Lesson 7

Question
1
(6725148
):
In this example of the Classical adjustment process, the recession is avoided when
_______________________________ is decreased by $100 billion which effectively
re-balances the leakages and injections in the economy.

Type: Multiple Choice
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
Saving by Households
Correct
answer(s
):
deficit spending by Government
import spending by Foreign Markets
Consumption spending by Households

Question
2
(6725125
):
In the Classical Theory, if businesses want fewer funds, the interest rate will
_________ and people will save less money and consume more.
Points 0.00 / 1.00
awarded:
Your
Answer(s
):
increase
Correct
answer(s
):
decrease
increase
stay the same in the Bathtub
none of the above

Question
3
(6725119
):
In the Classical Bathtub Model the water flowing into the tub (injection) represents the
flow of Consumption and _____________ spending.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
Investment
Correct
answer(s
):
Government
Net Export
Investment
None of the above

Question
4
(6725138
):
Even though interest rates were lower in the Great Depression, businesses became
____________ about the economy and did not spend enough on Investment to return
Savings into the flow.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
pessimistic
Correct
answer(s
):
pessimistic
optimistic
enthusiastic
confident

Question
5
(6725128
):
The dynamics of a ___________ interest rate will eliminate excess savings and
____________ prices and wages will maintain constant consumption.
Points
awarded:
1.00 / 1.00
Your
Answer(s
flexible
):
Correct
answer(s
):
rigid
fantasy
flexible
none of the above

Question
6
(6725133
):
In the Great Depression, spending on U.S. _________was reduced by foreign
countries as well as U.S. spending on their products which made the downward spiral
even worse on a global basis.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
Exports
Correct
answer(s
):
Exports
Imports
Internet services
Rap music

Question
7
(6725142
):
Although wages and prices did fall in the early 1930s, Consumption spending fell
_____________ on a relative basis and resulted in the quantity of AS being much
greater than the quantity of AD
Points
awarded:
0.00 / 1.00
Your
Answer(s
):
less
Correct
answer(s
):
more
less
only the same amount
none of the above

Question
8
(6725112
):
Adam Smiths ___________ economics is the idea that an economy with less
government restriction serves people best for allowing free allocation of resources.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
laissez faire
Correct
answer(s
ceteris paribus
carpe diem
): laissez faire
none of the above

Question
9
(6725146
):
In this example of the Classical adjustment process, a recession seems to be starting
with Business Investment spending declining by __________ billion dollars because
of pessimism regarding profit opportunities in the short run.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
100
Correct
answer(s
):
100
200
400
500

Question
10
(6725117
The Law of Markets (Ricardo, Mill, et al) argues that recession (low business activity)
is due to ___________________.
):
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
a lack of supply
Correct
answer(s
):
a preceding inflation
a lack of demand
a lack of supply
a preceding deflation

Question
11
(6725131
):
Classical Theory was questioned in the ___________ with the onset of the Great
Depression in the United States and other industrialized nations.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
1930s
Correct
answer(s
):
1990s
1970s
1950s
1930s

Question
12
(6725136
):
As ______________ continued to expand in the early 1930s, Aggregate Supply
continued to be greater than Aggregate Demand prompting businesses to further cuts
in employment and output.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
inventories
Correct
answer(s
):
Investment
Exports
inventories
Imports

Question
13
(6725139
):
Both I (investment) and C (consumption) ___________ significantly (and in that
order) at the start of the Great Depression.
Points 1.00 / 1.00
awarded:
Your
Answer(s
):
fell
Correct
answer(s
):
rose
fell
increased
none of the above

Question
14
(6725144
):
In this example of a Classical adjustment to declining Aggregate Demand, there is
________________ contributed to an understanding of todays modern economic
theories.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
something
Correct
answer(s
):
nothing
something
everything
none of the above

Question
15
(6725122
):
According to the Classical Theory, the level of water in the Bathtub (employment,
income, and output) is always at the maximum because _________ is (are) assumed to
create Demand.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
Supply
Correct
answer(s
):
International Trade
Government
Supply
All the above

Question
16
(6725153
):
In this example of the Classical adjustment process, Output will tend to be maintained
at the full employment level of _________ billion units.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
2500
Correct
answer(s
):
5000
3600
2500
400

Question
17
(6725151
):
In this example of the Classical adjustment process, employment will tend to be
maintained at the full employment level of _________ million people

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
120
Correct
answer(s
115
120
): 125
260

Question
18
(6725115
):
According to Says Law: Recession is unlikely since people receive money to produce
and the funds they receive _________ be spent to buy other goods.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
will
Correct
answer(s
):
will not
will sometimes
will
none of the above

Question
19
(6725130
):
In the Classical Theory if Aggregate Demand decreases only a decrease in the
__________ level is possible since the assumption is for a constant level of full
employment.
Points
awarded:
0.00 / 1.00
Your
Answer(s
):
unemployment rate
Correct
answer(s
):
endorphin
adrenaline
unemployment rate
price

Question
20
(6725149
):
In this example of the Classical adjustment process, the
Real Spending GDP _________ drop below the full employment level of $5000
billion.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
either b. or c.
Correct
answer(s
):
will drastically
does not
may briefly
either b. or c.

