Macroeconomics Chapter 9 Colander 9e – Flashcards
Unlock all answers in this set
Unlock answersquestion
"Classical economist" is often used interchangeably with which term?
answer
Laissez-faire economist.
question
Between 2007 and 2009, the US unemployment rate rose from under 5 percent to over 8 percent. A Keynesian economist would most likely blame this increase in unemployment on:
answer
A decline in the level of aggregate demand
question
Before the Great Depression the popular view of government was:
answer
Laissez-faire, and after the depression, the popular view of government was activist.
question
The laissez-faire policy prescription to eliminate unemployment was to:
answer
Eliminate labor unions and government policies that hold real wages too high.
question
The classical economists argued that:
answer
If unemployment occurs, it will cure itself because wages and prices will fall.
question
Which of the following was not a solution to the Depression favored by the Classical economists?
answer
Hire unemployed workers for public works programs.
question
Aggregate demand management policies are designed most directly to:
answer
control the aggregate level of spending in the economy.
question
Potential income is that level of income that:
answer
an economy is capable of producing without generating higher inflation.
question
Keynes believed equilibrium income was:
answer
Not fixed at the economy's potential income.
question
The paradox of thrift occurs when:
answer
An increase in saving reduces output.
question
Keynes argued that:
answer
The short run is a more important policy concern than the long-run.
question
The reason why the AS/AD model does not depend upon the concepts of substitution and opportunity cost is that:
answer
The AS/AD model considers total output. There are no goods to substitute.
question
As prices fall, people become richer and buy more. This occurs as a result of:
answer
The money wealth effect.
question
When aggregate demand is declining and the price level needs to fall to bring about equilibrium, pressure for the price level to fall brings expectations of falling aggregate demand, lower asset prices, and financial panics triggered by the decline in the value of financial assets. If these forces are strong enough, these dynamic effects can create a:
answer
leftward shift in the aggregate demand curve.
question
A fall in a foreign country's income will most likely cause:
answer
A reduction in U.S. exports, so the U.S. aggregate demand curve shifts left.
question
If businesses expect future demand to increase, this will cause a:
answer
rightward shift of the aggregate demand curve.
question
The new government of Pakistan transfers money from the rick to the poor. This will likely:
answer
Shift the Pakistan AD curve to the right.
question
In the summer of 1953, the Korean War ended and government expenditures decreased. In terms of the AS-AD model, this change should have:
answer
Shifted the AD curve to the left.
question
An increase in production costs is most likely to shift the:
answer
Short-run aggregate supply curve up(to the left).
question
In late 2004, oil prices increased sharply while the rate of growth in labor productivity declined. The combination of these two factors should:
answer
Shift the short-run aggregate supply curve up(to the left)
