Principles of Macroeconomics: A Study Guide

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Chapter 5: Introduction to Macroeconomics Multiple Choice
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1. The main subject of macroeconomics deals with: The factors that influence the production of particular products, and the behavior of individual industries. Household income and the determination of individual prices. The sum of individual decisions, or the aggregate behavior of consumers, firms, and the economy as a whole. The reasons behind the flexibility of prices and the tendency of all markets to converge toward equilibrium--where quantity supplied equals quantity demanded. All of the above. 2. The prolonged period of unemployment that existed during the Great Depression gave rise to the following thinking in the economics discipline: The classical revolution. The Marxist Revolution. The Keynesian Revolution. The monetarist revolution. The reversal of diminishing returns.
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3. Which of the following ideas was central in Keynesian theory? The invisible hand. The forces of supply and demand ensure that a market will quickly adjust to deviations from equilibrium. Self-correcting prices and wages determine the level of output and employment in the economy. Fiscal policy can and should be used to correct any deviations of output away from the full-employment level of output. Manipulation of the money supply is an ideal tool to correct the level of aggregate demand for goods and services.
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  • Fall '02
  • Sosa
  • Inflation, Keynesian economics, low inflation, high unemployment, high inflation

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