Title: Keynesian and Neoclassical Viewpoints on Policies
Course: TEST Course

Q: Neoclassical economists believe in which of the following views to stimulate economic growth?
- high taxes
- spending to generate demand
- low taxes
A: low taxes

Q: According to Neoclassical economists the following is a means to stimulate economic growth?
- high taxes
- government spending to increase demand
- low taxes
A: low taxes

Q: In general, neoclassical economists focus on aggregate ________ to help stimulate the economy?
- demand
- spending
- supply
A: supply

Q: The neoclassical economists believe to help grow the economy, they should focus on ________?
- aggregate demand
- spending
- aggregate supply
A: aggregate supply

Q: Which distinct school of thought is NOT typical of neoclassical economics?
- Supply side economics
- New classical economics
- Keynesian economics
A: Keynesian economics

Q: Which of the following distinct economic schools of thought is excluded from neoclassical style economics?
- Supply side economics
- New classical economics
- Keynesian economics
A: Keynesian economics

Q: Neoclassical economists believe that the economy ________.
- is not self-correcting
- needs government intervention to improve
- is self-correcting
A: is self-correcting

Q: The macroeconomy, according to neoclassical economists, ________.
- will not correct itself
- improves if government intervention is applied
- will correct itself
A: will correct itself

Q: According to Keynesian views, why is the effect of a government expenditure multiplier transmitted throughout the economy?
- Because government spending changes the interest rate.
- Because there is no change in taxes.
- Because government spending generates a change in income, which generates a change in consumption spending which generates a change in income, etc.
A: Because government spending generates a change in income, which generates a change in consumption spending which generates a change in income, etc.

Q: In the Keynesian model, the government can respond to a recessionary or inflationary gap by
- leaving autonomous spending alone.
- changing the quantity of money.
- relying on the spending multiplier to generate a change in real GDP that is a multiple of the change in autonomous spending.
A: relying on the spending multiplier to generate a change in real GDP that is a multiple of the change in autonomous spending.

Q: According to the Keynesian beliefs, if government spending decreased by $10 million, aggregate demand would decrease by
- $10 million.
- less than $10 million.
- more than $10 million.
A: more than $10 million.

Q: According to the Keynesian beliefs, if GDP was $100 million below potential GDP, what should the government do to bring it back to equilibrium?
- Raise government spending by $100 million.
- Do nothing.
- Raise government spending by something less than $100 million.
A: Raise government spending by something less than $100 million.

Q: According to Keynesian views, what is government's role when it comes to the U.S. economy?
- The government has a responsibility to follow a hands-off approach with the economy.
- The government has a responsibility to monitor the economy but not meddle with it.
- The government has a responsibility to manage the economy.
A: The government has a responsibility to manage the economy.

Q: If the economy were run with a strictly Keynesian point of view, what would the government's role be in regards to the U.S. economy?
- The government is responsible for managing the economy with a hands-off approach.
- The government is responsible for monitoring the economy but not interfering with it.
- The government is responsible for managing the economy.
A: The government is responsible for managing the economy.

Q: During the Great Recession when the Fed purchased in the open market, sellers held on to the funds instead of depositing them in banks. These actions stalled the interest rate from falling. According to Keynesian beliefs this is called a(n) ________ and the best monetary policy response should be a(n) ________.
- interest pitfall; expansionary policy
- monetary stall; contractionary policy
- liquidity trap; expansionary policy
A: liquidity trap; expansionary policy

Q: Keynes theorized of a time when the Fed purchased in the open market but sellers held on to the funds instead of depositing them in banks. These circumstances stalled the decreasing interest rate. This scenario called a(n) ________ occurred during the Great Recession and the best monetary policy response to it is to ________.
- interest pitfall; continue with an expansionary policy
- monetary stall; continue with a contractionary policy
- liquidity trap; continue with an expansionary policy
A: liquidity trap; continue with an expansionary policy