Full Download Economics Today 17th Edition Miller Test Bank All Chapter 2024 PDF
Full Download Economics Today 17th Edition Miller Test Bank All Chapter 2024 PDF
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Economics Today, 17e (Miller)
Chapter 11 Classical and Keynesian Macro Analyses
1
Copyright © 2014 Pearson Education, Inc.
4) The idea that supply creates its own demand is known as
A) the law of supply.
B) the law of demand.
C) Keynes' law.
D) Say's law.
Answer: D
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
2
Copyright © 2014 Pearson Education, Inc.
7) The first systematic attempt to explain the determinants of the price level and national levels
of income, employment, consumption and real Gross Domestic Product (GDP) was made by
________ economists.
A) Keynesian
B) supply-side
C) monetarist
D) classical
Answer: D
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
3
Copyright © 2014 Pearson Education, Inc.
10) Say's law says that
A) consumption is greater than supply.
B) desired expenditures always equal actual expenditures.
C) people produce the goods they consume.
D) people consume the goods they produce.
Answer: B
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
4
Copyright © 2014 Pearson Education, Inc.
13) The classical model uses the assumption that
A) all wages and prices are flexible.
B) monopoly is widespread in the economy.
C) interest rates are not flexible.
D) economic markets are fragile and have no tendency to move towards an equilibrium.
Answer: A
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
5
Copyright © 2014 Pearson Education, Inc.
16) All the following are assumptions of the classical model EXCEPT
A) pure competition exists.
B) buyers and sellers react to nominal money prices rather than to relative prices.
C) people are motivated by self-interest.
D) wages and prices are flexible.
Answer: B
Diff: 2
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
18) If a consumer buys less gasoline because gas prices increased by 10 percent, even though all
other prices have also increased by 10 percent, then
A) the consumer is paying too close attention to changes in relative prices.
B) wages and prices are too flexible.
C) the consumer has been fooled by money illusion.
D) inflation is not a problem in the economy.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
6
Copyright © 2014 Pearson Education, Inc.
19) Which of the following is an example of money illusion?
A) An individual is willing to work more hours when the nominal wage rises by 5 percent and
the overall price level rises by 4 percent.
B) An individual is willing to work more hours when the nominal wage rises by 5% and the
overall price level rises by 7 percent.
C) An individual will neither increase nor decrease the number of hours she is willing to work
when the nominal wage rises by 5 percent and the overall price level rises by 5 percent.
D) none of the above.
Answer: B
Diff: 2
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
20) According to the circular flow of income and output, saving causes
A) total output to fall.
B) consumption expenditures and total output to fall.
C) consumption expenditures to fall short of total output.
D) investment spending to fall.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
7
Copyright © 2014 Pearson Education, Inc.
22) Classical economists tend to
A) see unemployment as a persistent economic problem.
B) believe in Keynesian economics.
C) reject the equality of savings and investment.
D) support Say's law.
Answer: D
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
8
Copyright © 2014 Pearson Education, Inc.
25) In the classical model, aggregate demand and aggregate supply will
A) not exist.
B) intersect at less than full employment.
C) intersect at the point of full employment.
D) not intersect.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
26) An individual who is suffering from money illusion is more concerned with
A) relative prices than with nominal prices.
B) relative prices than with real prices.
C) nominal prices than with relative prices.
D) real prices than with nominal prices.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
9
Copyright © 2014 Pearson Education, Inc.
28) Suppose Paris thinks a 5 percent increase in her hourly wage as an incentive to work more
hours while the price level also increases by 5 percent. Paris is said to be suffering from
A) money illusion.
B) rationality.
C) irrationality.
D) the effects of competition.
Answer: A
Diff: 2
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
30) All of the following are assumptions of the classical model EXCEPT
A) inflexible wages.
B) absence of money illusion.
C) pure competition.
D) self-interest of economic actors.
Answer: A
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
10
Copyright © 2014 Pearson Education, Inc.
31) One tenet of classical economics is that
A) the role of the government should be limited, since the market will always be self-correcting.
B) the government should intervene whenever necessary to avoid any unemployment.
C) wages and prices are "sticky downward."
D) the government should set a minimum wage slightly above the natural market equilibrium
rate.
Answer: A
Diff: 2
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
33) Which of the following statements about the classical model of the economy is FALSE?
