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40 Cards in this Set

  • Front
  • Back
The velocity of money is assumed to be constant in the Classical model because
the payment habits of the community.
In the Classical model, the aggregate supply curve determines the
level of output.
In the Classical model, what is certain to shift the aggregate demand curve?
A rise in the money supply
What economist in the early 20th century refined the use of the equation of exchange?
Irving Fisher
In the Classical model, aggregate demand determines the
the price level.
Modern monetarists view any increases or decreases in total output stemming from expansions or contractions in the money supply as
temporary.
In the view of the Classical economists, a decrease in aggregate demand leads to
a higher price level.
According to Say's law
the economy will never suffer from unemployment or underconsumption.
In the Classical system, the interest rate is determined by all of the following except
the money supply.
The Great Depression is thought to have been prolonged and made deeper by
contraction of the money supply.
Classical economists and modern monetarists agree that the best way to examine the economy is through the use of
Question 11 answers
the quantity theory.
Monetarists have maintained the Classical tradition by emphasizing the
Question 12 answers
inherent stability of the economy.
If the equation of exchange holds, and if the velocity of money and total output are fixed, then, if the money supply doubles,
the price level will double.
Money neutrality implies that changes in the money supply have an impact on
the price level.
In the Classical view, the money supply determines
the price level.
Which of the following is assumed constant in the short-run Classical model?
Output
In the Classical system, the total output of goods and services and total employment are determined by all of the following except
the interest rate.
Which of the following ensures full employment in the Classical model?
Wage and price flexibility
Monetarists view government intervention in the economy as
unnecessary and potentially damaging.
Monetarists differ from Classical economists in that they argue that
velocity is not fixed but is predictable.
In the Classical view, inflation is the result of
excessive monetary growth.
Modern Monetarists argue that the velocity of money is
predictable.
Question 23 text In the Classical model, a decrease in the money supply __________ the real GDP and __________ the price level.
leaves unchanged; lowers
According to Classical interest rate theory, which of the following will increase the equilibrium interest rate?
A decrease in saving
In the view of the Classical economists, rising aggregate demand leads to
inflation.
According to Classical interest rate theory, falling interest rates will
decrease the saving rate.
The two cornerstones of Classical economics are the Quantity Theory and
Say's Law.
The function of the interest rate in the Classical model was to keep the economy at full employment equilibrium by assuring that
actual saving equaled actual investment.
In the Classical model, the price level is determined by
aggregate demand.
What is Y - C equal to?
S
In an economy without government or a foreign sector the equilibrium level of output occurs when
actual saving equals actual investment.
In an economy without government or a foreign sector it is always true that
actual saving equals actual investment.
Which of the following is not a factor in the equation of exchange?
Nominal income
In the Classical interest theory, saving and investment determine
interest rates.
If the inflation rate is 5 percent and the real rate of interest is 3 percent, the nominal interest rate is
8 percent.
If C + I = Y and Y - C = S, then
S = I.
If velocity and output are fixed at 5 and 400, respectively, and the price level is 2, then the money supply is
160.
In an economy with no government or foreign sector, which of the following always holds true, ex-post?
Saving equals investment.
Question 39 text In the Classical model, an increase in aggregate demand leads to __________ real GDP and __________ price level.
an unchanged; a rising
According to Classical interest rate theory, rising interest rates will
increase the saving rate.