Chapter 33 Preliminary Quiz
The Warring Schools of Macroeconomics

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

	1. Which of the following is consistent with the classical view of macroeconomics? a. Changes in aggregate demand affect the price level but have no lasting impact upon output and employment. b. Price and wage flexibility ensure that the real level of spending is sufficient to maintain full employment. c. both a and b d. neither a nor b
	2. Say's Law of Markets states that: a. overproduction is impossible. b. underproduction is very possible. c. overproduction always occurs. d. none of the above.
	3. Keynesian economists: a. emphasize long-run economic growth and forgo business-cycle stabilization policies. b. supplement growth policies with appropriate monetary and fiscal policies to curb business-cycle excesses. c. both a and b d. neither a nor b
	4. We call the rate at which money circulates through the economy: a. inflation. b. the money supply. c. money demand. d. velocity.
	5. The equation of exchange is: a. VP=MQ. b. P=kM. c. MV=PQ d. none of the above.
	6. The quantity theory of money and prices equation is: a. VP=MQ. b. P=kM. c. MV=PQ d. none of the above.
	7. Which of the following points is central to the monetarist school of macroeconomics? a. Money-supply growth is the prime systematic determinant of nominal GDP growth. b. Prices and wages are relatively flexible. c. The private sector is stable. d. All of the above.
	8. Which of the following holds that forecasts are unbiased and are based on all available information? a. real-business cycle theory b. efficiency wage theory c. supply-side economics d. the rational-expectations hypothesis
	9. Which of the following holds that business cycles are primarily due to changes in technology and does not invoke any monetary or demand-side forces? a. real-business cycle theory b. efficiency wage theory c. supply-side economics d. the rational-expectations hypothesis
	10. Which of the following explains that the rigidity of real wages and the existence of involuntary unemployment result from firms' attempts to keep wages above the market-clearing level to increase productivity? a. real-business cycle theory b. efficiency wage theory c. supply-side economics d. the rational-expectations hypothesis
	11. Which of the following emphasizes incentives and tax cuts as a means of increasing economic growth? a. real-business cycle theory b. efficiency wage theory c. supply-side economics d. the rational-expectations hypothesis