Question 1

The Great Depression began following a stock market crash and continued as thousands of banks failed; during this time,the government offered little assistance.The government raised taxes and refused to let the money supply increase.Household wealth and expected income both decreased.Using the aggregate demand and aggregate supply model,explain what effect these events had on the economy.

Accepted Answer

A stock market crash caused household we...

Question 2

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

Accepted Answer

A)   unemployment in the United States decreased.
B)   there was excessively high inflation during this time.
C)   there was a stock market boom.
D)   U.S.housing prices fell.
E)   the government dramatically increased taxes.F) A) and D)
G) A) and E)

Question 3

An institutional breakdown in U.S.financial markets would tend to cause:

Accepted Answer

A)   aggregate demand to increase.
B)   long-run aggregate supply to decrease.
C)   short-run aggregate supply to increase.
D)   long-run aggregate supply to increase.
E)   aggregate demand to decrease.F) A) and D)
G) C) and E)

Question 4

A decline in U.S.wealth would tend to cause:

Accepted Answer

A)   long-run aggregate supply to increase.
B)   aggregate demand to decrease.
C)   short-run aggregate supply to increase.
D)   long-run aggregate supply to decrease.
E)   aggregate demand to increase.F) C) and D)
G) A) and B)

Question 5

Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because:

Accepted Answer

A)   the long run is more important than the short run, and economic policy works only in the long run.
B)   prices are flexible and allow the economy to quickly return to full employment.
C)   supply is more important than demand in determining economic growth and output.
D)   savings is a crucial part of economic growth and investment.
E)   prices are sticky and prevent the economy from adjusting to full employment.F) C) and E)
G) B) and D)

Question 6

When 9,000 banks failed during the Great Depression,it caused aggregate demand to decrease because:

Accepted Answer

A)   consumers responded by decreasing their rate of savings and increasing spending.
B)   the government didn't help the banks, causing the money supply to decrease.
C)   expected income increased, causing an increase in investment.
D)   it led to very high rates of inflation, which eroded household spending.
E)   it caused a rapid decline in exports to other countries.F) A) and E)
G) C) and D)

Question 7

Use the following graph to answer the next seven 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 advance in technologyF) D) and E)
G) A) and C)

Question 8

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) B) and D)
G) B) and E)

Question 9

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

Accepted Answer

A)   the economy rapidly bounced back and resumed normal growth quickly.
B)   the economy never really declined much at all.
C)   the economy did not return to normal for at least one year.
D)   the economy increased rapidly following the beginning of the recession.
E)   the economy essentially collapsed and never recovered.F) A) and B)
G) A) and C)

Question 10

During the Great Recession,a major financial crisis followed the collapse of housing prices,which led to:

Accepted Answer

A)   a decrease in the money supply by the Federal Reserve.
B)   the decline in the health of many large financial firms and banks.
C)   skyrocketing oil prices.
D)   an increase in income tax rates to shrink the federal budget deficit.
E)   an increase in expected income.F) All of the above
G) A) and B)

Question 11

Which of the following economic statements would a Keynesian economist tend to support?

Accepted Answer

A)   Government intervention in the economy is unnecessary.
B)   The short run deserves more attention than the long run.
C)   The key determinant of economic growth is long-run aggregate supply.
D)   Savings is a crucial component of economic growth.
E)   The economy tends to be stable and at full employment.F) C) and E)
G) A) and B)

Question 12

Use the following graph to answer the next seven 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) D) and E)
G) A) and E)

Question 13

During the Great Depression,thousands of U.S.banks failed.As a result:

Accepted Answer

A)   aggregate demand increased.
B)   long-run aggregate supply increased.
C)   aggregate demand decreased.
D)   short-run aggregate supply increased.
E)   short-run aggregate supply decreased.F) A) and D)
G) All of the above

Question 14

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) A) and E)
G) D) and E)

Question 15

During the Great Recession,the U.S.long-run aggregate supply curve shifted to the left,in part,because:

Accepted Answer

A)   the government dramatically increased taxes.
B)   there was an institutional breakdown in financial markets.
C)   there was a decline in the level of technology.
D)   there was a decline in the U.S.population.
E)   there was a decrease in expected income.F) C) and D)
G) A) and E)

Question 16

The Great Depression ended in:

Accepted Answer

A)   June 2009.
B)   May 1937.
C)   August 1929.
D)   June 1938.
E)   August 2004.F) C) and D)
G) A) and C)

Question 17

Among the beliefs held by classical economists,one is that:

Accepted Answer

A)   the short run should be a bigger focus than the long run.
B)   aggregate supply should be a bigger focus than aggregate demand.
C)   prices are sticky.
D)   the economy needs help in moving back to full employment.
E)   the market tends toward instability and cyclical unemployment.F) A) and C)
G) B) and D)

Question 18

Which of the following best summarizes the main causes of the Great Recession?

