Question 1

According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore

Accepted Answer

A)   the government will need to stimulate aggregate demand.
B)   long-run aggregate supply is the primary source of economic growth.
C)   prices are quite rigid and inflexible.
D)   unemployment will tend to persist over time.
E)   long-run aggregate supply is irrelevant in determining growth.F) C) and D)
G) A) and D)

Question 2

The Great Recession began when housing prices began to decline, followed by a decline in stock prices. A significant financial crisis then occurred in 2008. Using the aggregate demand and aggregate supply model, explain what effect these events had on the economy.

Accepted Answer

The decrease in housing prices and stock...

Question 3

Discuss the features on the graph below using a classical perspective on macroeconomics.

Accepted Answer

In the classical view, prices adjust eas...

Question 4

Use the following graph to answer the next questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS)  have decreased, with no change in short-run aggregate supply (SRAS) .
 
-The graph accurately summarizes what happened during the Great Recession, because during that time, the price level____ and real gross domestic product (GDP)  _____.

Accepted Answer

A)   decreased; decreased
B)   increased; increased
C)   remained largely unchanged; decreased
D)   decreased; remained unchanged
E)   remained unchanged; increasedF) A) and B)
G) A) and C)

Question 5

The Great Depression is characterized by a decrease in aggregate demand. Of the following factors, which would have caused aggregate demand to decrease?

Accepted Answer

A)   an increase in the labor supply
B)   an increase in the money supply
C)   an advancement in technology
D)   a decrease in expected future income
E)   an increase in government spendingF) A) and C)
G) B) and E)

Question 6

When considering how the economy works, classical economists hold that

Accepted Answer

A)   prices are sticky.
B)   savings is a drain on demand.
C)   the market tends toward instability and cyclical unemployment.
D)   the long run is more significant than the short run.
E)   the economy needs help in moving back to full employment.F) A) and E)
G) B) and D)

Question 7

Use the image below to explain what happened to aggregate supply and demand during the Great Recession.

Accepted Answer

The Great Recession can be modeled as a ...

Question 8

If you asked a classical economist which economic time frame he or she prioritized, how might he or she respond?

Accepted Answer

A)   "Prices tend to be sticky when supply or demand changes."
B)   "Savings is a drain on aggregate demand."
C)   "The economy tends toward instability and cyclical unemployment."
D)   "The long run is key."
E)   "The short run is key."F) All of the above
G) A) and C)

Question 9

During the Great Recession, long-run aggregate supply decreased. This was caused by a(n)

Accepted Answer

A)   advancement in technology.
B)   decrease in income and business tax rates.
C)   increase in immigration to the United States.
D)   breakdown in the loanable funds market.
E)   increase in the U.S. labor force.F) A) and E)
G) A) and B)

Question 10

Use the following graph to answer the next questions. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS)  or long-run aggregate supply (LRAS) .
 
-During the Great Depression, the aggregate price level and real gross domestic product (GDP)  both decreased, as depicted in the graph. Unemployment increased to record levels. Which of the following best explains why this happened?

Accepted Answer

A)   A sudden increase in oil prices caused inflation and a deep recession.
B)   A stock market crash, large numbers of bank failures, an increase in tax rates, and a tight money supply caused a recession.
C)   A rapid decline in housing prices led to problems in the loanable funds market and a recession.
D)   A significant decline in military spending following the end of a war led to a recession.
E)   A sharp recession followed the United States abandoning the gold standard.F) A) and B)
G) C) and D)

Question 11

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because

Accepted Answer

A)   a large number of U.S. banks failed.
B)   there was an increase in the U.S. population.
C)   the U.S. government decreased taxes.
D)   there were advances in technology in manufacturing.
E)   there was an increase in stock prices.F) A) and D)
G) A) and E)

Question 12

During the Great Depression, a major financial crisis followed the collapse of the stock market, which led to

Accepted Answer

A)   a decrease in tax rates and increase in the money supply.
B)   an increase in oil and gas prices.
C)   the failure of many banks.
D)   an increase in consumer sentiment and spending.
E)   a decrease in barriers to international trade.F) A) and E)
G) A) and B)

Question 13

The Great Depression actually consisted of two recessions, the first of which began in _____and ended in ______.

