1 From a neoclassical view, which of the following is least important?

Select one:

a.improving the corporate portfolio

b.encouraging long-term growth

c.stimulating potential GDP

Incorrect. Need to revisit the characteristics of the neoclassical perspective.

d.increasing aggregate demand to fight unemployment

2 If government spending increases by $4 billion and real GDP increases by $8 billion, the expenditure multiplier must be ________.

Select one:

a.2.0

b.1.0

c.1.5

Incorrect. Need to revisit the correct calculation of a change in real GDP/change in spending.

d.3.0

3 If you hear someone say, "If you build (produce) it they will come (purchase)" you know it is a good way to describe ________.

Select one:

a.Intermediate economics

b.Short-run economics

Incorrect. Need to revisit the basic intuition behind Say's Law.

c.Keynesian economic policy

d.Say's Law

4 In the neoclassical view of the economy, expansionary fiscal policy cannot work to raise equilibrium output because

Select one:

a.in-kind variables would erode any gains.

b.it will disincentivize production.

Incorrect. Need to revisit the characteristics of the neoclassical perspective.

c.flexible prices will eventually choke off any increase in aggregate demand.

d.it will raise unemployment.

5 In the neoclassical view, the economy has a ________ to move back to potential GDP.

Select one:

a.irrational tendency

b.self-correcting tendency

c.tendency to be unable

Incorrect. Need to revisit the characteristics of the neoclassical perspective.

d.rational tendency

6 Keynes understood that in the short-run wages and prices are ________ and therefore encourage the use of ________ to return an economy to equilibrium.

Select one:

a.flexible; monetary policy

b.rigid; fiscal policy

c.rigid; monetary policy

Incorrect. Need to revisit the characteristics of the Keynesian perspective.

d.sticky; monetary

7 The Keynesian approach focuses on aggregate demand and sticky prices has proven useful in understanding how the economy fluctuates in the ________-run and why recessions and cyclical unemployment occur.

Select one:

a.intermediate

b.long

c.gap

Incorrect. Need to revisit the characteristics of aggregate demand from the Keynesian perspective.

d.short