Accepted Answer

A)   Oil-producing countries deliberately raised the price of petroleum, leading to inflation and a deep recession.
B)   The Federal Reserve raised short-term interest rates very high in an effort to decrease inflation, which also drove the economy into a recession.
C)   The end of overseas war efforts led to a deep decrease in federal spending, which reduced employment and caused a recession.
D)   The stock market collapsed following the end of a bubble in technology stock prices, which caused a decrease in investment spending and a recession.
E)   The collapse of housing prices led to decreased wealth and significant problems in financial markets, as well as a decrease in expected income and a stock market collapse.F) A) and B)
G) A) and C)

Question 19

Classical economists believe that the economy is stable and tends toward full employment because:

Accepted Answer

A)   the government plays an active role in managing the economy.
B)   savings is a drain on demand and must be limited.
C)   the short run is more important than the long run, and economic policy only works in the short run.
D)   prices are flexible and allow the economy to quickly return to full employment.
E)   prices are sticky and will not prevent the economy from adjusting to full employment.F) C) and D)
G) None of the above

Question 20

During the Great Depression,aggregate demand in the U.S.economy decreased.As a result,the unemployment rate _________ and real gross domestic product (GDP)  _________.

Accepted Answer

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

Exam 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

An institutional breakdown in U.S.financial markets would tend to cause:

Correct Answer
verified

A decline in U.S.wealth would tend to cause:

Correct Answer
verified

Among the beliefs held by classical economists,one is that:

Correct Answer
verified

The Great Depression ended in:

Correct Answer
verified

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

Correct Answer
verified
A stock market crash caused household we...
View Answer

Which of the following best summarizes the main causes of the Great Recession?

Correct Answer
verified

Correct Answer
verified

During the Great Depression,aggregate demand in the U.S.economy decreased.As a result,the unemployment rate _ and real gross domestic product (GDP) _.

Correct Answer
verified

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

Correct Answer
verified

Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because:

Correct Answer
verified

During the Great Depression,thousands of U.S.banks failed.As a result:

Correct Answer
verified

When 9,000 banks failed during the Great Depression,it caused aggregate demand to decrease because:

Correct Answer
verified

During the Great Recession,a major financial crisis followed the collapse of housing prices,which led to:

Correct Answer
verified

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

Correct Answer
verified

Classical economists believe that the economy is stable and tends toward full employment because:

Correct Answer
verified

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

Correct Answer
verified

Which of the following economic statements would a Keynesian economist tend to support?

Correct Answer
verified

Correct Answer
verified

During the Great Recession,the U.S.long-run aggregate supply curve shifted to the left,in part,because:

Correct Answer
verified

Exam 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates

An institutional breakdown in U.S.financial markets would tend to cause:

Correct AnswerverifiedShow Answer

A decline in U.S.wealth would tend to cause:

Correct AnswerverifiedShow Answer

Among the beliefs held by classical economists,one is that:

Correct AnswerverifiedShow Answer

The Great Depression ended in:

Correct AnswerverifiedShow 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

Correct AnswerverifiedA stock market crash caused household we...View AnswerShow Answer

Which of the following best summarizes the main causes of the Great Recession?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During the Great Depression,aggregate demand in the U.S.economy decreased.As a result,the unemployment rate _________ and real gross domestic product (GDP) _________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Keynesian economists believe that the economy is unstable and tends toward cyclical unemployment because:

Correct AnswerverifiedShow Answer

During the Great Depression,thousands of U.S.banks failed.As a result:

Correct AnswerverifiedShow Answer

When 9,000 banks failed during the Great Depression,it caused aggregate demand to decrease because:

Correct AnswerverifiedShow Answer

During the Great Recession,a major financial crisis followed the collapse of housing prices,which led to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Classical economists believe that the economy is stable and tends toward full employment because:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following economic statements would a Keynesian economist tend to support?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During the Great Recession,the U.S.long-run aggregate supply curve shifted to the left,in part,because:

Correct AnswerverifiedShow 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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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

Correct Answer
verified
A stock market crash caused household we...
View Answer

Correct Answer
verified

Correct Answer
verified

During the Great Depression,aggregate demand in the U.S.economy decreased.As a result,the unemployment rate _ and real gross domestic product (GDP) _.

Correct Answer
verified

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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