Question 1 A weakness of the classical model is the quality of its explanations

Question

Question 1

A weakness of the classical model is

the quality of its explanations for long-run movements of the economy

its confusion between the long and short run

its assumption that the labor market always clears

its inadequate attention to the long run

1 points   

Question 2

In the classical model, a falling demand for labor will

not cause unemployment because the labor market always clears

cause a recession with lower employment and a lower real wage

cause a recession with lower employment and an increasing real wage

cause a recession with lower unemployment and a lower real wage

cause a recession with higher employment and an increasing real wage.

1 points   

Question 3

When explaining expansions and recessions, the classical model is

reliable

seriously flawed

the favorite explanatory tool of economists

overly focused on the labor market

sometimes accurate and sometimes not

1 points   

Question 4

What do all expansions and recessions since the late 1960s have in common?

Changes in oil prices.

Changes in interest rates.

Changes in spending.

Changes in productivity.

1 points   

Question 5

The classical model is a poor predictor of short-run economic fluctuations in part because it assumes that

all workers wish to work

government will prevent these fluctuations

the labor market always clears

the long run is just a series of short-run periods

labor demand curve is stable

1 points   

Question 6

Which of the following statements best describes the U.S. economy since late 1960s?

Potential output has risen steadily, but actual output has fluctuated above and below full-employment output.

Actual output has risen steadily, but potential output has fluctuated above and below actual output.

Potential output and actual output have both not risen steadily.

Potential output and actual output have both fluctuated above and below what the classical model predicts

Potential output has remained constant but actual output has risen.

1 points   

Question 7

One difficulty with any explanation of economic fluctuations based on a shift in labor supply is that

workers' preferences tend to change very quickly

labor supply shifts all the time without causing recessions or expansions

labor supply is difficult to measure

workers' preferences tend to change very slowly

the unemployment rate changes during economic fluctuations

1 points   

Question 8

What would a leftward shift of the labor demand curve indicate?

Firms want to hire more workers than before at any given wage than before.

Firms want to pay a higher wage than before at any given level of employment.

Households want to supply fewer hours of work than before at any given wage rate.

Firms want to hire fewer workers than before at any given wage rate.

Households want to supply more hours of work than before at any given wage rate.

1 points   

Question 9

A period during which GDP exceeds its potential level is best known as a(n)

expansion

contraction

boom

recession

depression

1 points   

Question 10

Which of the following spending changes is most likely to cause an expansion?

An upward spike in oil prices.

An increase in autonomous consumption spending.

A significant decline in business equipment spending.

A sudden increase in the interest rate.

A significant decline in exports.

the quality of its explanations for long-run movements of the economy

its confusion between the long and short run

its assumption that the labor market always clears

its inadequate attention to the long run

Explanation / Answer

9. Boom is the situation in which the economy expands more than its capacity.

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