Macroeconomic Equilibrium1

Macroeconomic Equilibrium1 - Chapter 26 10 Macroeconomic...

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Chapter 26 / 10 Macroeconomic Equilibrium 1) BM26 \ A \\ Classical Equilibrium: The Long Run \ 2 \\ Classical macroeconomists viewed long-run equilibrium as occurring when: (a) wages, interest rates, and prices fully adjust to generate full employment. (b) there is no involuntary employment and wages are stable. (c) “we are all dead.” (d) there is no voluntary unemployment and prices are stable. (e) external shocks are canceled out. 2) BM26 \ C \\ Economic History \ 2 \\ In the United States during the years from 1929 to 1933: (a) induced consumption rose by almost 90 percent. (b) investment rose in an inflationary manner. (c) real national income fell roughly 30 percent. (d) autonomous spending multipliers averaged about eight. 3) BM26 \ C \\ History: John Maynard Keynes \ 2 \\ In his " The General Theory of Employment, Interest, and Money ," John Maynard Keynes asserted that in a market economy, macroequilibrium: (a) with involuntary unemployment is impossible. (b) has an inherently strong inflationary bias. (c) may or may not be reached at a full employment level in the short run. (d) with full employment requires laissez- faire policies. 4) BM26 \ B \\ Economic History \ 2 \\ Traditional Keynesians largely attributed the collapse of the U.S. economy that began in 1929 and which lasted throughout most of the 1930s to declines in: (a) government purchases and federal tax rates. (b) investor confidence and private investment. (c) autonomous consumption. (d) stock market values during the Stock Market Crash of 1929. (e) exports, because of a trade war. Ralph Byrns Chapter 26 / 10 : Macroeconomic Equilibrium Test Bank Two 1
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5) BM26 \ A \\ Keynesian Theory: Long Run vs. Short Run \ 2 \\ John Maynard Keynes’ famous quip that “… in the long run we are all dead … ” was intended as a condemnation of classical macroeconomics for failures to adequately address: (a) such policy issues as recessions or unemployment that seem critical in the short run. (b) how the government can control the rate of inflation. (c) determinants of saving and investment, and consequently, short run economic growth. (d) how the money supply affects the level of nominal national output and income. (e) the short run problem of achieving equity in the distribution of income. 6) BM26 \ D \\ Aggregate Demand \ 2 \\ The theory that inadequate demand often causes of cyclic downturns and which supports actively adjusting government policies to fight macroeconomic instability is: (a) Marxist theory. (b) classical macroeconomic theory. (c) psychological theory. (d) Keynesian theory. 7) BM26 \ A \\ Aggregate Demand \ 2 \\ According to Keynesian theory, when a market economy is in the grip of a recession: (a) demand creates its own supply. (b) supply creates its own demand.
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This note was uploaded on 02/07/2011 for the course ECON 3461 taught by Professor Spencer during the Spring '10 term at Golden West College.

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Macroeconomic Equilibrium1 - Chapter 26 10 Macroeconomic...

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