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Review Assessment

Review Assessment - Review Assessment Chapter 17 Multiple...

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Review Assessment: Chapter 17 Multiple Choice User Latricia Lewis Submitted 3/4/09 7:29 PM Name Chapter 17 Multiple Choice Status Completed Score 5 out of 25 points Instructions Question 1 0 out of 1 points Classical economists suggest that full employment is Correct Answer: the norm in a market economy
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Feedback: See p. 321. Question 2 1 out of 1 points The aggregate supply curve of classical economists Correct Answer: is vertical Feedback: Correct. The AS curve is vertical at the full employme nt level in the classical view. See p. 321, especially Figure 17.1. Question 3 0 out of 1 points Classical theory concludes that the production behavior of firms will not change when the price level decreases because input costs would
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Correct Answer: fall along with product prices to leave real profits and output unchanged Feedback: This is how the economy stays at the full employme nt level, because of flexible wages and prices. See p. 321, including Figure 17.1. Question 4 0 out of 1 points In classical economics, a decrease in aggregate demand results in Correct Answer: a decrease in the price level and no change in domestic output
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Feedback: A decrease in aggregate demand would cause a drop in output if wages and prices didn't adjust to the change in spending. However, in the classical view, wages and prices adjust downward and ensure that profits remain steady so output returns at the full employme nt level. See Figure 17.1a on p. 321. Question 5 0 out of 1 points The aggregate supply curve in the Keynesian model is Correct Answer: horizontal to the full- employment output level
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Feedback: See Figure 17.1b on p. 321. Question 6 0 out of 1 points In the Keynesian model, a decrease in aggregate demand results in Correct Answer: no change in the price level and a decrease in domestic output Feedback: In the Keynesian model, the AS curve is horizontal, so decreases in aggregate demand cause no change in prices but they do cause a decrease in output. See p. 321, Figure 17.1b. Question 7 0 out of 1 points The mainstream view of the economy holds that
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Correct Answer: changes in investment spending lead to changes in aggregate demand Feedback: See p. 322-323. The mainstrea m view is highly influenced by Keynesian ideas in this regard. Question 8 0 out of 1 points In the monetarist perspective Selected Answer: Correct Answer: government policies have reduced macroeconomic stability
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Feedback: In the monetarist view, the macroeco nomy is quite stable -- until the governme nt gets involved. See p. 323. Question 9 0 out of 1 points Which is the equation of exchange? Correct Answer: MV = PQ Feedback: See p. 323. Question 10 0 out of 1 points In the equation of exchange, if V is stable, an increase in M will necessarily increase Correct Answer: nominal GDP
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Feedback: In the equation of exchange, MV = PQ.
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