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Keynesian Aggregate Expenditures2

Keynesian Aggregate Expenditures2 - Chapter 9 25 Classical...

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Chapter 9 / 25 Classical Macroeconomics and Keynesian Aggregate Expenditures 1) BM25 \ C \\ Classical Macroeconomics: Laissez Faire \ 2 \\ Before the 1930s most mainstream economists held that supply creates its own demand, so that the policies of the federal government should be aimed at: (a) acquiring gold by maximizing exports while minimizing imports. (b) maximizing growth of both Aggregate Demand and Aggregate Supply. (c) stabilizing Aggregate Demand by balancing the government budget and regulating the money supply, while allowing private markets to determine Aggregate Supply. (d) boosting output while shrinking Aggregate Demand to lower prices. 2) BM25 \ A \\ Classical Macroeconomics \ 2 \\ Classical macroeconomic theories rely most heavily on: (a) Say’s law and flexible wages, interest rates, and prices. (b) Occam’s razor and the Keep It Simple Stupid [KISS] rule. (c) Keynesian cross models and sticky wages and prices. (d) fiscal policy and the visible hand of government spending. (e) creative responses within the financial system. 3) BM25 \ D \\ Classical Macroeconomics: Wage-Price Flexibility \ 1 \\ Classical theory emphasized, in contrast to Keynesian theory, the importance of: (a) macroeconomic analysis. (b) government intervention. (c) Aggregate Demand. (d) flexible wages, prices, and interest rates. 4) BM25 \ A \\ Say’s Law \ 1 \\ Among the foundations of classical macroeconomics is: (a) Say’s law. (b) price discrimination. (c) Occam’s razor. (d) the Keynesian cross model. (e) Gresham’s law. Ralph Byrns Chapter 9 / 25: Classical Macroeconomics and Keynesian Aggregate Expenditures Test Bank Two 1
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5) BM25 \ A \\ Say’s Law \ 1 \\ Say’s law, or the idea that “supply creates its own demand,” is central to the theory of: 6) BM25 \ C \\ Classical Theory: Labor Markets \ 2 \\ According to classical economic theory, involuntary unemployment in labor markets: (a) allows capitalists to exploit the working class. (b) results if workers won’t accept cuts in their money wages. (c) is inconsistent with flexible wages. (d) is inherent in a mature capitalist economy. 7) BM25 \ A \\ Classical Theory: Labor Markets \ 2 \\ Classical macroeconomics concludes that, in the long run, the forces of supply and demand channeled through markets: (a) make involuntary unemployment impossible. (b) ensure that people everywhere will be equally prosperous. (c) will cause capitalism to evolve into socialism. (d) stabilize the price level. 8) BM25 \ C \\ Classical Macroeconomics: Labor Markets \ 2 \\ Classical economists believed that: (a) if investment exceeds saving, prices and interest rates fall. (b) flexible prices and wages cannot restore full employment if interest rates are rigid. (c) flexible interest rates, wages, and prices ensure full employment. (d) voluntary unemployment reflects economic inefficiency.
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