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Macroeconomics Chapter 9 Colander 9e

“Classical economist” is often used interchangeably with which term?
Laissez-faire economist.
Between 2007 and 2009, the US unemployment rate rose from under 5 percent to over 8 percent. A Keynesian economist would most likely blame this increase in unemployment on:
A decline in the level of aggregate demand
Before the Great Depression the popular view of government was:
Laissez-faire, and after the depression, the popular view of government was activist.
The laissez-faire policy prescription to eliminate unemployment was to:
Eliminate labor unions and government policies that hold real wages too high.
The classical economists argued that:
If unemployment occurs, it will cure itself because wages and prices will fall.
Which of the following was not a solution to the Depression favored by the Classical economists?
Hire unemployed workers for public works programs.
Aggregate demand management policies are designed most directly to:
control the aggregate level of spending in the economy.
Potential income is that level of income that:
an economy is capable of producing without generating higher inflation.
Keynes believed equilibrium income was:
Not fixed at the economy’s potential income.
The paradox of thrift occurs when:
An increase in saving reduces output.
Keynes argued that:
The short run is a more important policy concern than the long-run.
The reason why the AS/AD model does not depend upon the concepts of substitution and opportunity cost is that:
The AS/AD model considers total output. There are no goods to substitute.
As prices fall, people become richer and buy more. This occurs as a result of:
The money wealth effect.
When aggregate demand is declining and the price level needs to fall to bring about equilibrium, pressure for the price level to fall brings expectations of falling aggregate demand, lower asset prices, and financial panics triggered by the decline in the value of financial assets. If these forces are strong enough, these dynamic effects can create a:
leftward shift in the aggregate demand curve.
A fall in a foreign country’s income will most likely cause:
A reduction in U.S. exports, so the U.S. aggregate demand curve shifts left.
If businesses expect future demand to increase, this will cause a:
rightward shift of the aggregate demand curve.
The new government of Pakistan transfers money from the rick to the poor. This will likely:
Shift the Pakistan AD curve to the right.
In the summer of 1953, the Korean War ended and government expenditures decreased. In terms of the AS-AD model, this change should have:
Shifted the AD curve to the left.
An increase in production costs is most likely to shift the:
Short-run aggregate supply curve up(to the left).
In late 2004, oil prices increased sharply while the rate of growth in labor productivity declined. The combination of these two factors should:
Shift the short-run aggregate supply curve up(to the left)

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