Question 1

What do Keynesians believe?
A)Saving depends on the level of the interest rate.
B)Saving depends on the level of income.
C)Investment is stable.
D)Government policies should be neutral.

Accepted Answer

Keynesians believe that saving depends on the level of income, as individuals tend to save more as their income increases. They also believe that investment is not stable and can fluctuate due to various factors such as uncertainty and expectations. Keynesians believe that government policies can and should be used to influence economic activity, and that they should not be neutral.

Question 2

Which of the following do neoclassical economists believe?
A)That,in equilibrium,the leakage of savings from the circular flow would always be matched by an equal amount of investment
B)That if savings exceed investment,the interest rate will fall
C)That surplus output would lead to a fall in prices
D)All of the above

Accepted Answer

Neoclassical economists believe all of the statements mentioned in the options - That, in equilibrium, the leakage of savings from the circular flow would always be matched by an equal amount of investment, if savings exceed investment, the interest rate will fall and surplus output would lead to a fall in prices.

Question 3

All of the following,except one,are pillars on which neoclassical theory is built.Which is the exception?
A)The flexibility of production
B)The validity of Say's Law
C)The flexibility of prices
D)The flexibility of interest rates
E)The flexibility of wages

Accepted Answer

The flexibility of production is not considered a pillar of neoclassical theory. Neoclassical theory primarily focuses on the flexibility of prices, wages, and interest rates to bring about market equilibrium, as well as the validity of Say's Law, which states that supply creates its own demand.

Question 4

Which of the following best describes the federal government's annual budgets for the last eighteen years?
A)There were budget surpluses for the first several years,then budget deficits for several more,followed by two years of surpluses.
B)There were budget deficits for the first couple of years,then budget surpluses for several more,followed by several years of deficits.
C)There were budget deficits for all of the years.
D)There were budget surpluses for all of the years.

Accepted Answer

Based on historical data, the federal government had budget deficits for the first couple of years (2002 and 2003), then had budget surpluses for several more years (2004-2007), followed by several years of deficits (2008-2012), and then a few years of smaller deficits (2013-2019). Therefore, option B is the best choice.

Question 5

Which of the following best explains the ups and downs of the Canadian dollar in the last several years?
A)They are caused by changes in productivity and wage rates within Canada
B)They are the result of differences in inflation rates in Canada compared to those in the United States
C)They are the result of changes in commodity prices and long-term investment by Canadians to foreign nations
D)They are the result of changes in commodity prices and long-term investment by foreigners into Canada

Accepted Answer

The ups and downs of the Canadian dollar in the last several years are largely due to changes in commodity prices, such as oil, and long-term investment by foreigners into Canada. These factors have a significant impact on the demand for Canadian dollars and therefore affect its value in the foreign exchange market. Increases or decreases in commodity prices and investment can cause fluctuations in the Canadian dollar's value.

Question 6

What ensures the equality of savings and investment,according to neoclassical theory?
A)Flexible prices
B)Flexible interest rates
C)Flexible wages
D)Say's Law

Accepted Answer

According to neoclassical theory, flexible interest rates ensure the equality of savings and investment. When there is excess savings i.e. when people save more than what they are willing to invest, interest rates decrease which stimulates investment and reduces savings. Conversely, when there is excess investment i.e. when people are willing to invest more than what is being saved, interest rates increase which reduces investment and stimulates savings. Therefore, flexible interest rates act as an automatic adjustment mechanism that ensures the equality of savings and investment.

Question 7

What characterized the decades of the 1950s and 1960s?
A)Low growth and high unemployment
B)Low unemployment and high inflation
C)Stagflation
D)Economic stability with reasonably low unemployment and inflation

Accepted Answer

The decades of the 1950s and 1960s were characterized by economic stability, with reasonably low unemployment and inflation. This period is often referred to as the post-World War II economic boom, marked by a rise in consumer spending, economic growth, and technological advancements. It was a time of relative prosperity and stability for many Americans.

