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Macroeconomic Equilibrium

Macroeconomic Equilibrium - Chapter 26 10 Macroeconomic...

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Chapter 26 / 10 Macroeconomic Equilibrium 1) AM26 \ C \\ Classical Equilibrium: The Long Run \ 2 \\ Classical macroeconomic theory emphasizes: (a) government cures for market failures. (b) possible equilibria at less than full employment. (c) a long-run view of the operation of market economies. (d) dynamic adjustments to Schumpeterian innovations. (e) saving and investment as functions of national income. 2) AM26 \ B \\ Classical Macroeconomics \ 2 \\ Achieving full employment in a classical macroeconomic model depends least on: (a) flexible prices. (b) induced consumption. (c) flexible wages. (d) Say’s Law. (e) flexible interest rates. 3) AM26 \ C \\ History: John Maynard Keynes \ 2 \\ Many beliefs held by classical economists prior to the 1930s: (a) cited automatic mechanisms to move toward socialism. (b) relied upon flexible quantities to ensure price level stability. (c) were challenged by John Maynard Keynes during the Great Depression. (d) concluded that demand creates its own supply. (e) hinged on differences between actual saving and investment. 4) AM26 \ A \\ Keynesian Theory as a General Theory \ 2 \\ John Maynard Keynes accepted classical macroeconomic theory as a special case that: (a) held for the long run, but which failed to consider the short run equilibria resulting from declines in Aggregate Demand. (b) was germane only as a recipe to help a market economy escape from a recession. (c) was useful for explaining cyclical unemployment, but not inflation. (d) overemphasized Aggregate Demand and ignored the determinants of Aggregate Supply. (e) offered few insights into the problem of persistent stagflation. Ralph Byrns Chapter 26 / 10 : Macroeconomic Equilibrium Test Bank One 1
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5) AM26 \ D \\ Keynesian Theory: Long Run vs. Short Run \ 2 \\ Keynesian theory accepts the classical macroeconomic theory that flexible wages, interest rates, and prices, combined with Say’s law, ensure full employment and a maximum value for output: (a) in the short run. (b) as long as government follows laissez faire policies. (c) but only if the government runs deficits to fight inflation and deflation. (d) in the long run, but “in the long run we are all dead.” (e) on average, but not at every instant in time. 6) AM26 \ E \\ Classical and Keynesian Theories: Long Run vs. Short Run \ 2 \\ John Maynard Keynes differed with neoclassical macroeconomics about whether: (a) demand creates its own supply when an economy is depressed, or vice versa . (b) wages are perfectly flexible or sticky. (c) classical theory is correct only in the long run, and in the long run we are all dead. (d) prices and interest rates are sticky or perfectly flexible (e) All of the above are issues about which Keynes differed with classical theory.
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Macroeconomic Equilibrium - Chapter 26 10 Macroeconomic...

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