Question

QUESTION 22 Classical economists argued that “expansionary” fiscal policies a. always produced inflation b. usually worked well to increase real GDP and employment c. were usually ineffective in increasing real GDP or employment d. usually increased real GDP, but lowered employment e. might only impact the housing sector of the economy

QUESTION 23 Based on Say’s Law, Classical economists argued that a recession would not turn into a permanent depression as long as a. workers did not suffer from money illusion b. the government was willing to engage in fine tuning policies c. the discount rate stayed above the federal funds rate d. workers remained interested in working e. velocity was constant

QUESTION 24 Which of the following price indexes is most closely watched by economists and business leaders?

    a.    the GDP Deflator
    b.    the CPI-W
    c.    the Core CPI
    d.    the price-adjusted PPI  
    e.    the Headline CPI

QUESTION 25

1. According to Classical economists, an increase in the money supply with no money illusion will cause
   
       a.    nominal interest rates to fall and real interest rates to rise
       b.    nominal interest rates to rise and real interest rates to fall
       c.    nominal interest rates to fall and real interest rates to remain unchanged
       d.    nominal interest rates to rise and real interest rates to remain unchanged
       e.    nominal interest rates to be less than real interest rates

Answer 1

ans 22

c) were usually ineffective in increasing real GDP and unemployment

according to classical economist, there is no nedd of interference from Govt, market mechanism determines the equilibrium levels and intervention in the market are usually ineffective in increasing real GDP and unemployemnt and may lead to inflation

ans 23

d) workers remain interested in working

according to say's law if they produce something and create supply of some good  , earn something and demand and then automatically we'll come out of recession . so supply creates demand for other goods and for creating supply, workers need to work

ans 24

c.   GDP defaltor

GDP is easily calculated by comparing GDP at constant and current price

ans 25

c) nominal interest rates to fall and real interest rates to remain unchanged

real interest rate = nominal interest rate - inflation rate

both nominal interest rate and inflation rate will increase but real interest rate will reamin same