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Which of the following is/are implied by the strong version of Say's Law?

Which of the following is/are implied by the strong version of Say's Law?

1. Which of the following is/are implied by the strong version of Say’s Law?
[1] Output generates an equivalent level of spending.
[2] Output is determined at its full employment level.
[3] Desired saving always equals desired investment spending.
[4] E = C(r) + I(r) =Y.
[5] All of the above.
2. In the classical model of the labour market, voluntary unemployment will increase if:
[1] the leisure preference of workers decreases.
[2] technological progress shifts the production function upwards.
[3] real wages are set below the market equilibrium level.
[4] All of the above.
[5] None of the above.
3. Which of the following is/are an example of involuntary unemployment?
[1] A housewife.
[2] A student.
[3] A subsistence farmer.
[4] A pensioner.
[5] None of the above.
4. Which of the following contradict(s) the classical explanation of the economy?
[1] Voluntary unemployment.
[2] Frictional unemployment.
[3] Full employment.
[4] Search unemployment.
[5] None of the above.
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5. In Keynes’s theory of employment and output:
[1] output and employment determine aggregate demand.
[2] output and aggregate demand determine employment.
[3] aggregate demand determines output and employment.
[4] employment determines output and aggregate demand.
[5] None of the above.
In questions 6-10, according to the classical theory:
6. The demand for money will decrease if:
[1] nominal output increases.
[2] the price level increases.
[3] real output increases.
[4] the interest rate increases.
[5] None of the above.
7. Increases in the money supply will lead to:
[1] a decrease in the nominal interest rate.
[2] a decrease in the real interest rate.
[3] an increase in the real interest rate.
[4] an increase in the nominal interest rate.
[5] None of the above.
8. Decreases in the money supply will lead to:
[1] higher prices and higher real output.
[2] lower prices and lower real output.
[3] higher nominal wages and higher nominal output.
[4] higher real wages and lower nominal output.
[5] None of the above.
9. The real rate of interest will decrease if the desire to save ( ) or the return on investment
( ).
[1] increases ; increases.
[2] decreases ; decreases.
[3] increases ; decreases.
[4] decreases ; increases.
[5] None of the above.
ECS4861/101
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10. An increase in desired saving leads to:
[1] an equivalent decrease in investment spending.
[2] a decrease in the real interest rate.
[3] an equivalent increase in consumption spending.
[4] a decrease in real output by a multiple of the increase in saving.
[5] None of the above.
11. Keynes accepted what he called the first postulate of classical economics but rejected the second postulate. Keynes thus accepted the classical belief that:
a. the supply of labour is solely a function of the real wage.
b. more workers will only be employed if the real wage decreases.
c. the equilibrium wage equals the marginal product of labour.
[1] All of the above.
[2] None of the above.
[3] a b
[4] c
[5] b
12. Given that the first postulate of classical economics holds, a decrease in employment is associated with:
[1] a decrease in the real wage.
[2] an increase in the real wage.
[3] an increase in nominal wages.
[4] no change in real wages.
[5] None of the above.
13. According to Tobin (1993), examples of Keynesian unemployment include situations where:
[1] trade unions increase real wages above their market clearing rates.
[2] expectations of being unemployed increase current spending of households.
[3] unemployment benefits increase the reservation wages of workers.
[4] there is an excess supply of unskilled labour.
[5] None of the above.
14. According to Tobin (1993), Keynesian macroeconomics relies on the idea that:
[1] nominal wages and/or prices are rigid.
[2] individuals are often irrational and suffer from “money illusion”.
[3] output and employment are constrained by aggregate demand.
[4] less than desired sales in one market will increase demand in other markets.
[5] None of the above.
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15. Which of the following does Skidelsky (2011) emphasize as supporting the relevance of Keynes’s ideas in analyzing the 2007-8 financial crisis and the recession that followed it?
[1] Sticky wages and prices preventing the adjustment of employment to lower aggregate demand.
[2] Global imbalances in the desire to save and invest.
[3] Excessive budget deficits and increases in public debt.
[4] The mispricing of risky financial assets.
[5] Expansion of the money supply through Quantitative Easing.
16. According to Keynes, involuntary unemployment can be dealt with by:
a. decreasing real wages through an increase in the price level brought about by an increase in aggregate demand.
b. ensuring that there is nominal wage flexibility in the economy.
c. decreasing nominal wages which causes a decrease in real wages and consequently firms employ more workers.
[1] All of the above.
[2] None of the above.
[3] a
[4] b
[5] c
17. Which of the following classical interpretations of Say’s Law was rejected by Keynes?
a. The act of saving leads to a corresponding increase in investment.
b. The interest rate is determined in the loanable funds market.
c. Supply creates its own demand at a less than full employment level of output.
[1] All of the above.
[2] None of the above.
[3] a b
[4] b c
[5] a c
18. Which of the following supports Say’s Law?
a. Investment spending is a negative function of the interest rate.
b. An increase in saving causes a decrease in the interest rate and consequently investment spending increases and the total demand for goods is unchanged.
c. The interest rate is determined in the money market and not by differences in the desire to save and invest.
[1] a b
[2] b c
[3] a
[4] b
[5] c
ECS4861/101
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19. In considering the nominal interest rate as an equilibrating mechanism, Tobin (1993) argues that:
a. the nominal interest rate might not fall far enough to ensure full employment.
b. an increase in the money supply is necessary to ensure that the interest rate falls far enough to help maintain full employment.
c. in the liquidity trap case the fall in the interest rate may not be enough to restore full employment.
[1] All of the above.
[2] None of the above.
[3] a b
[4] a c
[5] b c
20. In explaining the principle of effective demand, Keynes argued that:
a. an increase in employment increases household income.
b. as household income increases, consumption spending increases by less than the increase in income.
c. if an increase in employment were devoted to the production of consumer goods then the demand for consumer goods will be greater than the supply of consumer goods.
[1] All of the above.
[2] None of the above.
[3] a b
[4] a c
[5] b c

Johnson 10-Nov-2017

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