CHAPTER 39
Neoclassical View of Aggregate Supply and Demand
MULTIPLE CHOICE
424. What are the three main markets that comprise market capitalism?
a. the market for goods, the market for services, and the market for technology.
b. the market for goods, the market for services, and the market for labor.
c. the market for goods and services, the market for labor, and financial markets.
d. the market for services, the market for information, and financial markets.
425. In the neoclassical view of the macroeconomy, a temporary lack of demand for all goods
and services will lead to
a. inflation.
b. a fall in the price level.
c. an expansion.
d. a recession.
426. In the neoclassical view of the macroeconomy, if capitalists find they are unable to sell all
of their goods
a. they will continue to produce at current levels but will reduce their prices to sell more
goods.
b. they will maintain prices and put unsold goods into inventories.
c. they will cut back on production and lower prices.
d. they will cut back on production but maintain current prices to cover costs.
427. In the neoclassical view of the macroeconomy, any income not used for consumption
a. will be used to pay taxes.
b. will be used for investment.
c. will be used for government projects.
d. will be used for exports.
428. In the neoclassical view of the macroeconomy, if there is not enough investment spending
to use all available savings
a. the Federal Reserve will raise the interest rate.
b. the interest rate will fall.
c. excess savings will be hoarded.
d. excess savings will be used to pay taxes.
429. In the neoclassical view of the macroeconomy, the supply of savings is
a. unrelated to the interest rate.
b. inversely related to the interest rate.
c. positively related to the interest rate.
d. is fixed.
430. In the neoclassical view of the macroeconomy, investment spending is
a. unrelated to the interest rate.
b. inversely related to the interest rate.
c. positively related to the interest rate.
d. is completely unpredictable
431. In the neoclassical view of the macroeconomy, too many workers seeking work or
unemployment will lead to
a. falling wages.
b. rising wages.
c. rising interest rates.
d. government programs to help the unemployed.
432. Some neoclassical economists argue that recessions are caused by
a. a deficiency of aggregate demand.
b. hoarding of savings.
c. outside shocks or disruptions.
d. free trade.
APPENDIX 39.1
Blaming the Victim
MULTIPLE CHOICE
433. Progressive economists argue that conservatives tend to blame the unemployed for their
own unemployment. What does this mean?
a. Conservatives argue that the unemployed have caused businesses to fail.
b. Conservatives argue that the unemployed do not pay buy enough goods and services
causing the economy to go into a recession.
c. Conservatives argue that the unemployed are simply unwilling to work at the prevailing
wage.
d. Conservatives argue that the unemployed have lost their jobs by being so industrious that
they are no longer needed by their employers.
434. According to conservative economists, involuntary unemployment
a. does not exist.
b. should be imposed on those unwilling to work.
c. occurs during an economic expansion.
d. could be eliminated by effective government programs.