Keynesian Aggregate Expenditures1

Keynesian Aggregate Expenditures1 - Chapter 9 / 25...

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Chapter 9 / 25 Classical Macroeconomics and Keynesian Aggregate Expenditures 1) AM25 \ C \\ Classical Macroeconomics: Laissez Faire \ 1 \\ Laissez faire economic policies, broadly construed, tend to be most consistent with: (a) socio-political economics. (b) Keynesian theory. (c) classical macroeconomics. (d) institutional macroeconomics. 2) AM25 \ C \\ Classical Macroeconomics: Laissez Faire \ 2 \\ Classical macroeconomics suggests that the best government economic policy is usually to: (a) concentrate only on one policy objective at a time. (b) attempt to satisfy all objectives, while emphasizing the most important. (c) no government action at all, letting time work out any problems. (d) careful appraisal of alternatives, with a variety of policy approaches. 3) AM25 \ C \\ Classical Theory: Wage-Price Flexibility \ 2 \\ The classical prediction that the private sector would tend toward long-run equilibrium at full employment rests on an assumption of: (a) quantity adjustments and inflexible prices. (b) mobile goods and immobile resources. (c) resource mobility and flexible prices for outputs and resources. (d) Keynes’s fundamental psychological law. 4) AM25 \ C \\ Say’s Law \ 1 \\ According to Say’s Law: (a) demand and supply are totally independent. (b) demand creates its own supply. (c) supply creates its own demand. (d) unemployment and inflation are inversely related. 5) AM25 \ C \\ Say’s Law \ 1 \\ Jean Baptiste Say [1767-1832] asserted an economic law to the effect that: (a) demand creates its own supply. (b) long-run scarcity is impossible. (c) supply creates its own demand. (d) market shortages and surpluses never balance. Ralph Byrns Chapter 9 / 25: Classical Macroeconomics and Keynesian Aggregate Expenditures Test Bank One 1
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Figure A2506 6) AM25\ D \ A2506 \ Classical Theory: Labor Markets \ 3\\ If this labor market adjusts in a classical manner and the overall state of the economy has initially generated demand for unskilled labor D 0 , then roughly: (a) 66,000 unskilled workers [line bf ] will be unemployed. (b) 68,000 unskilled workers will each earn about $5.70 per hour [point e ]. (c) 50,000 unskilled workers will be employed [point c ]. (d) 68,000 workers being employed [point d ] at the $8 per hour equilibrium wage. 7) AM25 \ A \ A2506 \ Classical Theory: Labor Markets \ 3 \\ If this labor market was in equilibrium at point d during a prosperous period, and then a sharp recession reduced the demand for unskilled labor to D 1 , the initial adjustment would be for: (a) about 35,000 workers [line ad ] to become unemployed at the initial $8 hourly wage. (b) the equilibrium wage rate to instantaneously decline to roughly $5.70 per hour [point b ]. (c) about 68,000 unskilled workers to be willing to work for roughly $5.70 [point
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Keynesian Aggregate Expenditures1 - Chapter 9 / 25...

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