Question

5: If the real national output is more than the equilibrium level producers find

A. their inventories decreasing and expand their production.
B. their inventories increasing and expand their production.
C. their inventories decreasing and contract their production.
D. their inventories increasing and contract their production.

6: The Keynesian economists

A. dominated economic thought until the Great Depression.
B. believed that supply creates its own demand.
C. believed that any money saved will be wanted for investment.
D. dominated economic thought from the Great Depression to the 1970s.

7: Which of the following is true?

A. Classical economists said demand creates its own supply; Keynesians said supply creates its own demand.

B. Classical economists said supply creates its own demand; Keynesians said demand creates its own supply.

C. Classical and Keynesians both believe that supply creates its own demand.

D. Classical and Keynesians both believe that demand creates its own supply.

8: It is _____ that in the Keynesian model, prices and wages are “sticky”; it is _____ that according to the Keynesian economists, full employment is the norm.

A. true; true
B. false; false
C. false; true
D. true; false

Answer 1

5) Solution: their inventories increasing and contract their production

Explanation: Producers will reduce the production to avoid the losses

6) Solution: believed that supply creates its own demand.

Explanation: Say's law states that supply creates its own demand. Keynes' Law states that demand creates its own supply.

　

7) Solution: Classical economists said supply creates its own demand; Keynesians said demand creates its own supply

Explanation: Say's law states that supply creates its own demand. Keynes' Law states that demand creates its own supply.

　

8) Solution: false ; false

Explanation: Keynesison believe believe that prices and wages are sticky, especially downward; and according to the classical economists, full employment is the norm.