Exam One

Question 1

According to the text, the term for the broad goal of promoting the sustenance and flourishing of life is…

Answer 1

well-being

Question 2

According to the text, the three major macroeconomic goals are…

Answer 2

1) good living standards
2) stability and security
3) sustainability

Question 3

Classical economics is best characterized with which statement below?

Answer 3

Taking advantage of the division of labor through specialization leads to economic growth.

Question 4

Keynesian economics argues that the main way to get an economy out of a slump is to…

Answer 4

use fiscal policy to increase aggregate demand

Question 5

Keynesian economics originated during which period?

Answer 5

The Great Depression

Question 6

The four essential economic activities are…

Answer 6

1) production
2) consumption
3) distribution
4) resource maintenance

Question 7

The term laissez-faire would be applied to which type of economy?

Answer 7

An economy with limited government regulation

Question 8

What is Say’s Law?

Answer 8

Supply creates its own demand

Question 9

Which one of the following is a normative statement?

Answer 9

Reducing unemployment should be the main goal of the government

Question 10

Which one of the following is a positive statement?

Answer 10

Most economists believe the unemployment rate will increase next year

Question 11

The gasoline tax should be increased is an example of a positive statement. (T/F)

Answer 11

False

Question 12

Classical economics is based upon the notion of smoothly functioning markets. (T/F)

Answer 12

True

Question 13

Classical economists tend to believe that an economy will achieve full employment in the long run. (T/F)

Answer 13

True

Question 14

Keynesian economists tend to believe that unemployment can be persistent in an economy. (T/F)

Answer 14

True

Question 15

The Classical Period in economics occurred after the Great Depression. (T/F)

Answer 15

False

Question 16

Monetarists generally believe in laissez-faire economic policies. (T/F)

Answer 16

True

Question 17

John Maynard Keynes argued that Say’s Law was incorrect. (T/F)

Answer 17

True

Question 18

John Maynard Keynes believed that the key to increasing aggregate demand is to have the government take a more active role in investment. (T/F)

Answer 18

True

Question 19

Which one of the following statements is NOT associated with Classical economics?

Answer 19

Fiscal policy should be used to influence the level of aggregate demand

Question 20

Who was the most famous Classical economist?

Answer 20

Adam Smith