A) Savings and investment will always be equal.
B) Wages and prices are flexible.
C) The economy will always move toward, or be at, full employment.
D) Individuals pursue the public interest, not their own self-interest.
Answer: D
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
11
Copyright © 2014 Pearson Education, Inc.
34) If you feel you are better off because you receive a 20 percent raise even when the price level
also increases by 20 percent, then you are a victim of the
A) real income effect.
B) money income effect.
C) money illusion.
D) real purchasing power effect.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
12
Copyright © 2014 Pearson Education, Inc.
37) A key assumption in the classical model is
A) sticky wages.
B) pure competition exists.
C) sticky prices.
D) the government plays a major role in economic problems.
Answer: B
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
38) According to the classical model, more saving leads to more investment because
A) the people who save are the same people who invest.
B) the interest rate adjusts to keep investment equal to saving.
C) saving and investment are two sides of the same activity.
D) the interest rate is set by the federal government.
Answer: B
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
40) The equilibrating force in the credit market in the classical model is
A) the interest rate.
B) the price level.
C) full employment.
D) fiscal policy.
Answer: A
Diff: 2
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
13
Copyright © 2014 Pearson Education, Inc.
41) Classical economists argued that
A) there would always be an excess of saving over investment.
B) workers had money illusion.
C) excess savings would create unemployment.
D) a flexible interest rate would make saving equal to investment.
Answer: D
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
14
Copyright © 2014 Pearson Education, Inc.
44) In the classical model, desired saving
A) exceeds investment.
B) is inversely related to real income.
C) is equal to desired investment.
D) is less than desired investment.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
45) The classical economists argued that planned saving and planned investment will always be
equal because of changes in
A) the level of real disposable income.
B) the interest rate.
C) the price level.
D) wages.
Answer: B
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
46) According to classical theory, desired saving always equals investment due to changes in
A) prices.
B) wages.
C) the interest rate.
D) taxes.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
15
Copyright © 2014 Pearson Education, Inc.
47) In economics, investment is defined as
A) the spending by businesses on capital goods and inventories.
B) the spending by households on human capital and durable goods.
C) disposable income minus consumption.
D) disposable income plus consumption.
Answer: A
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
49) According to classical theory, full employment in the labor market occurs
A) whenever aggregate demand is less than aggregate supply.
B) at a wage rate at which quantity demanded equals quantity supplied.
C) only when the economy has just experienced a demand shock.
D) only when actual expenditures are greater than desired expenditures.
Answer: B
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
16
Copyright © 2014 Pearson Education, Inc.
50) In the classical model, what occurs if a wage of $20/hour results in unemployed workers?
A) The workers will go on strike to demand that more jobs be created.
B) Producers will quickly create more jobs and hire the unemployed workers, so unemployment
is short-lived.
C) The wage rate will drop, more workers will be hired, and the unemployment rate falls.
D) The government will step in and order firms to hire more workers.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
51) According to classical theory, total employment and real Gross Domestic Product (GDP) are
A) unrelated.
B) positively related.
C) inversely related.
D) negatively related.
Answer: B
Diff: 2
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
17
Copyright © 2014 Pearson Education, Inc.
53) In the classical model, real Gross Domestic Product (GDP) per year is
A) due to supply conditions plus the extent of government intervention in the economy.
B) determined by supply and demand conditions together.
C) supply determined.
D) demand determined.
Answer: C
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
55) In the classical model, a shift to the right in aggregate demand would result in
A) a permanent increase in unemployment.
B) a permanent increase in real incomes.
C) an increase in the price level.
D) a permanent shift past full employment.
Answer: C
Diff: 2
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
18
Copyright © 2014 Pearson Education, Inc.
56) According to the classical theory, an inward shift in aggregate demand would reduce
A) real Gross Domestic Product (GDP) and the price level.
B) the price level but have no effect on real Gross Domestic Product (GDP).
C) real income but have no impact on the price Gross Domestic Product (GDP).
D) the price level but increase real Gross Domestic Product (GDP).
Answer: B
Diff: 1
Topic: 11.1 The Classical Model
Learning Outcome: Macro-17: Discuss the fundamentals of key macroeconomic theories
AACSB: Analytic skills
Question Status: Previous Edition
20
Copyright © 2014 Pearson Education, Inc.
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