Deck 4: Keynesian Analysis, Monetary Approach, and Classical Model

Question 1

The purpose of Keynesian analysis is to explain what to determines the

A)size of the labor force
B)price level
C)amount of money required in the economy
D)levels of national income, output and employment

Answer 1

levels of national income, output and employment

Question 2

In the Keynesian range of the SRAS, if AD shift to the right, then

A)the price level falls
B)the price level rises
C)real gdp is unchanged
D)the price level is unchanged

Answer 2

the price level is unchanged

Question 3

If the aggregate supply curve is perfectly elastic as in the Keynesian model at low level of national incomes, as increase in AD will cause an increase in

A)the rate of inflation
B)the level of real national output
C)the government budget deficit
D)the level of consumer debt

Answer 3

the level of real national output

Question 4

Attempts to force inflation below no-accelerating inflation rate of unemployment (NAIRU) will cause:

A)inflation accelerate without any change in employment or output
B)inflation to decelerate with rising employment and output
C)inflation to decelerate with employment and output remaining the same
D)inflation to remain unchanged with fall in employment and output

Question 5

Which of the following is true with respect to the monetary approach to the balance of payments?

A)it views the balance of payments as an essentially monetary phenomenon
B)a balance of payments deficit results from an excess demand of money in the nation
C)a balance of payments surplus results from an excess supply of money
D)balance of payments disequilibrium are not automatically corrected in the long run

Question 6

According to monetarists, money supply constitutes

A)currency+ demand deposits
B)currency +demand deposits+time deposits
C)currency + demand deposits + equity shares
D)currency + all kinds of banks + deposits with other institutions + borrowing

Question 7

According to monetary approach a revaluation of a nation's currency

A)increase the nation's demand for money
B)increase the nation's supply of money
C)reduces the nation's demand for money
D)reduces the nation's supply of money

Question 8

what is the foundation of monetarism?

A)quantity theory of money
B)demand theory
C)islm model
D)none of these

Question 9

Suppose that the money stock is $10 billion, each dollar generates $ 5worth of spending, and the NAIRU is 7%. According to the quantity theory of what is nominal GDP (income)

A)$ 350 million
B)$ 70 million
C)$ 35 million
D)$ 50 million

Question 10

When there are vacancies in the job-market, but also high levels of unemployment, then we could say that this unemployment is?

A)cyclical
B)regional
C)seasonal
D)structural

Question 11

Demand-side unemployment is partly caused by:

A)imperfections in the labour market
B)occupational and geographic immobility of factors
C)demographic changes
D)a lack of aggregate demand

Question 12

According to the basic classical model, an increase in the money supply will cause

A)employment to increase.
B)the price level to increase.
C)output to increase.
D)investment to increase.

Question 13

Why does a temporary decrease in government purchases decrease labour supply in the classical model?

A)the fall in government spending decreases labour demand, decreasing the real wage, and so people decrease their labour supply.
B)the decrease in current or future taxes needed to pay for the decrease in government purchases increases people\s wealth.
C)people prefer to work less when the government is doing less for them.
D)decreased government purchases make people worse off, so they work less hours.