Deck 39: Neoclassical View of Aggregate Supply and Demand

Question 1

Whats defention of terms:
-Equilibrium

Answer 1

the point at which supply and demand come to be equal

Question 2

Whats defention of terms:
-outside shock

Answer 2

disturbances from outside the system that affect the economy

Question 3

Name the three markets that comprise the macroeconomy and explain how traditional economists come to the conclusion that all three markets tend to be in equilibrium.
-Which neoclassical argument claims that prices and output react in a certain way to outside shocks so as to lead back to equilibrium?

Answer 3

The argument for aggregate equilibrium is based on the concepts of supply and demand

Question 4

Name the three markets that comprise the macroeconomy and explain how traditional economists come to the conclusion that all three markets tend to be in equilibrium.
-Which neoclassical argument claims that employee compensation and number of employees hired react in a certain way to outside shocks so as to lead back to equilibrium?

Question 5

Name the three markets that comprise the macroeconomy and explain how traditional economists come to the conclusion that all three markets tend to be in equilibrium.
-Which neoclassical argument claims that money and interest rates react in a certain way to outside shocks so as to lead back to equilibrium?

Question 6

Name the three markets that comprise the macroeconomy and explain how traditional economists come to the conclusion that all three markets tend to be in equilibrium.
-Do these three arguments support or oppose Say's law?

Question 7

Give a brief history of the evolution of the current traditional economic models of the ?macroeconomy.
-Who was Wesley Mitchell? What was his argument against Say's law?

Question 8

Give a brief history of the evolution of the current traditional economic models of the ?macroeconomy.
-What is the neoclassical response to Keynes' vision of business cycles?

Question 9

Compare and contrast the traditional and progressive views of unemployment in the macroeconomy.
-What is the traditional view of involuntary unemployment?

Question 10

Compare and contrast the traditional and progressive views of unemployment in the macroeconomy.
-How would conservative economists explain the high unemployment rates of the Great depression? How would progressive economists?

Question 11

What are the three main markets that comprise market capitalism?

A) the market for goods, the market for services, and the market for technology.
B) the market for goods, the market for services, and the market for labor.
C) the market for goods and services, the market for labor, and financial markets.
D) the market for services, the market for information, and financial markets.

Question 12

In the neoclassical view of the macroeconomy, a temporary lack of demand for all goods and services will lead to

A) inflation.
B) a fall in the price level.
C) an expansion.
D) a recession.

Question 13

In the neoclassical view of the macroeconomy, if capitalists find they are unable to sell all of their goods

A) they will continue to produce at current levels but will reduce their prices to sell more goods.
B) they will maintain prices and put unsold goods into inventories.
C) they will cut back on production and lower prices.
D) they will cut back on production but maintain current prices to cover costs.

Question 14

In the neoclassical view of the macroeconomy, any income not used for consumption

A) will be used to pay taxes.
B) will be used for investment.
C) will be used for government projects.
D) will be used for exports.

Question 15

In the neoclassical view of the macroeconomy, if there is not enough investment spending to use all available savings

A) the Federal Reserve will raise the interest rate.
B) the interest rate will fall.
C) excess savings will be hoarded.
D) excess savings will be used to pay taxes.

Question 16

In the neoclassical view of the macroeconomy, the supply of savings is

A) unrelated to the interest rate.
B) inversely related to the interest rate.
C) positively related to the interest rate.
D) is fixed.

Question 17

In the neoclassical view of the macroeconomy, investment spending is

A) unrelated to the interest rate.
B) inversely related to the interest rate.
C) positively related to the interest rate.
D) is completely unpredictable

Question 18

In the neoclassical view of the macroeconomy, too many workers seeking work or unemployment will lead to

A) falling wages.
B) rising wages.
C) rising interest rates.
D) government programs to help the unemployed.

Question 19

Some neoclassical economists argue that recessions are caused by

A) a deficiency of aggregate demand.
B) hoarding of savings.
C) outside shocks or disruptions.
D) free trade.

Question 20

Progressive economists argue that conservatives tend to blame the unemployed for their own unemployment. What does this mean?

A) Conservatives argue that the unemployed have caused businesses to fail.
B) Conservatives argue that the unemployed do not pay buy enough goods and services causing the economy to go into a recession.
C) Conservatives argue that the unemployed are simply unwilling to work at the prevailing wage.
D) Conservatives argue that the unemployed have lost their jobs by being so industrious that they are no longer needed by their employers.

Question 21

According to conservative economists, involuntary unemployment

A) does not exist.
B) should be imposed on those unwilling to work.
C) occurs during an economic expansion.
D) could be eliminated by effective government programs.