Week 9 Quiz

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Question #1

Which of the following is a distinguishing characteristic of the neoclassical view?

A increasing price levels will increase the unemployment rate

B wages are maintained at original equilibrium

C wages and real GDP are sticky over time

D flexibility of wages and prices over time

Question #2

The Keynesian view of economics assumes that:

A the economy must focus is on long-term growth.

B economic output is primarily determined by aggregate supply.

C wages are sticky.

D the Keynesian Phillips curve is vertical.

Question #3

In the neoclassical version of the AD/AS model, which of the following should you use to represent the AS curve?

A an upward sloping curve with a vertical top

B the AS curve shifting as potential GDP expands

C a vertical line drawn at the level of potential GDP

D the AS curve shifting as productivity increases

Question #4

Suppose that a rise in business confidence has led to more investment in the economy and higher levels of output. In the short-run Keynesian analysis, the rise in aggregate demand will:

A lower unemployment.

B cause government to lower taxes.

C exports will drop.

D cause government to increase spending.

Question #5

At a macroeconomic level, the theory of rational expectations points out that if the ______________________ is vertical over time, then people should rationally expect this pattern.

A GDP

B aggregate demand curve

C aggregate supply curve

D Phillips curve

Question #6

Using a neoclassical model, what will the level of cyclical unemployment be when an economy is producing at potential GDP?

A zero

B 3% – 5%

C 1% – 3%

D never 0%

Question #7

The theory of _____________________ holds that people will use all information available to them to form the most accurate possible expectations about the future.

A rational expectations

B adaptive expectations

C Keynesian economics

D Neoclassical economics

Question #8

The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its ____________________.

A potential GDP; natural rate of unemployment

B long term growth; cyclical unemployment

C real GDP; natural rate of unemployment

D natural level of output; cyclical unemployment rate

Question #9

Suppose that out of the original 100 of government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what will the value of the total aggregate expenditures be after the fourth round in the cycle is completed?

A 144.41

B 141.70

C 147.62

D 147.48

Question #10

If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:

A is producing at a point where output is less than potential GDP.

B is producing at its equilibrium point.

C is producing at a point where output is more than potential GDP.

D is producing at its potential GDP.

Question #11

If markets throughout the global economy all have flexible and continually adjusting prices, then:

A all changes in prices and wages will create additional employment.

B each economy will always head for its natural rate of unemployment.

C each economy must shift in aggregate demand and create additional employment.

D all market-oriented economies will implement coordinated wage reductions.

Question #12

Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.

A pricing strategy

B policy prescription

C macro-economic model

D set of menu costs

Question #13

If a Phillip curve shows that unemployment is low and inflation is high in the economy, then that economy:

A is producing at a point where output is less than potential GDP.

B is producing at its equilibrium point.

C is producing at its potential GDP.

D is producing at a point where output is more than potential GDP.

Question #14

Consumption, investment, government spending, exports, and imports are:

A some of the opposing elements found in a market-orientated economy.

B all components of aggregate demand.

C all complementary elements of a market-orientated economy.

D some of the building blocks of Keynesian analysis.

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