Question 8

According to supply-siders,what is one of the keys to curbing stagflation?
A)Increasing the money supply and cutting government spending
B)Using income policies to increase productivity
C)Shifting the AD curve to the right
D)Convincing people to buy domestic rather than foreign-produced goods
E)Lowering taxes

Accepted Answer

According to supply-siders, lowering taxes is one of the keys to curbing stagflation. This is because lower taxes provide incentives for individuals and businesses to work harder and increase their productivity, which can lead to increased economic growth and lower unemployment. It also allows individuals and businesses to keep more of their own money, which they can then invest in the economy, further stimulating growth.

Question 9

What was the supply-side diagnosis of stagflation?
A)It was triggered by the high price of imported oil and accentuated by declining productivity rates.
B)It was triggered by the stock market crash and accentuated by the low price of imported oil.
C)It was triggered by the stock market crash and accentuated by declining productivity rates.
D)It was triggered by the stock market crash and accentuated by the high price of imported oil.

Accepted Answer

The supply-side diagnosis of stagflation was that it was triggered by the high price of imported oil and accentuated by declining productivity rates. This meant that the economy was experiencing high inflation (due to the high cost of oil) and low economic growth (due to declining productivity). Supply-side economists argued that the solution was to lower taxes and reduce government regulation to stimulate production and increase productivity.

Question 10

What is the essential difference between Keynesian and neoclassical views of macroeconomy?
A)The Keynesian view is that the economy is capable of automatically adjusting to economic changes because of the flexibility of wages,prices,and interest rates,while the neoclassical view is that the economy could get stuck in a recessionary gap because of their inflexibility.
B)The neoclassical view is that the economy can automatically adjust to economic changes because of the flexibility of wages,prices,and interest rates,while the Keynesian view is that the economy could get stuck in a recessionary gap because of their inflexibility.
C)While both views agree on the automatic adjustment ability of the economy,the Keynesian view sees wages as flexible,but the neoclassical view does not.
D)While both views agree on the automatic adjustment ability of the economy,the neoclassical view sees wages as flexible,but the Keynesians do not.

Accepted Answer

The essential difference between Keynesian and neoclassical views of macroeconomy is that neoclassical view is that the economy can automatically adjust to economic changes because of the flexibility of wages, prices, and interest rates, while the Keynesian view is that the economy could get stuck in a recessionary gap because of their inflexibility.

Question 11

With which of the following events are derivatives,hedge funds,and sub-prime mortgages all associated?
A)The Great Depression
B)The post-World War II economic boom period
C)The financial crisis of 2008-2010
D)The stagflation years of the 1970s

Accepted Answer

Derivatives, hedge funds, and sub-prime mortgages were all major factors in the financial crisis of 2008-2010. Derivatives, such as credit default swaps, were widely used and contributed to the collapse of major financial institutions. Hedge funds also played a role in the crisis, as many were highly leveraged and suffered huge losses. Sub-prime mortgages, which were risky loans given to borrowers with poor credit, were at the heart of the housing bubble that burst and led to the crisis.

Question 12

Which school of thought believed that long-run equilibrium occurs automatically and is the normal state of affairs in a market economy?
A)Keynesians
B)Neoclassicists
C)Supply-siders
D)Symbolic analysts

Accepted Answer

The neoclassical school of thought believed in the concept of long-run equilibrium, which occurs automatically and is the normal state of affairs in a market economy. They believed that the market would always move towards equilibrium, where all resources are fully utilized and all costs and benefits are balanced.

Question 13

According to Keynes,what determines interest rates?
A)The level of saving
B)The level of investment
C)The velocity of money
D)Both saving and investment
E)The interaction of the demand and supply of money

Accepted Answer

Keynes argued that interest rates are determined by the interaction of the demand for money (liquidity preference) and the supply of money, rather than by classical theories of savings and investments directly.

Question 14

How is a historical look at the macroeconomy of Canada beneficial?
A)It assures us that the real issues of the day do not change.
B)It enables us to realize that the views of economists about the issues of the day are very similar over time.
C)It helps us to identify the relationship between economic events and changes in macroeconomic theory.
D)It establishes the unchanging nature of macroeconomic theory.

Accepted Answer

A historical look at the macroeconomy of Canada can help us identify the relationship between economic events and changes in macroeconomic theory. This understanding can be helpful in shaping future policy decisions and in predicting the impact of economic events on the economy.

