \\hline 	ext { Hausehold Seving } & \$ 2.5 	ext { tillian } \\hline 	ext { Avestment Spenfing } & \$ 2.2 	ext { tillian } \\hline 	ext { Gavernment purchases } & \$ 3.0 	ext { trillian } \\hline\end{array} Consumption Spending  Net Taxes  Hausehold Seving  Avestment Spenfing  Gavernment purchases ​$3.5 tillian $2.7 tillian $2.5 tillian $2.2 tillian $3.0 trillian ​​ 
Total leakages are

Accepted Answer

A)   $2.5 trillion
B)   $2.7 trillion
C)   $3.0 trillion
D)   $5.2 trillion
E)   $5.7 trillion F) C) and D)
G) A) and B)

Question 13

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,

Accepted Answer

A)   this will lower the wage rate
B)   the demand for loanable funds will be horizontal
C)   an increase in government spending will crowd out more than an equal amount of private spending
D)   an increase in government spending will crowd out an equal amount of private spending
E)   an increase in government spending will crowd out less than an equal amount of private spendingF) None of the above
G) A) and B)

Question 14

In the classical model,the demand for loanable funds comes from

Accepted Answer

A)   consumption expenditures and the government deficit,if any
B)   net taxes and government expenditures
C)   government purchases
D)   investment spending and the government deficit,if any
E)   consumption expenditures,investment spending and government purchasesF) B) and C)
G) C) and E)

Question 15

John Maynard Keynes was the author of

Accepted Answer

A)   An Economic History of the Great Depression.
B)   The General Theory of Employment,Interest,and Money.
C)   The Wealth of Nations.
D)   The Principles of Political Economy and Taxation.
E)   Macroeconomic Policy.F) C) and D)
G) A) and D)

Question 16

Which of the following is a definition of the aggregate production function?

Accepted Answer

A)   the relationship describing which inputs an economy can use with different quantities of labor
B)   the relationship describing how much labor an economy can supply with different quantities of capital
C)   the relationship describing how much output an economy can produce with different quantities of labor
D)   the relationship describing what services an economy can produce with different quantities of capital
E)   the relationship describing how much output a firm can produce with different quantities of capitalF) D) and E)
G) C) and D)

Question 17

It is possible for an economy to produce more than its potential level of output,at least for a short period of time.

Accepted Answer

A) True 
 B)False

Question 18

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,an increase in government spending will

Accepted Answer

A)   lower the wage rate
B)   increase the supply of loanable funds
C)   cause total spending to decline
D)   cause total spending to increase
E)   leave total spending unchangedF) A) and D)
G) B) and E)

Question 19

Suppose there are no firms,only the government and households.What would be the result if for some reason the supply of saving at every interest rate suddenly fell?

Accepted Answer

A)   Interest rates would fall and the level of saving would fall.
B)   Interest rates would fall and the level of saving would not change.
C)   Interest rates would rise and the level of saving would not change.
D)   Interest rates would rise and the level of saving would fall.
E)   Interest rates would not change and the level of saving would fall.F) C) and D)
G) All of the above

Question 20

Classical economists believed that production could be stuck below its full employment level for a long period of time.

Accepted Answer

A) True 
 B)False

Exam 8:The Classical Long run Model

The market clearing assumption is

Correct Answer
verified

What is the price of funds in the loanable funds market?

Correct Answer
verified

John Maynard Keynes was the author of

Correct Answer
verified

Which of the following best describes the aggregate production function if output is measured on the vertical axis and the number of workers employed is measured on the horizontal axis? The curve is

Correct Answer
verified

In the classical model,the demand for loanable funds comes from

Correct Answer
verified

Which of the following is the formula for the government's budget deficit?

Correct Answer
verified

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,

Correct Answer
verified

Which of the following is a leakages from the circular flow?

Correct Answer
verified

One reason why economists often appear to disagree when asked about the impact of some bad economic news is that

Correct Answer
verified

It is possible for an economy to produce more than its potential level of output,at least for a short period of time.

Correct Answer
verified

Suppose there are no firms,only the government and households.What would be the result if for some reason the supply of saving at every interest rate suddenly fell?

Correct Answer
verified

Correct Answer
verified

-Refer to Figure 8-4.Based on these graphs,what is the total quantity of loanable funds demanded at an interest rate of 5 percent?

Correct Answer
verified

The desire for goods and services is

Correct Answer
verified

According to Say's Law,in the aggregate

Correct Answer
verified

Classical economists believed that production could be stuck below its full employment level for a long period of time.

Correct Answer
verified

The Classical model

Correct Answer
verified

Which of the following is a definition of the aggregate production function?

Correct Answer
verified

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,an increase in government spending will

Correct Answer
verified

Which concept springs to mind when thinking of the classical model?.

Correct Answer
verified

Exam 8:The Classical Long run Model

The market clearing assumption is

Correct AnswerverifiedShow Answer

What is the price of funds in the loanable funds market?

Correct AnswerverifiedShow Answer

John Maynard Keynes was the author of

Correct AnswerverifiedShow Answer

Which of the following best describes the aggregate production function if output is measured on the vertical axis and the number of workers employed is measured on the horizontal axis? The curve is

Correct AnswerverifiedShow Answer

In the classical model,the demand for loanable funds comes from

Correct AnswerverifiedShow Answer

Which of the following is the formula for the government's budget deficit?

Correct AnswerverifiedShow Answer

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,

Correct AnswerverifiedShow Answer

Which of the following is a leakages from the circular flow?

Correct AnswerverifiedShow Answer

One reason why economists often appear to disagree when asked about the impact of some bad economic news is that

Correct AnswerverifiedShow Answer

It is possible for an economy to produce more than its potential level of output,at least for a short period of time.

Correct AnswerverifiedShow Answer

Suppose there are no firms,only the government and households.What would be the result if for some reason the supply of saving at every interest rate suddenly fell?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-Refer to Figure 8-4.Based on these graphs,what is the total quantity of loanable funds demanded at an interest rate of 5 percent?

Correct AnswerverifiedShow Answer

The desire for goods and services is

Correct AnswerverifiedShow Answer

According to Say's Law,in the aggregate

Correct AnswerverifiedShow Answer

Classical economists believed that production could be stuck below its full employment level for a long period of time.

Correct AnswerverifiedShow Answer

The Classical model

Correct AnswerverifiedShow Answer

Which of the following is a definition of the aggregate production function?

Correct AnswerverifiedShow Answer

In the classical model,beginning from an equilibrium in which the government is running a budget surplus,an increase in government spending will

Correct AnswerverifiedShow Answer

Which concept springs to mind when thinking of the classical model?.

Correct AnswerverifiedShow Answer

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