Accepted Answer

A)   May 1937; June 1938
B)   August 1929; March 1933
C)   March 2001; November 2001
D)   December 2007; June 2009
E)   February 1971; August 1972F) A) and E)
G) A) and D)

Question 14

Keynesian economists believe that prices are sticky and do not adjust quickly, from which they concluded that

Accepted Answer

A)   the long run deserves more focus than the short run.
B)   savings is a crucial component of economic growth.
C)   the most important determinant of economic growth is long-run aggregate supply.
D)   government intervention is sometimes necessary to promote full employment.
E)   government intervention is never necessary to promote full employment.F) All of the above
G) A) and B)

Question 15

Use the following graph to answer the next four questions.
 
-In the aggregate demand-aggregate supply model shown, if point A occurs chronologically before point B, which situation would the figure accurately represent?

Accepted Answer

A)   Aggregate supply, long-run aggregate demand, and the price level have all decreased.
B)   Aggregate supply and long-run aggregate demand have decreased, while the price level has increased.
C)   Aggregate demand and long-run aggregate supply have increased, with no change in price level.
D)   Aggregate demand and long-run aggregate supply have decreased, with no change in price level.
E)   Aggregate demand, long-run aggregate supply, and price level have all decreased.F) A) and D)
G) B) and E)

Question 16

The Great Recession was similar to other recessions since World War II in that

Accepted Answer

A)   there was extremely high inflation.
B)   real gross domestic product GDP)  initially declined and then recovered sometime later.
C)   real gross domestic product GDP)  increased rapidly and then leveled off.
D)   the rate of unemployment was unchanged.
E)   the trade deficit fell to zero.F) B) and E)
G) D) and E)

Question 17

One similarity between the Great Recession and the Great Depression is that in both episodes

Accepted Answer

A)   large numbers of banks failed.
B)   there were significant problems in financial markets.
C)   the U.S. government raised taxes.
D)   the U.S. government allowed the money supply to decrease.
E)   the unemployment rate exceeded 20 percent.F) A) and E)
G) A) and B)

Question 18

During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because

Accepted Answer

A)   the stock market declined in value by one-third.
B)   there was a decline in the U.S. population.
C)   there was an increase in expected income.
D)   the U.S. government restricted trade with other countries.
E)   there was an increase in housing prices.F) C) and D)
G) C) and E)

Question 19

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _____and the price level ______.

Accepted Answer

A)   decreased; increased
B)   remained unchanged; increased
C)   increased; remained unchanged
D)   remained unchanged; remained unchanged
E)   increased; decreasedF) C) and D)
G) All of the above

Question 20

Use the following graph to answer the next questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS)  have decreased, with no change in short-run aggregate supply (SRAS) .
 
-Which of the following would have caused aggregate demand to decrease in the graph, such as occurred during the Great Recession?

Accepted Answer

A)   an increase in expected income
B)   a decrease in tax rates
C)   a decrease in housing prices and stock prices
D)   an increase in consumer sentiment
E)   an advancement in technologyF) A) and C)
G) A) and B)

Exam 14: Recessions, Expansions, and the Debate Over How to Manage Them

Correct Answer
verified

Correct Answer
verified

According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore

Correct Answer
verified

During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because

Correct Answer
verified

During the Great Depression, a major financial crisis followed the collapse of the stock market, which led to

Correct Answer
verified

Correct Answer
verified

The Great Depression actually consisted of two recessions, the first of which began in _and ended in __.

Correct Answer
verified

Discuss the features on the graph below using a classical perspective on macroeconomics.