Question 15

According to neoclassical economists,what would happen if total spending was less than total output?
A)Product prices would rise,but wage rates would fall.
B)Product prices would fall,but wage rates would rise.
C)Nominal GDP would rise,but real GDP would remain constant.
D)Both product prices and wage rates would fall.
E)Both product prices and wage rates would rise.

Accepted Answer

Neoclassical economists believe in the law of supply and demand, which states that when there is an excess supply of a good or service, prices will fall until the market clears. If total spending is less than total output, there will be an excess supply of goods and services, causing prices to fall. In turn, firms may reduce their production, causing unemployment and a decrease in wage rates. Therefore, both product prices and wage rates would fall.

Question 16

Which one of the following does not explain why Canada survived the financial crisis so much better than did the United States.
A)Canada's banking regulations limit the amount of leverage and securitization possible.
B)Canada's Financial Consumer Agency restricted sub-prime lending.
C)Canadians never got caught up in the ideology that denies any need for regulation of the banking system.
D)House prices in Canada did not increase.

Accepted Answer

While the other three options all address specific regulatory measures taken by Canada to limit risk in the financial system, option D refers to a factor that is not necessarily linked to regulation - the fact that house prices did not increase. While this may have contributed to Canada's resilience in the crisis, it is not a direct result of regulatory policy.

Question 17

Which of the following is a statement of Say's Law?
A)Demand creates its own supply.
B)Supply creates its own demand.
C)The costs of production decrease as output increases.
D)The costs of production increase as output increases

Accepted Answer

Say's Law states that supply creates its own demand. This means that the production of goods and services generates income for the producers, which they can use to buy other goods and services, thus creating demand.

Question 18

What characterized the decade of the 1970s in Canada?
A)Prosperity and strong economic growth
B)Stagflation
C)Economic recovery from the 1960s depression
D)Low unemployment and high inflation

Accepted Answer

The 1970s in Canada were characterized by stagflation, a period of high unemployment and high inflation, which made economic growth and recovery difficult. This was due in part to global economic instability, the oil crisis, and domestic political and social changes.

Question 19

When did the Great Depression occur?
A)At the beginning of the twentieth century
B)In the seven years following World War I
C)During the decade of the 1930s
D)In the five years following World War II

Accepted Answer

The Great Depression occurred during the 1930s, with the stock market crash of 1929 often seen as the beginning of the economic downturn. A and B are incorrect because they do not match the timeframe of the Great Depression, and D is incorrect because it occurred after the end of the Great Depression.

Question 20

A major shift in perceptions about the role of government occurred during which of the following periods in history?
A)Immediately following WW II
B)In the middle of the Great Depression
C)Just prior to World War I
D)In the 1990s

Accepted Answer

The Great Depression led to a major shift in perceptions about the role of government, as people began to look to the government for help in solving the economic crisis.

Quiz 13: A Walk Through the Twentieth Century and Beyond

What do Keynesians believe?

Which of the following do neoclassical economists believe?

All of the following,except one,are pillars on which neoclassical theory is built.Which is the exception?

Which of the following best describes the federal government's annual budgets for the last eighteen years?

Which of the following best explains the ups and downs of the Canadian dollar in the last several years?

What ensures the equality of savings and investment,according to neoclassical theory?

What characterized the decades of the 1950s and 1960s?

According to supply-siders,what is one of the keys to curbing stagflation?

What was the supply-side diagnosis of stagflation?

What is the essential difference between Keynesian and neoclassical views of macroeconomy?

With which of the following events are derivatives,hedge funds,and sub-prime mortgages all associated?

Which school of thought believed that long-run equilibrium occurs automatically and is the normal state of affairs in a market economy?

According to Keynes,what determines interest rates?

How is a historical look at the macroeconomy of Canada beneficial?

According to neoclassical economists,what would happen if total spending was less than total output?

Which one of the following does not explain why Canada survived the financial crisis so much better than did the United States.

Which of the following is a statement of Say's Law?

What characterized the decade of the 1970s in Canada?

When did the Great Depression occur?

A major shift in perceptions about the role of government occurred during which of the following periods in history?