question

A macroeconomic theory based on the idea that unrestricted markets generate the aggregate production needed to maintain full employment is:

answer

classical economics.

question

Classical economics was largely replaced as the dominant theory of macroeconomics by

answer

Keynesian economics.

question

According to classical economics, if market demand increases, the:

answer

market supply curve ultimately decreases.

question

An important implication of classical economics is:

answer

government intervention is a source of instability not the solution to it.

question

An important implication of classical economics is

answer

government intervention is not needed to ensure full employment.

question

An important implication of classical economics is

answer

markets quickly eliminate shortages or surpluses and achieve equilibrium

question

An important implication of classical economics is

answer

stability and full employment is normal for the economy.

question

The economic theory that emerged out of the economic turmoil of the 1930s was:

answer

Keynesian economics.

question

A program launched by the U.S. government during the Great Depression that was consistent with the later implications of Keynesian economics was the

answer

Social Security system

question

The most important implication of Keynesian economics is:

answer

persistent unemployment.

question

According to Keynesian economics, the appropriate fiscal policy to address the unemployment problems of a business-cycle contraction is:

answer

expansionary.

question

Prior to the 1970s, Keynesian economics implied that:

answer

higher inflation is offset by lower unemployment.

question

After it was introduced in the 1930s, Keynesian economics:

answer

was the foundation of macroeconomic instruction until the 1980s

question

In the Keynesian aggregate supply curve, full employment is most closely associated with the:

answer

vertical segment.

question

In the Keynesian aggregate supply curve, rigid prices is most closely associated with the:

answer

horizontal segment.

question

A macroeconomic theory based on the idea that unrestricted markets generate the aggregate production needed to maintain full employment is

answer

classical economics.

question

According to Keynesian economics, an increase in unemployment is offset by:

answer

a decrease in inflation.

question

According to Keynesian economics, an increase in inflation is offset by:

answer

a decrease in unemployment.

question

The concepts of gross domestic product, unemployment, and inflation are most closely associated with the study of:

answer

macroeconomic business cycles

question

One of the key assumptions of classical economics is:

answer

Say's Law.

question

Based on the shape of the classical aggregate supply curve, a decrease in the price level:

answer

is matched by a corresponding decrease in resource prices.

question

Fiscal policy makes use of __________ to control the business cycle.

answer

government spending and taxes

question

The business-cycle phase that is most likely to be associated with high rates of unemployment is:

answer

contraction.

question

The General Theory, by John Maynard Keynes, is credited with launching the macroeconomic theory commonly known as:

answer

Keynesian economics.

question

If aggregate demand increases in the aggregate market with a classical aggregate supply curve, then:

answer

temporary shortages occur in product markets throughout the economy.

question

A key assumption underlying the study of classical economics is the notion:

answer

prices are flexible and easily eliminate market shortages of surpluses.

question

A major Keynesian critique of classical economics is that:

answer

prices are rigid.

question

A program launched by the U.S. government during the Great Depression that was consistent with the later implications of Keynesian economics was the:

answer

Works Projects Administration.

question

In terms of the circular flow, the __________ sector includes the __________.

answer

household, consumers

question

The sum of consumption, investment, government purchases, and net exports are commonly termed:

answer

aggregate expenditures

question

If the slope of the Keynesian economics consumption line is 0.8, then the marginal propensity to consume is:

answer

0.8.

question

The psychological law of Keynesian economics is illustrated if a $100 decrease in income results in a:

answer

$75 decrease in consumption.

question

Induced saving shows up in the Keynesian economics saving line as the:

answer

slope.

question

The psychological law of Keynesian economics is illustrated if a $100 increase in income results in a:

answer

$10 increase in saving.

question

In terms of consumption expenditures, services are:

answer

intangible activities purchased by the household sector that provide direct satisfaction at the time of purchase.

question

If a consumption schedule has income values of $0, $100, $200, $300, and $400, with corresponding consumption values of $150, $175, $200, $225, and $250, then full employment occurs if income is:

answer

a value not indicated by the information provided.

question

If a consumption schedule has income values of $0, $100, $200, $300, and $400, with corresponding consumption values of $150, $175, $200, $225, and $250, then saving is $150 if income is:

answer

$400.

