Regarding the theoretical operation of the Pigou, expectations, and redistributi
ID: 1095221 • Letter: R
Question
Regarding the theoretical operation of the Pigou, expectations, and redistribution effects, does the U.S. experience between 1929 and 1933 provide any evidence?
A) Only the Pigou effect appears to have operated.
B) The Pigou effect appears to have overwhelmed the other effects.
C) The expectations and redistribution effects appear to have overwhelmed the Pigou effect.
D) Since the price level did not fall, no evidence is provided.
E) All three effects appear to have helped cushion the fall in output.
26) The first two years of the Great Depression were dominated by
A) rightward shifts of the LM curve.
B) upward shifts of the SAS curve.
C) leftward shifts of the IS curve.
D) leftward shifts of the LM curve.
E) rightward shifts of the IS curve.
27) Classical macroeconomists believed that a market-based economy has ________ self-correcting forces and thus ________ business cycles.
A) weak, mild and fleeting B) strong, violent and prolonged
C) strong, mild and fleeting D) weak, violent and prolonged
Figure 7-5
24) In Figure 7-5, a fiscal expansion from point A with no initial change in the nominal wage causes a movement to point
A) C. B) E. C) F. D) D. E) B.
Figure 7-5
25) In Figure 7-5 above, from initial point E, suppose AD1 shifts to AD0. Under the assumptions of classical macroeconomics, we would
A) almost immediately move to and then stay at point B.
B) almost immediately move to and then stay at point A.
C) almost immediately move to and then stay at point F.
D) stay at point E.
Explanation / Answer
25 C) The expectations and redistribution effects appear to have overwhelmed the Pigou effect.
26 D) leftward shifts of the LM curve.
27 B) strong, violent and prolonged
24 C) F
25 A) almost immediately move to and then stay at point B.
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