Theories of Economics

Question 1

Hayek argued that a spike in investment due to an increase in the money supply would cause:

Accepted Answer

Long term investments to peak, causing a short term bust

Question 2

High levels of unemployment and inflation plagued which of the following time periods most?

Accepted Answer

The 1970s

Question 3

Which of the following is considered more difficult to lower through government policy?

Accepted Answer

Inflation

Question 4

Keynes said that if a business were to lower wages then:

Accepted Answer

Lower disposable income hurts the business in the long run

Question 5

Some of Keynes's Theories clashed with the ideas of whom?

Accepted Answer

John Baptiste Say

Question 6

Although it was not necessarily true, Keynes's critics accused him of:

Accepted Answer

Being overly oppressive of the free market

Question 7

Many of the ideas supported by Keynes became the basis for

Accepted Answer

Neither (a) nor (b)

Question 8

Friedman proposed that central banks:

Accepted Answer

Set target levels of inflation

Question 9

Keynes theorized that aggregate demand was:

Accepted Answer

Consumption + investments + government spending + net export

Question 10

Large increases in the money supply can cause which of the following?

Accepted Answer

High inflation

Question 11

John Maynard Keynes, regarding "The Road to Serfdom":

Accepted Answer

Supported Hayek's ideas expressed in the book

Question 12

Hayek criticized Keynes's ideas because in order to keep unemployment low:

Accepted Answer

The inflation rate would continue to get higher and higher

Question 13

Which of the following is NOT a key tenet of Monetarism?

Accepted Answer

Fiscal policy is always more effective in the long run

Question 14

Along with Milton Friedman and others, Hayek would go on to do which of the following?

Accepted Answer

Found the Mont Pelerin Society

Question 15

Keynes said that if inflation or unemployment should become too high the the government should:

Accepted Answer

Use fiscal policy to bring the economy back to equilibrium

Question 16

In "The Road to Serfdom", Hayek:

Accepted Answer

Warned of the dangers of socialism

Question 17

Friedman claimed that the cause of the Great Depression was:

Accepted Answer

Botched Monetary policy

Question 18

"The Road to Serfdom", is primarily based on Hayek's observations of:

Accepted Answer

The Nazi Party

Question 19

Hayek saw that which of the following was a flaw in Monetary policy and the k-percent rule?

Accepted Answer

There are too many unpredictable factors in the economy

Question 20

The k-percent rule states:

Accepted Answer

The fed should increase money supply by a constant rate

Question 21

High levels of unemployment and inflation is:

Accepted Answer

Known as stagflation

Question 22

Keynes wrote:

Accepted Answer

"The General Theory of Unemployment, Interest and Money"

Question 23

Which type of investments are most sensitive to changes in the money supply?

Accepted Answer

Long term investments

Question 24

If the money supply is high, then:

Accepted Answer

Investment spending will increase

Question 25

What were Keynes's views on Monetarism

Accepted Answer

He was a believer in monetarism

Question 26

Initially Keynes's ideas were:

Accepted Answer

Doubted because of the laissez faire system in place

Question 27

Ultimately, an increase in the money supply causes which of the following to occur?

Accepted Answer

Inflation↑; real interest↓; investment↑; aggregate demand↑

Question 28

Which of the following did Keynes believe?

Accepted Answer

Demand creates supply

Question 29

Hayek's book, "The Constitution of Liberty", discussed which of the following?

Accepted Answer

The proper role of the government regarding the economy

Question 30

In order to curb inflation, in 1979, the fed limited the money supply, simultaneously causing:

Accepted Answer

The economy to enter a recession

Theories of Economics

Questions 30

Theories of Economics

Questions 30