In the classical model, an increase in aggregate demand will cause A) an increase in actual output, or Gross Domestic Product (GDP). B) a decrease in actual output, or Gross Domestic Product (GDP). C) a decrease in price level. D) an increase in price level. ANSWER D
Classical economists assumed that A) wages were inflexible. B) individuals suffered from money illusion. C) prices were sticky. D) none of the above. ANSWER D
An outward shift of the production possibilities curve demonstrates A) economic growth. B) an increased rate of inflation. C) a cyclical shock. D) a recession. ANSWER A
The first systematic attempt to explain the determinants of the price level and national levels of income, employment, consumption and real Gross Domestic Product (GDP) was made by ________ economists. A) supply-side B) classical C) Keynesian D) monetarist ANSWER B
The real output of the economy under conditions of full employment A) is long-run aggregate demand. B) is long-run aggregate supply. C) happens only when there is no inflation. D) is determined by the real-balance effect. ANSWER B
Refer to the above table. How long would it take for a country to triple its GDP if the GDP grew at a 20 percent rate? A) 10 years B) 6 years C) 4 years D) 2 years ANSWER B
Say’s law argues that I. overproduction is typical in a market economy. II. supply creates its own demand. A) I only B) II only C) Both I and II D) Neither I nor II ANSWER B
Refer to the above table. Two countries have per capita real GDPs in 2010 of $5000. If country A has a 4 percent growth rate and Country B a 5 percent growth rate, what will the per capita real GDPs of each be in the year 2060? A) A: $15,000; B: $30,000 B) A: $40,000; […]
The long run aggregate supply curve is vertical because A) a change in the level of prices will have no effect on real output in the long-run. B) the production possibilities curve is vertical. C) the aggregate demand curve is downward sloping. D) technology increases at a constant rate. ANSWER A
Which of the following will cause the long-run aggregate supply curve to shift? I. Changes in technology II. Changes in government spending III. Changes in the money supply A) I only B) II only C) I, II, and III D) only I and II ANSWER A