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| 1.
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According to Classical theory: |
| | A) | studying music, especially classical music, improves mathematical skills, leading to improvements in economic comprehension. |
| | 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 |
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| 2.
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According to Say's Law: |
| | 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. |
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| 3.
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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. |
| | D) | the sluggish adjustment of the economy caused economists to look to alternatives to the classical model. |
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| 4.
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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. |
| | 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. |
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| 5.
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The aggregate demand curve illustrates that: |
| | 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. |
| | D) | a decrease in the average price level is associated with a decrease in net exports. |
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| 6.
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The aggregate supply curve is: |
| | A) | always horizontal. |
| | B) | always vertical. |
| | C) | horizontal in the long run but clearly vertical in the short run. |
| | D) | typically upward sloping. |
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| 7.
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Macroeconomic equilibrium is associated with: |
| | A) | the intersection of the aggregate demand and aggregate supply curves. |
| | B) | any point on the aggregate supply curve. |
| | C) | any point on the aggregate demand curve. |
| | D) | all points above the intersection of the aggregate demand and aggregate supply curves but no points below the intersection. |
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| 8.
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The equilibrium level of output associated with the intersection of the aggregate demand and aggregate supply curves: |
| | A) | is always a full-employment level of output. |
| | B) | may be less than the full-employment level of output but is never above the full-employment level of output. |
| | C) | may be above the full-employment level of output but is never less than the full-employment level of output. |
| | D) | may occur at output levels that can be either below, at, or above the full-employment levels of output. |
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| 9.
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Suppose massive and worldwide crop failures dramatically increased resource costs. The result would be best represented by: |
| | A) | an upward movement along the aggregate demand curve representing the higher prices. |
| | B) | an upward movement along the aggregate supply curve representing the higher prices. |
| | C) | a leftward shift of the aggregate supply curve resulting in a higher price level and a lower level of aggregate output. |
| | D) | a rightward shift of the aggregate demand curve resulting in a higher price level. |
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| 10.
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Monetary policy designed to increase equilibrium income: |
| | A) | works primarily by changing the slope of the aggregate supply curve making it flatter, thereby increasing output given a stable aggregate demand curve. |
| | B) | works primarily by changing the position of the aggregate supply curve by shifting it to the right, thereby increasing output. |
| | C) | works primarily by changing the position of the aggregate demand curve by shifting it to the right, thereby increasing output. |
| | D) | None of the above are true since changes in the money supply have no effect on either the aggregate demand curve or the aggregate supply curve. |
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| 11.
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Which of the following are determinants of macro performance? |
| | A) | Internal market forces |
| | B) | External shocks |
| | C) | Policy levers |
| | D) | All of the above are true. |
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| 12.
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Classical economic theory believes in ______ prices and ______ wages. |
| | A) | flexible; flexible |
| | B) | inflexible; inflexible |
| | C) | flexible; inflexible |
| | D) | inflexible; flexible |
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| 13.
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Which economist said, "Supply creates its own demand"? |
| | A) | John Maynard Keynes |
| | B) | Adam Smith |
| | C) | Jean-Baptiste Say |
| | D) | Milton Friedman |
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| 14.
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Aggregate supply: |
| | A) | is the total supply of all goods and services. |
| | B) | is generally an upward sloping curve. |
| | C) | shows the relationship between the price level and the quantity of total output supplied, c.p. |
| | D) | All of the above are true. |
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| 15.
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The aggregate demand curve: |
| | A) | is horizontal. |
| | B) | is vertical. |
| | C) | is downward sloping. |
| | D) | is upward sloping. |
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| 16.
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A decrease or leftward shift of the aggregate supply curve will ______ GDP and ______ the price level. |
| | A) | increase; increase |
| | B) | decrease; decrease |
| | C) | increase; decrease |
| | D) | decrease; increase |
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| 17.
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An increase or rightward shift of the aggregate demand curve will ______ GDP and ______ the price level. |
| | A) | increase; increase |
| | B) | decrease; decrease |
| | C) | increase; decrease |
| | D) | decrease; increase |
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| 18.
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An increase in the price level will ______ the quantity of real output supplied, ceteris paribus. |
| | A) | increase |
| | B) | decrease |
| | C) | not change |
| | D) | None of the above is true. |
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| 19.
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If aggregate demand and aggregate supply both decrease, the level of output and employment will ______. |
| | A) | increase |
| | B) | decrease |
| | C) | not change |
| | D) | None of the above is true. |
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| 20.
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Which economic policy was most influential in the 1980s? |
| | A) | Fiscal policy |
| | B) | Monetary policy |
| | C) | Supply-side policy |
| | D) | None of the above is true. |
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| 21.
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Which of the following are basic macro outcomes? |
| | A) | Output |
| | B) | Jobs |
| | C) | Growth |
| | D) | All of the above are true. |
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| 22.
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Unemployment occurs when the equilibrium quantity of output is _____ than the full-employment level of output. |
| | A) | equal to |
| | B) | less than |
| | C) | greater than |
| | D) | None of the above is true. |
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| 23.
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In economics the word aggregate means: |
| | A) | marginal. |
| | B) | total. |
| | C) | efficient. |
| | D) | small. |
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| 24.
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A stock market decline or drop in consumer confidence would be expected to shift the aggregate _____ curve to the _____. |
| | A) | supply; right |
| | B) | supply; left |
| | C) | demand; right |
| | D) | demand; left |
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| 25.
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Keynesian economics is known as a _____ theory. |
| | A) | demand-side |
| | B) | supply-side |
| | C) | nonactivist |
| | D) | laissez-faire |
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| 26.
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A decrease in oil prices will tend to shift the aggregate _____ curve to the _____. |
| | A) | demand; right |
| | B) | demand; left |
| | C) | supply; right |
| | D) | supply; left |
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| 27.
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Which of the following economists believed the private economy was inherently unstable? |
| | A) | Adam Smith |
| | B) | Jean-Baptiste Say |
| | C) | John Maynard Keynes |
| | D) | David Ricardo |
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| 28.
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As a result of damage to the Gulf Coast from Hurricanes Katrina and Rita, the _____ curve shifted to the _____. |
| | A) | AD; right |
| | B) | AD; left |
| | C) | AS; right |
| | D) | AS; left |
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