Question

Question 1 1 pts

Say's Law indicates that:

Group of answer choices

demand creates its own supply.

a stable, inflexible interest rate will guarantee perpetual full-employment.

supply creates its own demand.

falling prices will decrease the purchasing power of a declining level of total money demand

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Question 2 1 pts

Classical macroeconomic theory believed that if total spending was less than the amount necessary to establish full-employment, then:

Group of answer choices

product prices would rise, resulting in an increase in supply and a return to full employment

product and resource prices would fall, restoring full-employment

the government should use certain policies to bring the economy back to full employment.

product prices would fall, but resource prices would rise, restoring full employment.

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Question 3 1 pts

John Maynard Keynes expressed his ideas about macroeconomics and attacked Classical economics in his book,

Group of answer choices

An Inquiry into the Nature & Causes of the Wealth of Nations

The Gospel of the Flying Spaghetti Monster.

The General Theory of Employment, Interest and Money

The Great Unraveling.

The Theory of General Relativity.

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Question 4 1 pts

Except for convincing a good deal of the economics profession that government could play a positive role when it came to "stabilizing" the economy in the short-run in the above publication, John Maynard Keynes had a rather dull & uneventful life.

Group of answer choices

True

False

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Question 5 1 pts

5. Keynesian economics would best be described by which statement?

Group of answer choices

Keynesian economics is basically modern-day Marxism

capitalism is not a self-correcting economic system.

saving(s) is the driving force behind economic growth.

supply creates its own demand.

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Question 6 1 pts

Keynesian economics emphasizes the _______________, and changes in aggregate ______________.

Group of answer choices

short run; supply.

long-run; demand.

long-run; supply.

short-run; demand.

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Question 7 1 pts

7. In Keynesian economics, equilibrium can occur (Hint: the 45 degree "reference" line)

Group of answer choices

at any level where aggregate expenditures is equal to real GDP/income

only at levels less than full-employment.

only at levels greater than full-employment.

only at full-employment

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Question 8 1 pts

The concept known as the "neutrality of money" suggests:

Group of answer choices

that changes in the money supply has no impact on the economy--none.

that low interest rates may increase interest sensitive expenditures.

that changes in the money supply would have no impact on real economic variables, e.g. employment.

that changes in the money supply typically alter the velocity of money.

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Question 9 1 pts

In reaction to the last recession, household saving increased. Unfortunately, this was likely an additional drag on the economy in the short-run. This phenomenon is known as

Group of answer choices

crowding out.

the neutrality of money.

the paradox of thrift.

Say's Law.

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Question 10 1 pts

Unlike Keynesian" economists, Classicals generally disapprove of the use of fiscal policy as a short-run demand management tool.

Group of answer choices

True

False

Answer 1

1. (c) supply creates its own demand.

Say's Law of Markets is theory from classical economics arguing that the ability to purchase something depends on the ability to produce and thereby generate income. Say reasoned that to have the means to buy, a buyer must first have produced something to sell. That is, supply creates its own demand.

2. (d) product prices would fall, but resource prices would rise, restoring full employment.

3. (c) The General Theory of Employment, Interest and Money.

The General Theory of Employment, Interest and Money of 1936 is the last and most important book by the English economist John Maynard Keynes.

4. (b) False

5. (a) Keynesian economics is basically modern-day Marxism.

6. (d) short-run; demand.

Keynes believed that equilibrium is demand driven and did not believe in long run.

7. (a) at any level where aggregate expenditures is equal to real GDP/income.

The equilibrium in the diagram occurs where the aggregate expenditure line crosses the 45-degree line, which represents the set of points where aggregate expenditure in the economy is equal to output, or national income.

8. (c) that changes in the money supply would have no impact on real economic variables, e.g. employment.

Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, with no effect on real variables, like employment, real GDP, and real consumption.

9. (c) the paradox of thrift.

The paradox of thrift, or paradox of savings, is an economic theory which posits that personal savings are a net drag on the economy during a recession. The paradox states that an increase in autonomous saving leads to a decrease in aggregate demand and thus a decrease in gross output which will in turn lower total saving.

10. (a) True.