Glendale Community College » Economics » Econ 102 - Principles of Macroeconomics » Winter 2023

Econ 102 - Principles of Macroeconomics » Winter 2023 » Week 4 Reading Quiz Chs. 12 and 13

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Question #1

The Keynesian economic framework is based on an assumption that:

A. an increase in government spending will cause the aggregate demand curve to shift to the left.

B. prices and wages are sticky and do not adjust rapidly.

C. an increase in government spending will cause the aggregate demand curve to shift to the left.

D. people can afford a high level of government services.

Question #2

The equilibrium quantity of labor increases and the equilibrium wage decreases when:

A. labor supply shifts to the left, if wages are flexible.

B. labor demand shifts to the right, if wages are flexible.

C. labor demand shifts to the left, if wages are flexible.

D. labor supply shifts to the right, if wages are flexible,

Question #3

The equilibrium quantity of labor and the equilibrium wage increase when:

A. labor demand shifts to the left, if wages are flexible.

B. labor demand shifts to the right, if wages are flexible.

C. labor supply shifts to the right, if wages are flexible.

D. labor supply shifts to the left, if wages are flexible.

Question #4

If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left to D1, while wages remained at w0 and prices remained at P0, what will be the result?

A. natural rate of unemployment

B. excess supply

C. depression

D. coordinated wage reductions

Question #5

According to the Keynesian framework, ________________________ may cause a recession, but not inflation.

A. a decrease in interest rates

B. a major trading partner's economic slowdown

C. a decrease in a major trading partners export prices

D. an increase in domestic investment

Question #6

Suppose that out of the original 100 increase in government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what value would be recycled in the fourth round of this cycle?

A. 3.37

B. 9.89

C. 3.59

D. 5.23

Question #7

If a Phillip curve shows that unemployment is low and inflation is high in the economy, then that economy:

A. is producing at its equilibrium point.

B. is producing at its potential GDP.

C. is producing at a point where output is more than potential GDP.

D. is producing at a point where output is less than potential GDP.

Question #8

Suppose that out of the original 100 increase in government spending, 60 will be recycled back into purchases of domestically produced goods and services. Following this multiplier effect, what value will be recycled in the next round in the cycle?

A. 3.6

B. 36

C. 42

D. 16.66

Question #9

According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation?

A. a decrease in military spending

B. decrease in spending by government on health care

C. an increase in military spending

D. increase in spending by the government on health care

Question #10

In the neoclassical view of the economy, expansionary fiscal policy cannot work to raise equilibrium output because

A. It reduces aggregate output.

B. it will raise unemployment.

C. it will dis-incentivize production.

D. flexible prices will eventually choke off any increase in aggregate demand.

Question #11

According a neoclassical perspective, in the long run, a surge in aggregate demand will most likely result in

A. A rise in the level of output.

B. An increase in the aggregate price level.

C. Downward pressure on the price level.

D. A decline in the level of output

Question #12

According to the Neo-classical view, if consumer demand slowed down

A. Prices would decrease, and the economy would return to its long-term growth trend.

B. Investment and government demand would increase, and the economy would return to its long-term growth trend

C. Wages would increase, and the economy would return to its long-term growth trend.

D. Prices would increase, and the economy would return to its long-term growth trend.

Question #13

According to the neoclassical point of view

A. Unemployment will never happen

B. Cyclical Unemployment might occur temporarily

C. All goods supplied will be demanded at an unchanged price.

Question #14

The Keynesian model focuses more on short-term fluctuations caused by business cycles and the neoclassical model focuses more on:

A. long-run determinants of output and employment

B. Intermediate aspects of taxes and spending

C. Short-term fluctuations caused by technological change and labor force growth

D. Immediate determinants like changes in hiring and firing

Question #15

A vertical aggregate supply graph indicates that aggregate demand has no effect on:

A. Inflation

B. Prices

C. Quantity of output

D. Wages

Question #16

According to neoclassical economists, a graph of aggregate supply in long run appears:

A. Horizontal

B. Upward sloping

C. Vertical

D. Downward sloping

Question #17

Potential real GDP is defined as:

A. The macro equilibrium

B. The quantity of output that the economy can produce when it is at full employment of its labor and physical capital.

C. The quantity of output that the economy can produce when it is above the natural rate of unemployment.

D. The quantity of output that the economy can produce when it is at less than potential employment of its resources.

Question #18

Keynes believed that economies are ___ driven in the ___.

A. supply; long-run

B. supply; short-run.

C. demand; long-run

D. demand; short-run.

Question #19

What policies will a Neoclassical Economist tell the government to enact in order to foster a healthy economy?

A. The government should set up and regulate wages and unions, and set price floors and ceilings for specific fundamental goods.

B. The government should keep inflation low and maintain low tax levels over the long run.

C. The government should increase production output through regulating sales of resources and strictly monitor exports and imports.

D. The government should implement the COLA to improve the economy

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