Questions:
Question 1.In the Keynesian model, employment
is determined by output.
is determined by price level.
determines the level of output.
depends on aggregate supply.
is independent of output.
Question 2. Say's law states that supply creates its own demand because
there is always a buyer for every good purchased.
supply prices are always equal to demand prices.
prices are such that producers know exactly how much to produce in the short run.
the act of producing creates income sufficient to purchase all that is produced.
Question 3. Before Keynes, most economists and politicians believed in
a cyclically balanced budget.
an annually balanced budget.
a structural deficit.
a budget that was balanced only at full employment.
Question 4. When aggregate planned expenditure falls short of potential output, the economy experiences
inflation.
inadequate supply.
a recessionary gap.
an equilibrium state.
a government budget deficit.
Question 5. Keynes believed that the correct role for government during a depression was to
shift aggregate supply.
increase the money supply.
shift money demand.
increase government spending or cut taxes.
balance the budget.
Question 6. A laissez-faire attitude toward most markets is most closely associated with
Keynesians.
monetarists.
classical economists.
supply siders.
Reaganomics.
Question 7. Keynes blamed economic downturns primarily on
the instability of consumption.
declines in the interest rate.
poor governmental management.
the instability of investment.
international trade.
Question 8. The measure that shows how much of the deficit is due to a downturn in economic activity is
the structural deficit.
the real deficit.
the actual deficit.
the cyclical deficit.
the budget deficit excluding Social Security accounts.
Question 9. The Investment Tax Credit
affects the level of output through changes in investment.
is a supply side policy, not fiscal policy.
is an automatic stabilizer.
changes the level of input through changes in employment.
is contractionary and does not affect the level of output.
Question 10. If an economy has high unemployment, slow growth, and low inflation rates, an appropriate fiscal policy consists of
lower taxes, higher government spending.
higher taxes, higher government spending.
higher taxes, lower government spending.
lower taxes, lower government spending.
higher taxes, no change in government spending.