• Question 1

5 out of 5 points

Which of the following best describes a situation when there is "slack" in the economy?

Selected Answer:	More can be produced without cost pressures, so prices are stable as production increases.
Answers:	More can be produced, but inefficiently, so costs and prices rise if production increases.
	Less can be produced, but inefficiently, so costs and prices rise if less is produced.
	The aggregate supply curve is vertical so production cannot be increased.
	More can be produced without cost pressures, so prices are stable as production increases.

• Question 2

0 out of 5 points

Which of the following is not a reason supply-side tax policy may result in 'trickle down' economics?

Selected Answer:	Savings from tax cuts are spent on consumer goods.
Answers:	Savings from tax cuts are spent on consumer goods.
	Savings from tax cuts are invested in real estate, not business investment.
	Savings from tax cuts result in more business investment and employment.
	Savings from tax cuts are used to build factories outside of the U.S.

• Question 3

0 out of 5 points

Which of the following best describes "slack"?

Selected Answer:	The unemployment rate is low and capacity utilization is high.
Answers:	The unemployment rate is low and capacity utilization is low.
	The unemployment rate is high and capacity utilization is high.
	The unemployment rate is high and capacity utilization is low.
	The unemployment rate is low and capacity utilization is high.

• Question 4

0 out of 5 points

Which of the following cannot be thought of as a New Deal policy intended to stimulate the economy through the demand-side?

Selected Answer:	The creation of Social Security.
Answers:	The Labor Peace Act.
	The Fair Labor Standards Act which established the minimum wage and time-and-a-half.
	The Civilian Conservation Corps (CCC) and the Works Project Administration (WPA).
	The creation of Social Security.

• Question 5

0 out of 5 points

According to supply-side theory, periods of high inflation due to increased aggregate demand are corrected by which of the following?

Selected Answer:	A reduction in wages and an increase in unemployment.
Answers:	An increase in wages and a reduction in production and employment.
	An increase in production and employment.
	A reduction in wages and an increase in unemployment.
	A decrease in aggregate demand and an increase in aggregate supply.

• Question 6

5 out of 5 points

Which of the following in not true of fiscal policy for the federal government?

Selected Answer:	Fiscal policy is determined by the U. S. Treasury.
Answers:	Fiscal policy involves taxing and spending policy.
	Fiscal policy involves the congressional budget process.
	Fiscal policy is determined by the U. S. Treasury.
	If spending exceeds tax revenue, fiscal policy includes deficits and debt.

• Question 7

0 out of 5 points

Which of the following best describes the 'paradox of thrift'?

Selected Answer:	As the rate of savings increases, so does the level of GDP.
Answers:	Supply creates its own demand.
	Demand creates its own supply.
	As the rate of savings increases, so does the level of GDP.
	If everyone tries to save more, not everyone will be able to save.

• Question 8

5 out of 5 points

Which of the following is not a conclusion of demand-side economics?

Selected Answer:	A wage cut during a recession will contribute to economic recovery. B) Budget deficits are the price of curing recessions.
Answers:	Poor profit and employment expectations result in lower consumer and business spending in a recession.
	A wage cut during a recession will contribute to economic recovery. B) Budget deficits are the price of curing recessions.
	Increases in government spending is an effective way of recovering from recession.

• Question 9

5 out of 5 points

Government intervention is necessary according to demand side theory for which of the following reasons?

Selected Answer:	The market system in not self-correcting and a recession can worsen to depression.
Answers:	The market system in not self-correcting and a recession can worsen to depression.
	Government intervention is necessary in the process of market adjustment. That is, government must help the economy adjust during recession be lowering the wages of the unemployed.
	Government intervention is necessary to correct for societal problems that extend beyond the economy.
	Government intervention is necessary to keep the 'ball of the economy' balanced at the bottom of the valley.

• Question 10

5 out of 5 points

Which of the following describes the long-run aggregate supply curve according to supply-side theory?

Selected Answer:	Perfectly vertical.
Answers:	Perfectly horizontal.
	Relatively flat at low levels of GDP and becoming positively sloped as GDP increases.
	Perfectly vertical.
	Relatively flat at high levels of GDP and positively sloped at low levels of GDP.

• Question 11

5 out of 5 points

Which of the following best describes demand-side economics?

Selected Answer:	The level of spending largely determines the level of GDP.
Answers:	The level of savings and production determine the level of GDP.
	Lower taxes and higher levels of savings will increase GDP.
	When level of savings is greater than the level of spending, GDP will increase.
	The level of spending largely determines the level of GDP.

• Question 12

5 out of 5 points

Which of the following best describes Say's Law?

Selected Answer:	Supply creates its own demand.
Answers:	A decrease in the rate of unemployment means higher inflation.
	Demand creates its own supply.
	Interest rates rise with inflation.
	Supply creates its own demand.

• Question 13

0 out of 5 points

Which of the following best illustrates the intended effect of supply-side economic policy?

Selected Answer:	If tax cuts to the wealthy are not productively invested, the benefits will trickle down to the lower income classes.
Answers:	If tax savings are spent on consumption, the economy will grow.
	If tax savings are productively invested, GDP and employment will increase.
	If tax cuts to the wealthy are not productively invested, the benefits will trickle down to the lower income classes.
	Tax savings should be invested in other countries.

• Question 14

0 out of 5 points

Which of the following is not a tax change recommended by supply-siders policy makers?

Selected Answer:	Reduced capital gains taxes.
Answers:	Reduced taxes for corporations.
	Reduced capital gains taxes.
	A consumption tax.
	Reduced taxes for low-income households.

• Question 15

0 out of 5 points

According to demand-side economics, wages are sticky, or inflexible downward, for all of the following reasons except:

Selected Answer:	Workers do not usually compete for jobs on the basis of lower wages.
Answers:	When the unemployment rises above 6%, wages must fall.
	Contracts and the minimum wages prevent wages from falling.
	Workers do not usually compete for jobs on the basis of lower wages.
	The unemployed would rather face a spell without work rather than accept lower wages.

• Question 16

5 out of 5 points

Which of the following describes the long-run aggregate supply curve according to demand-side theory?

Selected Answer:	Relatively flat at low levels of GDP and becoming positively sloped as GDP increases.
Answers:	Perfectly horizontal.
	Relatively flat at low levels of GDP and becoming positively sloped as GDP increases.
	Perfectly vertical.
	Relatively flat at high levels of GDP and positively sloped at low levels of GDP.