Unemployment Only Exists During Periods Of War Discussion
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Unemployment Only Exists During Periods Of War Discussion
The classical economists argued that planned saving and planned investment will always be equal…1 answer below »
The classical economists argued that planned saving and planned investment will always be equal because of changes in
– the price level.
– the interest rate.
– wages.
– the level of real disposable income.
If there is a change in the U.S. endowment of factors of production, then there would be
– a movement along the SRAS curve.
– a shift in both LRAS and SRAS.
– a shift in just LRAS.
– shifts in just SRAS.
Say”s law implies that
– surpluses never occur.
– there will always be unemployment.
– surpluses or shortages are possible, but only for a short time.
– shortages never occur.
According to the classical model,
– unemployment is a temporary phenomenon.
– the natural rate of unemployment is zero.
– long-term unemployment is unavoidable.
– unemployment only exists during periods of war.
For an investment to be considered autonomous, it must
– increase as the level of income increases.
– be negatively related to the interest rate.
– include fixed components.
– be independent of the level of real disposable income.
If a consumer buys less gasoline because gas prices increased by 10 percent, even though all other prices have also increased by 10 percent, then
– the consumer has been fooled by money illusion.
– the consumer is paying too close attention to changes in relative prices.
– wages and prices are too flexible.
– inflation is not a problem in the economy.
An upward sloping short-run aggregate supply curve suggests that
– prices and wages adjust in part to short-run demand changes.
– real GDP is determined by aggregate supply.
– prices and wages are completely flexible.
– prices and wages are completely inflexible.
All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT
– a change in planned capital goods expenditure.
– a change in producer expectations of future profit.
– a change in productive technology.
– a change in the real interest rate.
In an economy with no government and no international trade, consumption expenditures will be less than the total value of goods and services when
– people save some of their income.
– investment is zero.
– saving is zero.
– people barter rather than use money in making exchanges.
Investment is
– autonomous with respect to real GDP.
– a positive function of interest rates.
– a negative function of real GDP.
– a positive function of real GDP.
Suppose the euro appreciates against the dollar. This causes U.S. exports to become less expensive for consumers in the European Union, which would likely cause the U.S.
– aggregate demand to shift rightward.
– aggregate demand to shift leftward.
– aggregate supply to shift leftward.
– aggregate supply to shift rightward.
Suppose autonomous consumption decreases. This reduction in autonomous consumption will cause which of the following to occur?
– The consumption function becomes less steep.
– The consumption function shifts down.
– The consumption function shifts up.
– The consumption function becomes steeper.
Suppose there is a $200 billion increase in government spending. We know that this increase in government spending will cause which of the following to occur?
– an increase in equilibrium real GDP and no change in the multiplier.
– an increase in equilibrium real GDP and a reduction in the multiplier.
– an increase in equilibrium real GDP and an increase in the multiplier.
– equilibrium real GDP will increase by exactly $200 billion
If equilibrium level of real Gross Domestic Product (GDP) is less than the full-employment real Gross Domestic Product (GDP) consistent with the position of the economy’s long-run aggregate supply (LRAS) curve, then the difference between full-employment real Gross Domestic Product (GDP) and current equilibrium real Gross Domestic Product (GDP) is
– a recessionary gap.
– an inflationary gap.
– an aggregate demand shock.
– an aggregate supply shock.
According to modern Keynesian analysis, an increase in aggregate demand leads to a higher price level because the
– aggregate demand curve is upward horizontal.
– aggregate demand curve is upward sloping.
– short-run aggregate supply curve is upward sloping.
– short-run aggregate supply curve is vertical.
Which of the following will shift the Keynesian short-run aggregate supply curve downward and to the right?
– a fall in the price level
– an increase in input costs
– a decrease in input costs
– a rise in the price level
Keynesian economists argue that
– equilibrium real GDP can be reached only in a theoretical economy.
– reaching equilibrium real GDP always results in inflation.
– equilibrium real GDP is supply-determined.
– equilibrium real GDP is demand-determined.
The classical model indicates that at the equilibrium interest rate , saving is
– less than investment.
– greater than investment.
– unnecessary for investment.
– equal to investment.
Which of the following statements is NOT true about Say”s law?
– Markets would be regularly hit by severe shortages and surpluses.
– Surpluses will be eliminated by falling prices and shortages will be eliminated by increasing prices.
– People produce more goods than they want for their own use only if they seek to trade them for other goods.
