Chapter 11 - Classical and Keynesian Economics

1		Who believed that our economy was either at full employment or tended toward full employment.
			A)	the classical economists
			B)	the Keynesians
			C)	both the classicals and the Keynesians
			D)	neither the classicals nor the Keynesians
2		The basic foundation for the classical belief in full employment was laid by
			A)	Adam Smith.
			B)	Milton Friedman.
			C)	Jean Baptiste Say.
			D)	H. Wicksteed.
3		One thing that could throw off Say's Law would be if people
			A)	spent more than they earned.
			B)	saved some of their earnings.
			C)	consumed some of what they produced.
			D)	went into business for themselves.
4		Wages are downwardly flexible. This statement would be made by
			A)	the Keynesians.
			B)	the classicals.
			C)	both the Keynesians and the classicals.
			D)	neither the Keynesians nor the classicals.
5		Savings and investing is done by different people for different reasons. This statement would be made by
			A)	the Keynesians.
			B)	the classicals.
			C)	Both the Keynesians and the classicals.
			D)	Neither the Keynesians nor the classicals.
6		The long-run aggregate supply curve is
			A)	vertical.
			B)	horizontal.
			C)	downward sloping.
			D)	upward sloping.
7		It's possible to raise output without raising prices in the ______ range of the aggregate supply curve.
			A)	Classical
			B)	Intermediate
			C)	Keynesian
8		The real balance effect
			A)	balances savings and investment.
			B)	balances imports and exports.
			C)	balances aggregate demand and aggregate supply.
			D)	is the influence of a change in your purchasing power on the quantity of real GDP that you are willing to buy.
9		Supply creates its own demand. This is a statement that would be agreed with by
			A)	the Keynesians.
			B)	the classicals.
			C)	both the Keynesians and the classicals.
			D)	neither the Keynesians nor the classicals.
10		Aggregate demand is our economy's prime mover. This statement would be agreed to by
			A)	the Keynesians.
			B)	the classicals.
			C)	both the Keynesians and the classicals.
			D)	neither the Keynesians nor the classicals.
11		The consumption function states that
			A)	consumption is a function of saving.
			B)	as income rises, consumption rises, but not as quickly.
			C)	consumption is a function of investment.
			D)	as consumption declines, savings rises.
12		The economy is always tending toward equilibrium was a belief held by
			A)	the Keynesians.
			B)	the classicals.
			C)	both the Keynesians and the classicals.
			D)	neither the Keynesians nor the classicals.
13		Keynes said that to fight a recession the government should
			A)	go to war.
			B)	spend a lot of money.
			C)	balance the budget.
			D)	do nothing.
14		The most recent example of a government carrying out a Keynesian program to fight a recession was in
			A)	the United States in the 1930s.
			B)	Germany in the 1970s.
			C)	Great Britain in the 1980s.
			D)	Japan in the 1990s.
15		The most important difference between the short-run aggregate supply curve and the long-run aggregate supply curve is whether
			A)	nominal interest rates are changing.
			B)	people fully anticipate changes in the price level.
			C)	there are changes in fiscal policy.
			D)	there are changes in monetary policy.