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| 1 | |
Which of the following is a statement of Say’s Law? |
| | A) | Demand creates its own supply. |
| | B) | Supply creates its own demand. |
| | C) | The costs of production decrease as output increases. |
| | D) | The costs of production increase as output increases. |
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| 2 | |
Which school of thought believed that long-run equilibrium occurs automatically and is the normal state of affairs in a market economy? |
| | A) | Keynesians |
| | B) | Neoclassicists |
| | C) | Supply-siders |
| | D) | Symbolic analysts |
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| 3 | |
What do Keynesians believe? |
| | A) | Saving depends on the level of the interest rate. |
| | B) | Saving depends on the level of income. |
| | C) | Investment is stable. |
| | D) | Government policies should be neutral. |
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| 4 | |
What ensures the equality of savings and investment, according to neoclassical theory? |
| | A) | Flexible prices |
| | B) | Flexible interest rates |
| | C) | Flexible wages |
| | D) | Say’s Law |
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| 5 | |
When did the Great Depression occur? |
| | A) | At the beginning of the twentieth century |
| | B) | In the seven years following World War I |
| | C) | During the decade of the 1930s |
| | D) | In the five years following World War II |
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| 6 | |
What characterized the decade of the 1970s in Canada? |
| | A) | Prosperity and strong economic growth |
| | B) | Stagflation |
| | C) | Economic recovery from the 1960s depression |
| | D) | Low unemployment and high inflation |
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| 7 | |
A major shift in perceptions about the role of government occurred during which of the following periods in history? |
| | A) | Immediately following WW II |
| | B) | In the middle of the Great Depression |
| | C) | Just prior to World War I |
| | D) | In the 1990s |
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| 8 | |
Which one of the following best describes the federal government’s annual budgets for the last twenty years? |
| | A) | There were budget surplus for the first several years, then budget deficits for several more, followed by two years of surpluses. |
| | B) | There were budget deficits for the first several years, then budget surpluses for several more, followed by two years of deficits. |
| | C) | There were budget deficits for all of the years. |
| | D) | There were budget surpluses for all of the years. |
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| 9 | |
According to Keynes, what determines interest rates? |
| | A) | The level of saving |
| | B) | The level of investment |
| | C) | The velocity of money |
| | D) | Both saving and investment |
| | E) | The interaction of the demand and supply of money |
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| 10 | |
All of the following, except one, are pillars on which neoclassical theory is built. Which is the exception? |
| | A) | The flexibility of production |
| | B) | The validity of Say’s Law |
| | C) | The flexibility of prices |
| | D) | The flexibility of interest rates |
| | E) | The flexibility of wages |
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| 11 | |
According to supply-siders, what is one of the keys to curbing stagflation? |
| | A) | Increasing the money supply and cutting government spending |
| | B) | Using income policies to increase productivity |
| | C) | Shifting the AD curve to the right |
| | D) | Convincing people to buy domestic rather than foreign-produced goods |
| | E) | Lowering taxes |
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| 12 | |
Refer to the following five statements:- Housing prices will always rise.
- Unregulated markets are preferable to markets that are regulated.
- The risks inherent in granting sub-prime mortgages can never be hedged.
- The collapse of Long Term Capital Management’s hedge fund was a precursor to the future.
- No one was responsible for the hundreds of billions of dollars that were being loaned out.
The chapter identifies three blunders during the several years leading up to the financial crisis of 2007–2010. Which three of these statements reflect those blunders? |
| | A) | 1, 3 and 4 |
| | B) | 2, 3, and 5 |
| | C) | 1, 2 and 5 |
| | D) | 3, 4, and 5 |
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| 13 | |
Refer to the following five statements:- Housing prices will always rise.
- Unregulated markets are preferable to markets that are regulated.
- The risks inherent in granting sub-prime mortgages can never be hedged.
- The collapse of Long Term Capital Management’s hedge fund was a precursor to the future.
- No one was responsible for the hundreds of billions of dollars that were being loaned out.
Which name is most closely associated with the idea that unregulated markets are preferable (statement #2)? |
| | A) | Arthur Laffer |
| | B) | John M. Keynes |
| | C) | Mark Carney |
| | D) | Alan Greenspan |
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| 14 | |
What characterized the decades of the 1950s and 1960s? |
| | A) | Low growth and high unemployment |
| | B) | Low unemployment and high inflation |
| | C) | Stagflation |
| | D) | Economic stability with reasonably low unemployment and inflation |
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