question

The vertical intercept of the saving line is

answer

autonomous saving

question

A downward shift of the consumption line can be caused by a(n):

answer

increase in taxes.

question

A downward shift of the consumption line can be caused by a(n):

answer

decrease in financial wealth.

question

A downward shift of the consumption line can be caused by a(n):

answer

increase in interest rates.

question

A downward shift of the consumption line can be caused by a(n):

answer

decrease in consumer confidence.

question

A determinant of consumption expenditures that is most closely related to the implementation of fiscal policy is:

answer

taxes.

question

During a business-cycle __________, income causes __________ in __________ consumption.

answer

expansion, increases, induced

question

During a business-cycle __________, income causes __________ in __________ consumption.

answer

contraction, decreases, induced

question

The official measure for expenditures on gross domestic product by the foreign sector is:

answer

net exports of goods and services.

question

The official measure for expenditures on gross domestic product by the household sector is:

answer

personal consumption expenditures.

question

An important implication of Keynesian economics is the:

answer

high unemployment.

question

According to Keynesian economics, autonomous expenditures:

answer

creates an imbalance in the aggregate economy.

question

A consumption expenditure that changes as the level of national income changes is termed:

answer

induced consumption.

question

According to Keynesian economics, the source of net exports is the __________ sector.

answer

foreign

question

The Keynesian economics principle stating that people have the propensity to spend a large fraction, but not all, of additional income is:

answer

: the psychological law

question

The multiplier means that fiscal policy can use __________ changes in __________ to correct the problems of the business cycle.

answer

small, government purchases

question

The slope of the consumption line is the:

answer

marginal propensity to consume.

question

The slope of the consumption line is:

answer

induced consumption.

question

The psychological law of Keynesian economics is illustrated if a $100 decrease in income results in a:

answer

$75 decrease in consumption.

question

The psychological law of Keynesian economics is illustrated if a $100 increase in income results in a:

answer

$10 increase in saving.

question

In terms of the circular flow, the __________ markets undertake the exchange of __________.

answer

resource, factor services

question

An upward shift of the consumption line can be caused by a(n):

answer

increase in financial wealth.

question

An upward shift of the consumption line can be caused by a(n):

answer

decrease in taxes

question

An upward shift of the consumption line can be caused by a(n):

answer

increase in consumer confidence.

question

An upward shift of the consumption line can be caused by a(n):

answer

decrease in interest rates.

question

The portion of each additional dollar of household income that is used for saving is the:

answer

marginal propensity to saving.

question

According to Keynesian economics, the household sector is the source of:

answer

consumption.

question

Factors other than income that affect consumption expenditures are termed:

answer

consumption determinants

question

An important implication of Keynesian economics is:

answer

the use of fiscal policy.

question

In terms of the circular flow, the __________ sector is responsible for __________.

answer

business, investment expenditures

question

According to Keynesian economics, the source of investment expenditures is the __________ sector.

answer

business

question

The specific flow most likely to change the total volume of the circular flow is:

answer

net exports.

question

The slope of the consumption line is the:

answer

marginal propensity to consume.

question

A government purchases line is positively sloped due to:

answer

induced government purchases.

question

An increase in financial wealth causes a(n):

answer

upward shift of the aggregate expenditures line.

question

An increase in interest rates causes a(n):

answer

downward shift of the aggregate expenditures line.

question

Contractionary fiscal policy includes a(n) __________ that is designed to correct the problems of a business-cycle __________.

answer

increase in taxes, expansion

question

According to Keynesian economics, expansionary fiscal policy is designed to:

answer

shift the aggregate expenditures line upward.

question

Keynesian equilibrium requires equilibrium in the __________ markets, but not necessarily equilibrium in the __________ markets.

answer

product, resource

question

The C + I + G + (X - M) line with induced imports:

answer

is less steeply sloped than the C + I + G line.

question

The combined expenditures by the four macroeconomics sectors on domestic production is commonly termed:

answer

aggregate expenditures

question

Tangible goods purchased by the household sector that tend to last for more than a year are:

answer

durable goods.

question

Tangible goods purchased by the household sector that tend to last for less than a year are:

answer

nondurable goods.

question

Optimistic expectations about the future of the economy by the household and business sectors cause a(n):

answer

upward shift of the aggregate expenditures line.

