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Economics
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28 Nov 2019

QUESTION 9

According to the Classical view, recessions typically begin with an inadequate supply of money, or an outright reduction in the supply of money.

True

False

.

QUESTION 10

According to the New Classical view, monetary policy is effective at boosting aggregate demand in times of recession because prices and wages are sticky.

True

False

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Related questions

TRUE/FALSE

1) The classical Model makes assumptions about the economy that make sense in the short run, but not the long run. (T/F)

2) A leftward shift in the labor demand curve would occur if fewer people wanted to work at any given wage/ (T/F)

3) During a recession, firms typically operate at below-normal rates of labor utilization. (T/F)

4) According to the classical view, the economy needs the government's help in achieving full employment (T/F)

5) Net taxes are equal to the government's total tax revenue minus government transfer payments. (T/F)

6) In the classical model, an increase in government spending - with no other change - will shift the total demand for funds curve rightward. (T/F)

7) Investment spending and government purchases play the role of injections. (T/F)

8) The classical model takes a short-run view of the economy, while the Keynesian model takes a more long-run view. (T/F)

9) The aggregate production function tells us how much output can be produced with different amounts of capital and land, and a fixed amount of labor. (T/F)

Please help wtih these economics questions. I'll give the best answer to the person who justifies their answer.. or someone who does well in economics and knows the subject area well.

Which of the following statements is not true about Say's Law?

A. People produce more goods than they want for their own use only if they seek to trade them for other goods.

B. Markets would be regularly hit by severe shortages and surpluses.

C. Desired expenditures will equal actual expenditures.

D. Surpluses will be eliminated by falling prices and shortages will be eliminated by increasing prices.


Which of the following is not an assumption of the classical model?

A. Buyers and sellers react to changes in relative prices.

B. Households want to maximize economic well being.

C. Wages and prices will move freely in the upward direction but not the downward direction.

D. No single buyer or seller of a commodity can affect its price.


Money illusion is

A. when people think they are better off when their income increases even though prices have increased by the same amount.

B. when people are motivated by self-interest.

C. could not exist if the economy did not have competitive markets.

D. a basic condition that all classical economists assume people have.


Saving is not a problem in the classical model because

A. interest rates were flexible and savings were channeled into investment.

B. savers and investors were the same people.

C. the classical economists assumed that saving was beneficial to people for retirement.

D. saving would be spent by consumers eventually.


Which of the following statements is true?

A. There is an inverse relationship between investment and the interest rate.

B. There is no relationship between investment and the interest rate.

C. There is a direct relationship between investment and the interest rate.

D. Investment is always less than savings.


In the classical model, high unemployment due to either a demand or a supply shock

A. will return to its normal level quickly as wages adjust.

B. will persist if due to a supply shock but not if due to a demand shock.

C. can persist for an indefinite period of time.

D. never exists because unemployment can never deviate from its normal level.


The classical model makes little distinction between the long-run and short-run because

A. the model has not been fully developed yet.

B. prices adjust so fast that the economy is quickly moving towards the long-run.

C. the classical economists knew that we are always operating in the short run.

D. current changes influence the long run, so it is not possible to plan for the future.


In the classical model

A. the level of real GDP per year does not depend on the level of aggregate demand.

B. the level of GDP is demand determined.

C. the level of GDP determines prices independent of demand.

D. changes in aggregate supply affect the price level, not real GDP.


Which of the following is a true statement?

A. Classical economists believed output adjusted more than prices when aggregate demand fell while Keynes believed prices adjusted more than output.

B. Classical economists believed price adjusted more than output when aggregate demand fell while Keynes believed output adjusted more than prices.

C. A decrease in aggregate demand has no short-run effects according to the classical economists, but had significant effects according to Keynes.

D. A decrease in aggregate demand was not possible according to the classical economists, but was possible according to Keynes.


Which of the following is not a reason why GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis?

A. Prices and wages are flexible allowing for needed adjustments.

B. In the short-run existing workers can work more hours.

C. The existing capital stock can be used more intensively.

D. Higher prices induce firms to hire more workers.


A recessionary gap can be caused by

A. a decrease in aggregate supply holding aggregate demand constant.

B. an increase in aggregate demand holding aggregate supply constant.

C. an increase in the long run aggregate supply curve holding the aggregate demand constant.

D. a decrease in both aggregate demand and aggregate supply.



1. Answer True or False for each of the following.

Rational Expectations believes that markets accurately incorporate all known info

According to the Monetarists wages and prices are completely flexible.

The Monetarists believe that the velocity of money is a constant.

The Monetarists believe that fiscal policy results in a high level of crowding out.

Supply side economists believe that the government skews the incentive system.

The R-E economists believe that money affects real economic variables.

The Monetarists admit that wages and prices are sticky in the short run.

According to supply-siders tax cuts should go to households.

According to Milton Friedman, the Fed should increase the money supply at a constant rate each year.

According to the original supply-siders, raising taxes can raise tax revenue some of the time.

2. The money supply is currently growing at 8% per year. According to the monetarists what will happen to the price level? What should the money supply be doing?

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