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Exam 14: Recessions, Expansions, and the Debate Over How to Manage Them

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Question 31

Multiple Choice

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Keynesian economists believe that government intervention in the economy is necessary because

A) prices are flexible and allow the economy to quickly return to full employment.
B) the long run is more important than the short run, and economic policy works only in the long run.
C) savings is a crucial part of economic growth and investment.
D) prices are sticky and prevent the economy from moving toward full employment.
E) supply is more important than demand in determining economic growth and output.

F) A) and D)
G) A) and E)

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Question 32

Multiple Choice

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The Great Recession is characterized by a decrease in aggregate demand. A(n) _____ in____ would have caused such a decrease.

A) decrease; consumer sentiment
B) decrease; income tax rates
C) increase; international trade
D) increase; expected income
E) increase; immigration to the United States

F) C) and E)
G) B) and C)

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Question 33

Multiple Choice

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Which of the following best summarizes the main causes of the Great Depression?

Classical economists believe that the economy is stable and tends toward full employment because

Keynesian economists believe that more focus should be placed on aggregate demand than aggregate supply because

Classical economists believe that government intervention in the economy is unnecessary because

The stock market crash in______ is generally viewed as the beginning of the Great Depression.

Classical economists believe that when aggregate demand changes, the economy remains at full employment because

When 9,000 banks failed during the Great Depression, it caused aggregate demand to decrease because

Use the following graph to answer the next questions. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS) . -During the Great Depression, the aggregate price level fell by 20 percent as depicted in the graph, suggesting that

When U.S. housing prices declined prior to and during the Great Recession, it caused aggregate demand to decrease because

In regard to the macroeconomy, it is believed by classical economists that

The Great Recession lasted from _____to_____ .

Which of the following policy statements would a Keynesian economist tend to support?

The Great Depression actually consisted of two separate recessions. The "first wave" of the Great Depression first began in ______and initially lasted for_____ months.

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because

Use the following graph to answer the next four questions. -With regard to the Great Depression, the movement from point A to point B demonstrates what?

When held up against other economic downturns, the Great Depression had

Use the following graph to answer the next questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased, with no change in short-run aggregate supply (SRAS) . -In the graph, we see that long-run aggregate supply decreased during the Great Recession. This was due to a decline in housing prices and the subsequent financial crisis. Why did these factors cause long-run aggregate supply to decrease?

During the Great Recession, consumer sentiment in the United States declined, leading to a decrease in consumer spending. Which of the following factors caused this decrease in consumer sentiment?