11 - According to Classical theory: ( )A) studying music,...

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According to Classical theory: ( ) A) studying music, especially classical music, improves mathematical skills, leading to improvements in economic comprehension. (X) B) the economy is inherently stable. ( ) C) prices are slow to adjust, and thus the economy can remain in a persistent recession for prolonged periods of time. ( ) D) economic growth is entirely due to inflation. Feedback: Classical economists believed that the economy is stable and self-correcting. According to Say's Law: (X) A) it isn't what you say but how you say it that matters most. ( ) B) demand will create its own supply. ( ) C) supply creates its own demand. ( ) D) in the long run we are all dead. Feedback: According to Say's Law, "supply creates its own demand." During the period of the 1930s: ( ) A) wages and prices adjusted quickly to changing economic conditions. ( ) B) the classical view of the macroeconomy was validated by prevailing economic conditions. ( ) C) wages adjusted quickly as expected by Say's Law but other prices, especially agricultural prices, did not. (X) D) the sluggish adjustment of the economy caused economists to look to alternatives to the classical model.
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Feedback: The economy was slow to adjust and self-correct during the 1930s. According to the Keynesian view of the macroeconomy: ( ) A) the economy is inherently stable. ( ) B) the economy is not always stable; however, the economy quickly returns to full employment. (X) C) the economy is inherently unstable; however, government intervention would only worsen the situation. ( ) D) not only is the economy inherently unstable, but government has the ability to intervene in a way that will increase economic stability. Feedback: Keynes <CANES> believed that the private economy was inherently unstable and that government intervention was needed. The aggregate demand curve illustrates that: (X) A) an increase in the price level results in increased spending because higher prices means times are good for everyone. ( ) B) it is clear that there is no relationship in the short run between the price level and total spending. ( ) C) a lower average price level results in higher levels of aggregate spending, all other factors being equal. ( )
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This note was uploaded on 03/07/2012 for the course BUSN 1000 taught by Professor Web during the Spring '12 term at Webster.

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11 - According to Classical theory: ( )A) studying music,...

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