11. A Keynesian economist would be most likely to agree with which of the follow
ID: 1253140 • Letter: 1
Question
11. A Keynesian economist would be most likely to agree with which of the following statements?
A) Government policies do not affect economic activity.
B) Government can implement policy proposals that can positively impact the economy.
C) Most government policies would probably make things worse.
D) The economy ought to be left to market forces.
1. A Classical economist would be most likely to agree with which of the following statements?
A) Government policies do not affect economic activity.
B) Government can implement policy proposals that can positively impact the economy.
C) Most government policies would probably make things worse.
D) Government intervention in the market is necessary for a smoothly operating economy.
2. What event shifted public opinion away from a laissez-faire view of government towards a more activist view?
A) World War I.
B) The Great Depression.
C) World War II.
D) The Vietnam War and the social turbulence of the 1960s.
3. Classical economists argued that unemployment during the Depression could be reduced by:
A) eliminating labor unions and government policies that kept wages too high.
B) strengthening unions and government regulations protecting unions and workers.
C) increasing real wages so that people are encouraged to work.
D) lowering taxes.
4. The level of income an economy can produce without generating higher inflation is called:
A) potential income. B) equilibrium income. C) nominal income. D) real income.
5. Keynes believed equilibrium income __________ potential income:
A) always equaled C) was always above
B) was always below D) could be above, below, or equal to
6. The aggregate demand, short-run aggregate supply, and long-run aggregate supply curves are based upon the:
A) principle of substitution.
B) principle of opportunity cost.
C) relationship between a single good and its price.
D) relationship between the price level and total output.
7. For some time now, the U.S. has been pressuring Japan to institute policies to improve its weak economy. What effect would these policies have on the U.S.?
A) They would cause the U.S. to move up its aggregate demand curve.
B) They would cause the U.S. to move down its aggregate demand curve.
C) They would shift the U.S. aggregate demand curve left.
D) They would shift the U.S. aggregate demand curve right.
8. If companies begin to expect an improvement in the business climate, this will cause:
A) a movement down the aggregate demand curve.
B) a movement up the aggregate demand curve.
C) a rightward shift of the aggregate demand curve.
D) a leftward shift of the aggregate demand curve.
9. The effect that a change in the distribution of income has on the aggregate demand curve is based on the observation that:
A) workers are less likely than stockholders to save the income they receive.
B) stockholders are less likely than workers to save the income they receive.
C) workers and stockholders are equally likely to save the income they receive.
D) the distribution of income is always shifting in favor of workers.
10. If total income remains the same but wages fall, the aggregate demand curve will most likely:
A) shift to the right. B) shift to the left. C) become flatter. D) become steeper.
Explanation / Answer
11. A Keynesian economist believes that if a market is left on its own, then it will always lead to an inefficient macroeconomic outcome. To solve this, policy responses by the public sector is required, i.e. fiscal and monetary policies should be implemented to stabilize and positively impact the economy.
answer - Option B
1. A Classical economist would be most likely to agree with government intervention in an economy is unnecessary and will make things worse because they believe that prices are flexible and therefore the economy will move back to full employment on its own.
Answer - Option C
2. the great depression shifted public opinion away from a laissez-faire view of the government towards a more activist view.
Answer - Option B
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