Correct Answer
verified
In the classical view, prices adjust eas...
View Answer

The Great Recession began when housing prices began to decline, followed by a decline in stock prices. A significant financial crisis then occurred in 2008. Using the aggregate demand and aggregate supply model, explain what effect these events had on the economy.

Correct Answer
verified
The decrease in housing prices and stock...
View Answer

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _and the price level __.

Correct Answer
verified

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because

Correct Answer
verified

One similarity between the Great Recession and the Great Depression is that in both episodes

Correct Answer
verified

Use the image below to explain what happened to aggregate supply and demand during the Great Recession.

Correct Answer
verified
The Great Recession can be modeled as a ...
View Answer

The Great Recession was similar to other recessions since World War II in that

Correct Answer
verified

The Great Depression is characterized by a decrease in aggregate demand. Of the following factors, which would have caused aggregate demand to decrease?

Correct Answer
verified

Keynesian economists believe that prices are sticky and do not adjust quickly, from which they concluded that

Correct Answer
verified

If you asked a classical economist which economic time frame he or she prioritized, how might he or she respond?

Correct Answer
verified

Use the following graph to answer the next four questions. -In the aggregate demand-aggregate supply model shown, if point A occurs chronologically before point B, which situation would the figure accurately represent?

Correct Answer
verified

During the Great Recession, long-run aggregate supply decreased. This was caused by a(n)

Correct Answer
verified

When considering how the economy works, classical economists hold that

Correct Answer
verified

Exam 14: Recessions, Expansions, and the Debate Over How to Manage Them

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore

Correct AnswerverifiedShow Answer

During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because

Correct AnswerverifiedShow Answer

During the Great Depression, a major financial crisis followed the collapse of the stock market, which led to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Great Depression actually consisted of two recessions, the first of which began in _____and ended in ______.

Correct AnswerverifiedShow Answer

Discuss the features on the graph below using a classical perspective on macroeconomics.

Correct AnswerverifiedIn the classical view, prices adjust eas...View AnswerShow Answer

The Great Recession began when housing prices began to decline, followed by a decline in stock prices. A significant financial crisis then occurred in 2008. Using the aggregate demand and aggregate supply model, explain what effect these events had on the economy.

Correct AnswerverifiedThe decrease in housing prices and stock...View AnswerShow Answer

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _____and the price level ______.

Correct AnswerverifiedShow Answer

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because

Correct AnswerverifiedShow Answer

One similarity between the Great Recession and the Great Depression is that in both episodes

Correct AnswerverifiedShow Answer

Use the image below to explain what happened to aggregate supply and demand during the Great Recession.

Correct AnswerverifiedThe Great Recession can be modeled as a ...View AnswerShow Answer

The Great Recession was similar to other recessions since World War II in that

Correct AnswerverifiedShow Answer

The Great Depression is characterized by a decrease in aggregate demand. Of the following factors, which would have caused aggregate demand to decrease?

Correct AnswerverifiedShow Answer

Keynesian economists believe that prices are sticky and do not adjust quickly, from which they concluded that

Correct AnswerverifiedShow Answer

If you asked a classical economist which economic time frame he or she prioritized, how might he or she respond?

Correct AnswerverifiedShow Answer

Use the following graph to answer the next four questions. -In the aggregate demand-aggregate supply model shown, if point A occurs chronologically before point B, which situation would the figure accurately represent?

Correct AnswerverifiedShow Answer

During the Great Recession, long-run aggregate supply decreased. This was caused by a(n)

Correct AnswerverifiedShow Answer

When considering how the economy works, classical economists hold that

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The Great Depression actually consisted of two recessions, the first of which began in _and ended in __.

Correct Answer
verified

Correct Answer
verified
In the classical view, prices adjust eas...
View Answer

Correct Answer
verified
The decrease in housing prices and stock...
View Answer

During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _and the price level __.

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Great Recession can be modeled as a ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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