question

The C + I line is derived by:

answer

adding investment to the consumption line

question

The graphical depiction of the relation between household saving and household disposable income is the:

answer

saving line

question

The graphical depiction of the relation between investment expenditures and national income is the:

answer

investment line.

question

Federal, state, and local governments are included in the:

answer

government sector.

question

The situation that exists if there is a persistent increase in the economy's average price level is the macroeconomic problem of:

answer

inflation.

question

Keynesian economics is a school of thought based on the proposition that:

answer

aggregate demand is a primary source of business-cycle instability.

question

According to Keynesian economics, the __________ sector is largely the cause of business cycles, while the __________ sector is primarily responsible for stabilizing business cycles.

answer

private, public

question

In Keynesian economics, the foundation of the two-sector aggregate expenditures line is the:

answer

consumption line.

question

The inclusion of taxes into the three-sector Keynesian model causes:

answer

a downward shift of the consumption line

question

The three-sector Keynesian model is obtained by adding the __________ sector to the two-sector Keynesian model.

answer

government

question

In the three-sector injections-leakages model, the injection(s) is(are):

answer

investment and government purchases

question

The C + I + G line is more steeply sloped than the C + I line in the three-sector Keynesian model due to:

answer

induced government purchases.

question

In the three-sector injections-leakages model, if investment is less than saving at equilibrium, then:

answer

government purchases are greater than taxes.

question

In the four-sector injections-leakages model, the horizontal line is the __________ line.

answer

I + G + X

question

In the three-sector injections-leakages model, if I + G exceeds S + T, then:

answer

aggregate production increases.

question

In the three-sector injections-leakages model, the leakage(s) is(are):

answer

saving and taxes.

question

A non-consumption expenditure on aggregate production is commonly termed a(n):

answer

: injection.

question

An upward shift of the aggregate expenditures line can be triggered by:

answer

fiscal policy designed to reduce unemployment.

question

An upward shift of the aggregate expenditures line can be caused by:

answer

an increase in financial wealth.

question

An upward shift of the aggregate expenditures line can be triggered by:

answer

an increase in government purchases.

question

An upward shift of the aggregate expenditures line can be caused by:

answer

a decrease in interest rates

question

An upward shift of the aggregate expenditures line can be caused by a(n):

answer

increase in transfer payments.

question

An upward shift of the aggregate expenditures line can be triggered by:

answer

a decrease in taxes.

question

An upward shift of the aggregate expenditures line can be triggered by:

answer

expansionary fiscal policy.

question

In terms of the multiplier process, Keynesian equilibrium is disrupted by __________ and restored by __________.

answer

autonomous expenditures, induced expenditures

question

In Keynesian economics, the two sectors combined as the private sector are the:

answer

household and business sectors.

question

Aggregate expenditures and aggregate production are the opposing forces for equilibrium in the theory of:

answer

Keynesian economics.

question

The three-sector Keynesian aggregate expenditures line is obtained adjusting the two-sector Keynesian aggregate expenditures line for both:

answer

government purchases and taxes.

question

According to Keynesian economics, a recessionary gap is best closed through:

answer

expansionary fiscal policy.

question

In terms of the multiplier process, Keynesian equilibrium is disrupted by __________ and restored by __________.

answer

autonomous expenditures, induced expenditures

question

The leakage added to the three-sector injections-leakages model to derive the four-sector model is(are):

answer

imports.

question

The injection added to the three-sector injections-leakages model to derive the four-sector model is(are):

answer

exports

question

The state that exists when opposing forces do not offset each other and there is an inherent tendency for change is termed:

answer

disequilibrium

question

In terms of the circular flow model, injections are represented by flows:

answer

into the product markets.

question

In terms of the circular flow model, leakages are represented by flows:

answer

out of the household sector.

question

Expansionary fiscal policy is designed to reduce the __________ rate with a(n) __________.

answer

unemployment, increase in government purchases.

question

New classical economics philosophically tends to be most consistent with:

answer

conservative politics.

question

According to classical economics, if market demand increases, the:

answer

: resources ultimately return to full employment.

question

According to classical economics, if market demand increases, the:

answer

market supply curve ultimately decreases.