(6725143
):
In this example of a Classical adjustment to declining Aggregate Demand, there would
be _____________ controversy among todays economists regarding the adjustment
process and the actual outcome of that adjustment process.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
considerable
Correct
answer(s
):
no
very little
considerable
all the above

Question In this example of the Classical adjustment process, the recession is avoided when
2
(6725148
):
_______________________________ is decreased by $100 billion which effectively
re-balances the leakages and injections in the economy.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
Correct
answer(s
):
deficit spending by Government
import spending by Foreign Markets
Consumption spending by Households

Question
3
(6725113
):
According to the ______________ theory the government that governs least is
thought to be the government that governs best.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
laissez faire
Correct
answer(s
):
ceteris paribus
carpe diem
laissez faire
none of the above

Question
4
(6725136
):
As ______________ continued to expand in the early 1930s, Aggregate Supply
continued to be greater than Aggregate Demand prompting businesses to further cuts
in employment and output.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
inventories
Correct
answer(s
):
Investment
Exports
inventories
Imports

Question
5
(6725118
):
The Law of Markets (Ricardo, Mill, et al) argues that business activity can be
increased by stimulating _______________ .
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
supply
Correct
answer(s
):
supply
demand
inflation
deflation

Question
6
(6725134
):
In the Great Depression, the formula GDP = C + I + G + Xn became an interactive
exercise for a(n) _______________ economy.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
contracting
Correct
answer(s
):
expanding
contracting
growing
vigorous

Question
7
(6725150
):
In this example of the Classical adjustment process, the Real Production GDP of the
Business sector _________ drop below the full employment level of $5000 billion.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
either c. or d. below
Correct
answer(s
):
will drastically
either c. or d. below
does not
may briefly

Question
8
The dynamics of a ___________ interest rate will eliminate excess savings and
____________ prices and wages will maintain constant consumption.
(6725128
):
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
flexible
Correct
answer(s
):
rigid
fantasy
flexible
none of the above

Question
9
(6725146
):
In this example of the Classical adjustment process, a recession seems to be starting
with Business Investment spending declining by __________ billion dollars because
of pessimism regarding profit opportunities in the short run.

Points
awarded:
1.00 / 1.00
Your 100
Answer(s
):
Correct
answer(s
):
100
200
400
500

Question
10
(6725153
):
In this example of the Classical adjustment process, Output will tend to be maintained
at the full employment level of _________ billion units.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
2500
Correct
answer(s
):
5000
3600
2500
400

Question
11
(6725119
):
In the Classical Bathtub Model the water flowing into the tub (injection) represents the
flow of Consumption and _____________ spending.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
Investment
Correct
answer(s
):
Government
Net Export
Investment
None of the above

Question
12
(6725152
):
In this example of the Classical adjustment process, unemployment will tend to hold
steady at the natural level of _________ million people.

Points
awarded:
1.00 / 1.00
Your
Answer(s
):
five
Correct
answer(s
):
zero (no unemployment)
two
five
ten

Question
13
(6725137
):
In the Great Depression, businesses lost their ____________ the economy and did not
spend enough on Investment to return Savings into the flow even though interest rates
were lower.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
all the below
Correct
answer(s
):
all the below
confidence in
optimism for
enthusiasm for

Question
14
(6725122
):
According to the Classical Theory, the level of water in the Bathtub (employment,
income, and output) is always at the maximum because _________ is (are) assumed to
create Demand.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
Supply
Correct
answer(s
):
International Trade
Government
Supply
All the above

Question
15
(6725129
):
In the Classical Theory if Aggregate Demand increases only an increase in the
__________ level is possible since the assumption is for a constant level of full
employment.
Points
awarded:
0.00 / 1.00
Your
Answer(s
):
unemployment
Correct
answer(s
):
price
endorphin
adrenaline
unemployment

Question
16
(6725139
):
Both I (investment) and C (consumption) ___________ significantly (and in that
order) at the start of the Great Depression.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
fell
Correct
answer(s
):
rose
fell
increased
none of the above

Question
17
(6725115
):
According to Says Law: Recession is unlikely since people receive money to produce
and the funds they receive _________ be spent to buy other goods.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
will
Correct
answer(s
):
will not
will sometimes
will
none of the above

Question
18
(6725131
):
Classical Theory was questioned in the ___________ with the onset of the Great
Depression in the United States and other industrialized nations.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
1930s
Correct
answer(s
):
1990s
1970s
1950s
1930s

Question
19
(6725125
):
In the Classical Theory, if businesses want fewer funds, the interest rate will
_________ and people will save less money and consume more.
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
decrease
Correct
answer(s
):
decrease
increase
stay the same in the Bathtub
none of the above

Question
20
(6725142
):
Although wages and prices did fall in the early 1930s, Consumption spending fell
_____________ on a relative basis and resulted in the quantity of AS being much
greater than the quantity of AD
Points
awarded:
1.00 / 1.00
Your
Answer(s
):
more
Correct
answer(s
):
more
less
only the same amount
none of the above

Lesson 7

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