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Flashcards in Chapter 11 Deck (26):
1

Our economy is always tending towards full employment according to

The classical Economists

2

At equilibrium GDP

Savings = investment and aggregates demand =aggregated supply

3

Laissez-faire economics was advocated by

The classical but not by Keynes

4

Says law states that

Supply creates its own demand.

5

People work, according to Jean Baptiste Say, so that they can

Spend

6

According to the classical economists, if the amount of money people are planning to invest is greater than the amount that people want to save

Interest rates will rise and savings will rise

7

Each of the following supports the classical theory of the employment except

Government spending programs

8

Which best describes the classical theory of employments except

Government spending programs

9

Which beat describes the classical theory of employment?

We will occasionally have some unemployment, but our economy will automatically move back towards full employment

10

Keynes considered full employment GDP to be

A rare occurrence

11

The Keynesian and classical aggregate supply analyses

Are very similar

12

At equilibrium GDP, aggregate demand ----- aggregate supply and savings -------investments.

Is equal to; is equal to

13

To fight depression, Keynes said that the government should

Spend a lot of money

14

The notion that everything the economy produces is purchased

Sums up Say's law

15

Classical economics was based upon the belief that

Full employment was the natural state of the economy and that government should not interfere with the private market forces of supply and demand.

16

Keynesian economics finds fault with the the classical economic argument that wage and price flexibility would guarantee full employment because

Large unions and businesses resist wage and price cuts and lower wages mean decreased incomes and consumer spending

17

Keynesian theory

Is primarily demand -orientated

18

The economy can be in equilibrium, with aggregate supply equal to aggregate demand, at a level substantially below the full employment level of output" This statement best describes the views of

The Keynesians

19

According to the classical economists

If unemployment appears, it would soon disappear because of a reduction in interest rate, wages, and prices.

20

The principal cause of the Great Depression of the 1930s was

A collapse in the aggregate demand

21

Classical employment theory holds that

All of the choices are true of classical employment theory.

22

Classical economists believe that

Flexible interest rates wages and prices would assure full employment

23

According to the classical economists, an increase in unemployment

Would be reduced by a decrease by a decrease in interest rates wages and prices.

24

The Keynesians point of view suggests that

Demand creates its own supply

25

Unintended inventory changes

Are signals to business firms to increase or cut production

26

Which question did John Maynard Keyes pose for the classical economist?

What if savings and investments wet not equal?