1.In studying growth theory, we:

A) Assume that labor, capital and raw materials are all fully employed

B) Assume that increased use of inputs cannot lead to a higher living standard

C) Ignore technological advances

D) Try to explain the reasons for recessions and booms

E) All of the above

2.Government intervention into economic activity will NOT lead to a change in the price level in:

A) The short-run model

B) The medium-run model

C) The long-run model

D) The classical model

E) A macro-model that focuses on the growth of productive capacity

3.In the very short run:

A) Output is determined by both aggregate demand and aggregate supply

B) Output is determined by aggregate demand alone

C) Prices are determined by both aggregate demand and aggregate supply

D) Prices are determined by aggregate demand alone

E) Both A) and C)

4.The full-employment level of output is defined as:

A) Actual output plus the output gap

B) Potential output plus the output gap

C) Potential output minus the output gap

D) The level of output at a zero unemployment rate

E) Both A) and D)

5.Keynesian economics includes the idea that

A.Economic policies are ineffective

B.The economy is basically stable

C.Prices adjust to clear the markets

D.Labor markets don't always clear due to wage rigidities

CONCEPTUAL

6.'Since the long-run AS curve is vertical we can conclude that the total real output of a nation cannot grow in the long-run'. Comment on this statement.

7."In the very short run real output is fixed, and therefore any increase in aggregate demand will simply increase the price level but not affect how many goods and services are produced in an economy." Comment on this statement.

8.Elaborate on the schools of thought prior to the great depression, in the 1960's, late 1970s and in the 1980 - 90s.