Question

1. John Maynard Keynes and his followers argued that

             a.         the classical model does a good job of explaining the economy's operation in both the short run and long run

b.         the short run is unimportant so economists should focus their attention on the long run

c.         the economy should be allowed to function with minimal government interference

d.         while the classical model might explain economic performance in the long run, the long run could take a long time to reach

2. When there are diminishing marginal returns to labor by holding all other inputs constant, as the amount of labor firms employ increases, the amount of additional output per worker should

a.         increase

b.         remain the same

c.         decline then increase

d.         decline

3. According to Say's law, in the aggregate

a.         the production of output will generate exactly enough income to purchase what has been produced

b.         demand creates its own supply

c.         the economy is incapable of producing output fast enough to ensure full employment

d.         full employment cannot be sustained without government action

Answer 1

(1)

Keynesian economics focuses on short run and argue that government intervention is necessary to stimulus the economy.

John Maynard Keynes and his followers argued that while the classical model might explain economic performance in the long run, the long run could take a long time to reach

Answer: Option (D)

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(2) Diminishing marginal return says that increase in labor by an unit leads to increase in output by a decreasing rate.

Hence, as the amount of labor increases, the amount of additional output per worker should decline.

Note: Output per worker = (Y / L)

Answer: Option (D)

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(3) Say's law states that supply creates its own demand.

according to say's law, in aggregate the production of output will generate exactly enough income to purchase what has been produced.

Answer: Option (A)