Deck 38: Money and Profit Says Law and Institutionalist Criticism

Question 1

Whats defention of terms:
-aggregate demand

Answer 1

the total dollar amount of goods that consumers, investors, foreigners, and governments plan to buy at a given price level

Question 2

Whats defention of terms:
-aggregate supply

Answer 2

the total output that business produces and plans to sell at a given price level

Question 3

Whats defention of terms:
-equilibrium

Answer 3

the point at which supply and demand come to be equal

Question 4

Whats defention of terms:
-Say's law

Question 5

Explain Say's law and discuss the arguments supporting it.
-What does Say's law mean? Why can't there ever be a lack of demand in the aggregate?

Question 6

Explain Say's law and discuss the arguments supporting it.
-Describe the process that keeps aggregate supply and demand equal.

Question 7

Explain the relationship of business cycles and Say's law.
-What are three main characteristics of the capitalist economy that make possible cycles of boom and bust?

Question 8

Explain the relationship of business cycles and Say's law.
-How do these cycles violate Say's law? What would a conservative economist say about how the economy readjusts? Why?

Question 9

Describe how Say's law informs policy decisions about the economy.
-If Say's law holds, should the government try to smooth the effects of a boom and bust? Why or why not?

Question 10

Describe how Say's law informs policy decisions about the economy.
-How is the economy different today from feudalist society that leads to boom and bust?

Question 11

Discuss why Say's law is true in many precapitalist societies but not in capitalism as we see it today.
-Did cycles of boom and bust exist under feudalism? Why or why not?

Question 12

List and describe the four functions of money.
-What are the four functions of money? Does it serve all functions equally well? ?Explain.

Question 13

List and describe the four functions of money.
-How does the use of credit complicate business cycles?

Question 14

Which of the following is true of Say's law?

A) there is often a lack of sufficient demand for goods and services.
B) there can never be excess production above demand for any length of time.
C) the economy is naturally prone to severe booms and busts.
D) there is a constant danger of runaway inflation.

Question 15

Suppose the United States produced $12 trillion of goods and services in 2005, according to Say's law

A) the economy will produce more than $12 trillion in 2006.
B) the supply of $12 trillion goods will lead to a general glut of goods if consumer demand falls.
C) the supply of $12 trillion in goods and services will be matched by $12 trillion in spending.
D) the economy will be able to save about $1 trillion for future consumption.

Question 16

Aggregate demand is defined as

A) the total dollar amount of goods and services that consumers, investors, foreigners, and governments plan to buy at a given price level.
B) the total dollar amount of goods and services that business produces and plans to sell at a given price level.
C) the demand for a materials used in concrete.
D) the demand for all the various types of goods and services consumed by a household.

Question 17

Aggregate supply is defined as

A) the total output that business produces and plans to sell at a given price level.
B) the total dollar amount of goods and services that consumers, investors, foreigners, and governments plan to buy at a given price level.
C) the total quantity of goods that sellers would like to sell during a given period, at various prices, holding other things constant.
D) the total quantity of goods that buyers would like to buy during a given period, at various prices, holding other things constant.

Question 18

Progressive economists such as Wesley Mitchell

A) showed that capitalist economies often do not produce equilibrium but do produce a business cycle with booms and busts.
B) claimed that the internal workings of market capitalism produce an economy without booms or busts or price inflation that the market could not correct quickly.
C) claimed that unemployment and inflation are caused by factors external to the economy and are not due to how the economy itself operates.
D) argued that aggregate demand must always equal aggregate supply at any level of supply.

Question 19

Progressive economists argue that recessions and depressions occur when

A) there is an unexpected outside shock to the economy.
B) aggregate demand is insufficient to purchase aggregate supply.
C) government intervenes and disturbs the process of equilibrium.
D) the Federal Reserve issues too much currency.

Question 20

Capitalist economic institutions were fully developed in England

A) by the end of the 18^th century
B) by the end of the 16^th century
C) by the end of the 17^th century
D) by the end of the 15^th century.

Question 21

An economy in which most output is produced for sale on the market is

A) a feudal economy.
B) a capitalist economy.
C) a communal economy.
D) a socialist economy.

Question 22

During the Roman Empire, there was considerable trade, and most of it was

A) in agricultural goods.
B) in military goods.
C) in luxury goods.
D) in livestock

Question 23

What are the 4 functions of money in a modern economy?

A) store of value, unit of accounting, medium of exchange, standard of deferred payment.
B) store of value, collector's item, medium of exchange, unit of accounting.
C) store of value, medium of exchange, standard of deferred payment, emergency reserve.
D) medium of exchange, standard of deferred payment, unit of accounting, collector's item.