sign in sign up
<<
Home , Classical economics

Ch. 15 / 16 Study Guide

Multiple Choice

____ 1. You are President Obama’s economic advisor. In order to get the U.S. economy moving out of the recent , you advise the President to pursue expansionary fiscal and monetary policies. The President should support: A. increasing and C. lower rates and higher taxes B. decreasing taxes and increasing D. increasing interest rates and raising taxes government spending

____ 2. The purpose of expansionary is to A. increase output. B. prevent . C. slow the growth of the GDP. D. increase the separation between government and private industry.

____ 3. is most closely associated with which of the following? A. laissez faire C. B. fiscal policy D. hyperinflation

____ 4. What is the relationship between interest rates and demand for ? A. As interest rates decrease, increases. B. As interest rates increase, demand for money increases. C. Interest rates are determined by demand for money. D. Interest rates and demand for money are unrelated.

____ 5. An example of contractionary fiscal policy would be A. cutting taxes. B. decreasing government spending. C. increasing of consumer . D. expanding the government’s role in regulating private industry.

____ 6. Which of these tools in an example of monetary policy? A. reducing income taxes C. increasing government spending B. raising interest rates to fend off D. borrowing money through deficit spending

____ 7. Which of these is a contractionary fiscal policy? A. The federal government builds a new medical research center at a prestigious state university. B. The President and Congress pass a new two-cent-per-gallon gasoline . C. The federal government sends taxpayers up to $300 each in the form of an income tax rebate. D. The sales tax on clothing is lifted for one week before the school year begins.

____ 8. In contrast with classical , A. reduces the role of government. B. increases the role of the government. C. relies more heavily on the laws of . D. more strongly emphasizes the importance of individual to the overall health of the economy.

____ 9. How did the relate to the school of classical economics? A. The end of the Great Depression in the 1940s confirmed many of the theories of classical economics. B. Crises like the Great Depression were predicted by . C. The Great Depression appeared to disprove the classical theory that demand and supply could return to a healthy equilibrium through forces alone. D. The issues of the Great Depression had no connection to classical economics.

____ 10. The U.S. economy experienced double digit inflation in the 1980’s. To bring down, aggregate (total) demand needed to be reduced. Accordingly, what 2 actions should the government have taken? A. raise interest rates and reduce government spending B. lower interest rates and reduce government spending C. raise interest rates and lower taxes D. drop back 15 yards and punt

____ 11. An example of expansionary fiscal policy would be A. cutting taxes. C. cutting production of consumer goods. B. cutting government spending. D. cutting prices of consumer goods.

____ 12. All of the following are features of classical economics EXCEPT A. a economy. B. the law of supply and demand. C. the idea of achieving market equilibrium. D. a significant role for government in the running of the economy.

____ 13. Which ONE of the following would NOT likely be included in a study of classical economists? A. Adam Smith C. Thomas Malthus B. D.

Short Answer You are an economic advisor to the President. Briefly explain what course of action the President should take in order to bring the rate in the country down. Ch. 15 / 16 StudyGuide

Answer Section

MULTIPLE CHOICE

1. B

2. A

3. C

4. A

5. B

6. B

7. B

8. B

9. C

10. A

11. A

12. D

13. D