question

The change in government purchases divided by the change in income is the:

answer

marginal propensity for government purchases.

question

In terms of consumption expenditures, services are:

answer

intangible activities purchased by the household sector that provide direct satisfaction at the time of purchase.

question

According to Keynesian economics, an inflationary gap is best closed through:

answer

contractionary fiscal policy.

question

The after-tax income that the household sector does not use for consumption is:

answer

saving.

question

One of the key assumptions of Keynesian economics is:

answer

rigid prices.

question

The C + I + G line is derived by:

answer

adding government purchases to the C + I line.

question

The C + I line is parallel to the consumption line in the two-sector Keynesian model due to:

answer

autonomous investment.

question

If household income increases from $100 to $150 and consumption increases from $90 to $110, then the MPS is:

answer

0.6

question

If household income increases from $100 to $150 and consumption increases from $90 to $110, then the MPC is

answer

0.4.

question

The official measure for expenditures on gross domestic product by the government sector is:

answer

government consumption expenditures and gross investment.

question

The official measure for expenditures on gross domestic product by the business sector is:

answer

gross private domestic investment.

question

Compared to Keynesian economics, which was originally concerned primarily with the problem of unemployment, the aggregate market is:

answer

concerned with both the problems of unemployment and inflation.

question

Expansionary fiscal policy is characterized by:

answer

an increase in transfer payments.

question

Expansionary fiscal policy is characterized by:

answer

an increase in government purchases.

question

The size of the Keynesian multiplier is based on the:

answer

slope of the aggregate expenditures line.

question

According to classical economics, the aggregate supply curve is:

answer

a vertical line.

question

According to classical economics, if market demand increases, the:

answer

resources ultimately return to full employment.

question

According to Keynesian economics, the aggregate supply curve is:

answer

L-shaped.

question

Prior to publication of The General Theory by John Maynard Keynes, the U.S. government:

answer

undertook policies later implied by Keynesian economics.

question

The term for all spending by the government sector is:

answer

government expenditures.

question

After it was introduced in the 1930s, Keynesian economics:

answer

supported the emerging Democratic political philosophy.

question

After it was introduced in the 1930s, Keynesian economics:

answer

dominated government policies for the next four decades.

question

The portion of household income used for saving is the:

answer

average propensity to save.

question

In Keynesian economics, the consumption line depicts the relation between consumption and:

answer

income.

question

An important implication of Keynesian economics is the:

answer

possibility of persistent high rates of unemployment.

question

An important implication of Keynesian economics is:

answer

unemployment can persist for an extended period of time.

question

An important implication of Keynesian economics is:

answer

the aggregate supply curve is L-shaped.

question

An important implication of Keynesian economics is the:

answer

critical role played by the demand side of the economy

question

According to Keynesian economics, expansionary fiscal policy is designed to:

answer

shift the aggregate expenditures line upward.

question

The Keynesian multiplier is the:

answer

cumulatively reinforcing interaction between consumption and income that amplifies changes in autonomous expenditures.

question

The macroeconomic problem of unemployment is most likely to result if:

answer

aggregate expenditures are less than aggregate production.

question

According to classical economics, the market for a specific commodity:

answer

achieves equilibrium through flexible prices

question

The vertical intercept of the saving line is:

answer

autonomous saving.

question

The saving line is derived as the vertical distance between the __________ and the __________.

answer

consumption line, 45-degree line

question

In the simple two-sector Keynesian model, the 45-degree equilibrium guideline shows:

answer

all points with equality between aggregate production and aggregate expenditures.

question

In the simple two-sector Keynesian model, equilibrium is achieved at the intersection of the:

answer

45-degree and C + I lines.

question

In the simple two-sector Keynesian model, disequilibrium results if:

answer

aggregate expenditures are not equal to aggregate production.

question

Expansionary fiscal policy includes a(n) __________ that is designed to correct the problems of a business-cycle __________.

answer

increase in transfer payments, contraction

question

During the 1930s, the U.S. unemployment rate reached a peak of about:

answer

25%.

question

During the 1930s, the U.S. unemployment rate never fell below:

answer

12%.

question

The slope of the saving line is the:

answer

MPS.

question

The slope of the saving line is:

answer

induced saving

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