Glendale Community College » Economics » Econ 102 - Principles of Macroeconomics » Spring 2020

Econ 102 - Principles of Macroeconomics » Spring 2020 » iVAT Chapter 9 Part 2

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Question #1

According to Classical economists if there is a recessionary gap what is likely to happen to wages? Which curve will shift and what effect will this have on real output and the price level?

A. Wages will decline; The SAS curve will shift down, which causes the price level to drop and real output to increase

B. Wages will increase; The SAS curve will shift down, which causes the price level to drop and real output to increase

C. Wages will decline; The SAS curve will shift up, which causes the price level and real output to decline

D. Wages will decline; The SAS curve will shift up, which causes the price level and real output to increase

Question #2

Suppose the economy is operating below potential output and the government decides to increase government spending.

A. The AD curve will shift to the left; The price level will increase and real output will decrease

B. The AD curve will shift to the right; The price level and real output will increase

C. The AD curve will shift to the left; The price level and real output will decrease

D. The AD curve will shift to the right; The price level and real output will decrease

Question #3

According to Classical economists if there is an inflationary gap what is likely to happen to wages? What will happen to the price level and real output?

A. Wages will increase; The price level and real output increases

B. Wages will decrease; The price level decreases and real output declines

C. Wages will increase; The price level increases and real output declines

D. Wages will decrease; The price level increases and real output declines

Question #4

If the economy is in an inflationary gap what is a Keynesian economist most likely to argue for ?

A. A decrease in taxes.

B. Expansionary monetary policy.

C. An increase in government spending.

D. An increase in taxes.

Question #5

Both Classical and Keynesian economists will always agree that potential output is a certain amount?

A. FALSE

B. TRUE

Question #6

Keynesians would argue that:

A. Expansionary monetary policy was not needed.

B. Government spending after the Great Recession was inadequate and didn't return us to potential output.

C. Government spending after the Great Recession was adequate and did return us to potential output.

D. Expansionary monetary policy as not only not necessary, but was also inadequate.

Question #7

Suppose that the price level drops, which causes home values to decline. What type of feedback effect can occur in the AS/AD model?

A. The deflationary pressures can cause people to increase their spending in the economy. This can lead to an inflationary gap.

B. Banks can stop lending to the real economy, which will cause the AD curve to shift left and the economy could remain or go into a recession.

C. Banks can increase lending to the real economy, which will cause the AD curve to shift right and the economy could go into an inflationary gap.

D. The deflationary pressures can cause people to decrease their spending in the economy. This can lead to an inflationary gap.

Question #8

Say's law states that an increase in long-run aggregate supply can:

A. Cause aggregate demand to increase.

B. Cause the SAS curve to shift left.

C. Cause the AD curve to shift left.

D. Cause aggregate demand to decrease.

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