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ECON 2301 Exam 3 (Ch 11,12,13) Flashcards | StudBud
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ECON 2301 Exam 3 (Ch 11,12,13)
ECON 2301 Exam 3 (Ch 11,12,13)
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1
If the government increases spending by $300 million and the multiplier equals 2, how much will total output increase?
$150 million
$600 million
2
Tax increases or cuts in government spending designed to decrease aggregate demand and reduce inflationary pressures
contractionary fiscal policy
expansionary fiscal policy
3
Adam Smith used ______________________ to explain the unintended benefits for society that result from a free market
undeveloped Real GDP
Invisible hand
4
Neoclassical economists generally emphasize the importance of _______ in determining the size of the macroeconomy ______
aggregate demand; over the short run
aggregate supply ; over the long run
5
In macroeconomics, what name is given to the costs of changing prices that businesses must consider?
consumer cost
menu cost
internal cost
6
Equilibrium at a level of output above potential GDP
recessionary gap
inflationary gap
7
A public policy of not interfering with market activities in the economy.
laissez-faire
ceteris paribus
8
Keynes’ law states
“supply creates its own demand”
“demand creates its own supply”
9
Equilibrium at a level of output below potential GDP
inflationary gap
recessionary gap
10
Neoclassicals hold that long-term expansion of potential GDP due to economic growth will determine size of the economy
True
False
11
Stagflation is when an economy experiences
high inflation and stagnant growth at the same time
low inflation and high GDP at the same time
12
The AD/AS graph illustrates an inflationary gap when the equilibrium level of real GDP is
substantially to the left of potential GDP or the LRAS curve.
substantially to the right of potential GDP or the LRAS curve.
13
Neoclassical perpective says in the long run, the economy rebounds back to its potential GDP & Natural Unemployment
False
True
14
The Keynesian economic framework is based on an assumption that:
Prices and wages are sticky and do not adjust rapidly.
prices and wages are flexible both upward and downward and adjust rapidly
15
The total spending on domestic goods and services at each price level is called
production possibilities curve
aggregate demand curve
aggregate supply curve
16
From a neoclassical perspective, _____ would most likely be viewed as an element that underpins long-run productivity
decreases in physical capital per person
investment in human capital
17
Keynes believed that increases in aggregate demand at points on the vertical portion of the Aggregate Supply curve only
increase total output (total GDP)
increase the price level
18
Classical / Neoclassical economists believe that if the economy finds itself in a recessionary gap
wages and input prices will rise and the SRAS curve will shift left.
wages and input prices will drop and the SRAS curve will shift right.
19
An increase in consumption, investment, government spending or net exports will cause the AD curve to
shift to the left
shift to the right
20
Maximum quantity an economy can produce w/ full employment of its labor, physical capital, technology & institutions
aggregate demand
potential GDP
Keynes Law
21
The graph below is a
aggregate demand curve
aggregate supply curve
Keynesian Phillips curve
22
The graph below demonstrates a
inflationary gap
keynesian short run aggregate supply curve
recessionary gap
23
Keynes' law states
"supply creates its own deman
"demand creates its own supply"
24
Neoclassical economists believe that the economy will rebound out of a recession or contract during an expansion
because prices and wage rates are flexible.
because prices and wage rates are inflexible.
25
Disposable income is income after taxes
False
True
26
Keynes believed that increases in aggregate demand at points below Potential GDP increases
total output (or GDP)
price level
27
An increase in wages will
shift the SRAS curve to the right
shift the SRAS curve to the left
28
The Keynesian aggregate supply curve is
upward sloping
horizontal at levels below Potential GDP and then vertical at Potential GDP
29
Keynesian concept that asserts that a change in autonomous spending causes a more than proportionate change in real GDP.
expenditure multiplier
Say's law
Keynes' law
30
A decrease in consumption, investment, government spending or net exports will cause the AD curve to
shift to the right
shift to the left
31
Tax cuts or increases in government spending designed to stimulate aggregate demand & move the economy out of recession
contractionary fiscal policy
expansionary fiscal policy
32
Maximum quantity an economy can produce w/ full employment of its labor, physical capital, technology & institutions
potential GDP
Keynes Law
aggregate demand
33
Which of the following is a building block of neoclassical economics?
wages and prices are inflexible downward
wages & prices will adjust both upward and downward in a flexible manner
34
The graph below is showing
An inflationary gap according to classical economist
A Keynesian aggregate supply curve and a recessionary gap at E1
35
Say's law states
“demand creates its own supply”
"supply creates its own demand”
“the long run Real GDP will shift to the left”
36
From a neoclassical perspective, _____ would most likely be viewed as an element that underpins long-run productivity
Investment in physical capital per person
Menu cost
37
The vertical line at potential GDP showing no relationship between the price level for output & real GDP in the long run
The long run aggregate supply curve (LRAS)
The short run aggregate supply curve (SRAS)
38
From a neoclassical perspective, _____ would most likely be viewed as an element that underpins long-run productivity
decreases in human capital
advances in technology
39
According to Neoclassical economics, if an economy is in a recession, then wages will fall and
the Short Run Aggregate Supply Curve will shift to the right
the Short Run Aggregate Supply Curve will shift to the left
40
A country is more likely to face a _______________________ if it has strong _____________________________
a trade deficit if it has strong economic growth
a trade surplus if it has strong economic growth
41
We are at full employment and the actual rate of unemployment is equal to the natural rate of unemployment.
The economy is in long-run equilibrium
The economy is in a recessionary gap
42
Represents the theory that high unemployment may be accompanied by low inflation, and low unemployment by high inflation
Keynesian Phillips curve
Production Possibilities Frontier
43
According to Keynesian economist, if an economy is in a recession,
the government should increase spending or cut taxes
the government should decrease spending or increase taxes
44
Amount and kind of machinery and equipment available to help a person produce a good or service
Human capital
Physical capital per person
45
Consumption, investment, government spending and net exports are:
all components of aggregate supply
all components of aggregate demand
46
John Maynard Keynes believed that wages may be inflexible downward. Consequently, an economy
could get stuck in a recessionary gap
would always shift the aggregate supply curve to the right
would always produce more than potential GDP
47
Changes in wages, input prices, productivity and supply shocks can
lead to a shift of the Short Run Aggregate Supply curve.
can lead to a shift of the Aggregate Demand curve
48
Adam Smith is considered a
keynesian economist
classsical economist
49
If the actual unemployment rate is higher than the natural unemployment rate.
the economy is most likely in a recessionary gap.
the economy is most likely in an inflationary gap.
50
In the __________________view, changes in
aggregate demand
can only change the price level in the long run
Neoclassical
Keynesian
