The economy’s money supply curve is vertical.
In the classical model, beginning from an equilibrium in which the government is
running a budget surplus
a. the supply of loanable funds will be horizontal
b. an increase in government spending will cause the interest rate to rise
c. the supply of loanable funds will be vertical
d. an increase in government spending will crowd out less than an equal amount of
private spending
e. a decrease in government spending will crowd out less than an equal amount of
private spending
According to Keynesian economists,
a. the economy will return quickly to full employment in most cases
b. if output is below its potential, the economy will soon return to full employment
c. production can be stuck below its full-employment level for extended periods of time
d. the Great Depression proved that classical economics does a good job of explaining
how the economy operates
e. he economy will achieve full employment in the short run but, in the long run, GDP
will fluctuate
GDP is used in the __________ to __________.
a. long run; alert us to recessions
b. short run; alert us to recessions
c. long run; gauge the success of monetary policy
d. short run; measure changes in the standard of living
e. short run; check for inflation
Evan left a job in which he was earning $75,000 a year for one he liked better but pays
only $50,000 a year. Around the same time as the job switch, Evan needed to buy a new
car. Had he kept his old job he would have bought a new car but instead he was forced
to buy a used car. Therefore
a. used cars are normal goods for Evan
b. new cars are inferior goods for Evan
c. the supply curve for new cars shifted to the left
d. new and used cars are complements
e. used cars are inferior goods for Evan
If consumption expenditures increased by $150 million, while GDP remained the same,
which of the following could have occurred, all else equal?
a. Exports increased by $150 million
b. Imports decreased by $150 million
c. Net exports increased by $150 million
d. Net exports decreased by $150 million
e. Private investment increased by $150 million
The aggregate demand curve tells us equilibrium real GDP at any level of income.
When households and businesses interact in product markets resources are
a. not exchanged
b. flowing toward businesses
c. flowing toward households
d. not used at all
e. flowing to both businesses and households
The classical model does a good job of explaining the __________ while doing poor a
job of explaining the __________.
a. short run; long run
b. business cycle; long run
c. short run; business cycle
d. unemployment rate; interest rates
e. long run; short run
A larger controversy of the financial crisis among both members of Congress and the
general public had to do with the Fed’s expanded role in the economy.