Question

11. A Keynesian economist would be most likely to agree with whichof the following statements?
A) Government policies do not affect economic activity.
B) Government can implement policy proposals that can positivelyimpact the economy.
C) Most government policies would probably make things worse.
D) The economy ought to be left to market forces.

1. A Classical economist would be most likely to agree with whichof the following statements?
A) Government policies do not affect economic activity.
B) Government can implement policy proposals that can positivelyimpact the economy.
C) Most government policies would probably make things worse.
D) Government intervention in the market is necessary for asmoothly operating economy.

2. What event shifted public opinion away from a laissez-faire viewof government towards a more activist view?
A) World War I.
B) The Great Depression.
C) World War II.
D) The Vietnam War and the social turbulence of the 1960s.

3. Classical economists argued that unemployment during theDepression could be reduced by:
A) eliminating labor unions and government policies that kept wagestoo high.
B) strengthening unions and government regulations protectingunions and workers.
C) increasing real wages so that people are encouraged towork.
D) lowering taxes.


4. The level of income an economy can produce without generatinghigher inflation is called:
A) potential income. B) equilibrium income. C) nominal income. D)real income.

5. Keynes believed equilibrium income __________ potentialincome:
A) always equaled C) was always above
B) was always below D) could be above, below, or equal to

6. The aggregate demand, short-run aggregate supply, and long-runaggregate supply curves are based upon the:
A) principle of substitution.
B) principle of opportunity cost.
C) relationship between a single good and its price.
D) relationship between the price level and total output.

7. For some time now, the U.S. has been pressuring Japan toinstitute policies to improve its weak economy. What effect wouldthese policies have on the U.S.?
A) They would cause the U.S. to move up its aggregate demandcurve.
B) They would cause the U.S. to move down its aggregate demandcurve.
C) They would shift the U.S. aggregate demand curve left.
D) They would shift the U.S. aggregate demand curve right.

8. If companies begin to expect an improvement in the businessclimate, this will cause:
A) a movement down the aggregate demand curve.
B) a movement up the aggregate demand curve.
C) a rightward shift of the aggregate demand curve.
D) a leftward shift of the aggregate demand curve.

9. The effect that a change in the distribution of income has onthe aggregate demand curve is based on the observation that:
A) workers are less likely than stockholders to save the incomethey receive.
B) stockholders are less likely than workers to save the incomethey receive.
C) workers and stockholders are equally likely to save the incomethey receive.
D) the distribution of income is always shifting in favor ofworkers.

10. If total income remains the same but wages fall, the aggregatedemand curve will most likely:
A) shift to the right. B) shift to the left. C) become flatter. D)become steeper.