Desired expenditures will equal actual expenditures.
If the average propensity to save (APS) is 0.60, then this means
– people are spending 60 percent of their disposable income.
– the government spends 60 percent of its revenues.
– people are saving 60 percent of their disposable income.
– the marginal tax rate is 60.
If the economy is operating at a point at which short-run aggregate supply is horizontal, then
– increases in aggregate demand do not increase the price level.
– real GDP cannot contract.
– real GDP cannot expand.
– then increases in aggregate demand do not increase real GDP.
According to the classical model, more saving leads to more investment because
– the interest rate is set by the federal government.
– the people who save are the same people who invest.
– saving and investment are two sides of the same activity.
– the interest rate adjusts to keep investment equal to saving.
According to classical economists, a decrease in the rate of interest will
– increase consumer saving.
– increase unemployment.
– increase business failures.
– increase business investment.
Individuals will increase their saving as
– the interest rate increases.
– the interest rate falls.
– business investment falls.
– the rate of unemployment increases.
Demand-pull inflation occurs
– when the aggregate demand curve shifts to the right, while aggregate supply remains stable.
– when the aggregate demand curve shifts to the left, while aggregate supply remains stable.
– when the aggregate supply curve shifts to the left, while aggregate demand remains stable.
– when the aggregate supply curve shifts to the right, while aggregate demand remains stable.
If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS) curve must be
– horizontal.
– downward sloping.
– upward sloping.
– vertical.
The 45-degree reference line indicates all points at which
– planned real saving and planned real saving are equal.
– planned real consumption expenditures and planned real saving are equal.
– planned real consumption expenditures and real GDP are equal.
– planned real saving and planned real investment are equal.
The concept that producing goods and services generates the means and the willingness to purchase other goods and services is
– cost-push inflation.
– money illusion.
– the Keynesian approach.
– Say”s Law.
The inflation associated with the oil price shocks in the 1970s after OPEC restricted the supply of oil is an example of
– cost-push inflation due to a demand shock.
– demand-pull inflation due to a demand shock.
– demand-pull inflation due to a supply shock.
– cost-push inflation due to a supply shock.
The full-employment rate of output can
– be surpassed in the long run only if input prices are flexible.
– be surpassed only when firms are not yet producing at full capacity.
– not be surpassed in either the short run or the long run.
– be surpassed only in the short run.
A classical model of the economy predicts
– full employment in the long run.
– cyclical changes in the unemployment rate.
– the same unemployment rates as the Keynesian model.
a 15 to 20 percent unemployment level whenever the economy is in equilibrium.
– An increase in the interest rate will cause
– the investment function to shift in.
– the investment function to shift out.
– planned investment spending to increase.
Which of the following is NOT an assumption of the classical model?
– People are motivated by the own self-interest.
– Buyers react to changes in relative prices.
– Pure competition exists.
– Wages and prices are fixed.
If the economy is near full capacity, the effect of a negative aggregate demand shock is to
– cause the price level to fall.
– increase the level of employment.
– increase the firm”s cost of producing at every level of output.
– increase the level of aggregate demand.
If the full-employment level of real GDP is greater than the equilibrium level of real GDP, the nation would be experiencing a(n)
– inflationary gap.
– rising prices.
– demand-pull inflation.
– recessionary gap.
According to the classical theory, the aggregate supply curve is
– upward sloping.
– downward sloping.
– horizontal.
– vertical.
If real Gross Domestic Product (GDP) is above its equilibrium level,
– planned consumption is less than actual consumption.
– firms accumulate unplanned inventories.
– planned investment is greater than planned saving.
– firms are not maximizing their profits.
As real disposable income increases, consumption expenditures
– increase by the same amount.
– remain constant.
– increase by a smaller amount.
– increase by a larger amount.
The difference between savings and saving
– is that savings occurs when consumption does not and saving is used to purchase consumption goods.
– is that savings is a stock concept and saving is a flow concept.
– is nonexistent.
– is that savings is measured in real terms while saving is measured in nominal terms.
In Keynesian analysis, if investment remains constant when income changes, the investment is called
– autonomous.
– discretionary.
– unplanned.
– planned.
In the short run, if aggregate demand shifts to the left while the position of the short-run aggregate supply curve does NOT change, then
– a recessionary gap occurs.
– there is no change in real GDP and the price level.
– an inflationary gap occurs.
– the level of economic activity rises.
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