Name: Score:
56 Multiple choice questions
Definition 1 of 56
It is total spending/total output/Real GDP that will be done at various price levels. It is negatively
sloped. Why? Because as the price level rises, demand and purchasing power of one's nominal
income falls. As price levels rise, people need to borrow more money, which will cause interest
rates to rise, which will make it more expensive for businesses to borrow money, so Ig spending
will fall, which will cause a decrease in quantity demanded/AD/Real GDP. As domestic price level
rises higher than foreign price levels, the demand for foreign/imports will rise, causing a decrease
in Net Exports, which will cause a decrease quantity demanded of Real GDP.
What are the 3 regions of the aggregate supply curve (AS)?
What are the 5 sources of market failure?
What is the meaning of macro equilibrium output?
What is the definition of aggregate demand (AD)?
Definition 2 of 56
Income inequality arises because of differences among individuals in their attitudes toward work,
ambition, priorities in life, knowledge, skills and talents. Government can use its power to tax to
redistribute income. It will tax high-income households at a higher rate and redirect a portion of
this group's money to low-income households. In a market economy, the marketplace acts like a
mirror that reflects back one's efforts & talents. The more talent & effort you put out into the
market, the more you tend to get back from the market.
4) Income Inequality/Equity:
During the Great Depression, what happened to the US banking industry? Why did this
happen? Did a regulatory agency exist at the time to protect depositors' money if banks
failed?
What is the definition of aggregate supply (AS)? How is it graphed?
What is the definition of aggregate demand (AD)?
,Term 3 of 56
What is meant by "market failure"?
A Market Failure occurs whenever the pricing system or market mechanism fails to produce
the mix of output desired by society.
1) Lack of access to timely, accurate, complete info. 2) Public Goods. 3) Externalities 4)
Income Inequality/Equity 5) Market Power.
total market value of final goods and services that could be produced in a given time
period at full employment=natural rate of unemployment
1) Great Depression, 2) German Hyperinflation of 1922-23, 3) devastation of WWII and
Bretton Woods Accord, and 4) Soviet expansionist aggression post-WWII.
Definition 4 of 56
Fabian Socialists= not atheists, based socialism on Christian principles, religion is not evil,
capitalism is not evil, ET is not evil, BUT Gov't can do better job of taking care of citizens.
Transition towards central planning can be done w/o the need for violence by compensating
owners fair market price for their assets
How did high marginal tax rates impact entrepreneurship and incentives to innovate in
Britain?
Explain Keynesian fiscal policy. What are the 3 tools it uses to manage the macro
economy?
What is the definition of aggregate demand (AD)?
How do "Fabian socialists" differ from "Marxist socialists or communists"?
,Term 5 of 56
In Britain's mixed economy, how high did the marginal tax rate get for high income earners'
earned income? And on their unearned income?
24%
Aggregate supply & aggregate demand don't necessarily intersect at a macro equilibrium
output that provides full employment nor capacity production. Therefore, government
should use fiscal policy to increase aggregate demand and restore full employment output.
horizontal, short-run, and vertical regions
83%, 98%
Term 6 of 56
Who are the "Fabian socialists"? What political party were they affiliated with?
The SEC was established to 1) establish and enforce a set of rules on accounting practices,
2) prohibit insider-trading, and 3) establish and enforce protocol for reporting the financial
condition of publicly-traded firms. In short, it was designed to provide accurate, timely,
complete information to prospective investors, so that they could make well-informed
investment decisions.
Fabians were British socialists who wanted to replace the "scramble for private gain" with
"collective welfare" and "socialism". They were associated with the Labour Party
Many savers lost their life savings when their banks failed.
The FDIC was established to insure savers' deposits in the event of their banks failed.
Deposits were insured up to a maximum of $100,000 per deposit.
, Definition 7 of 56
Cost-benefit analysis showed it cost more to mine coal in Britain than it would cost to pipe in
crude oil & gas from the bottom of the North Sea; and it also cost more than importing coal from
other coal-producing countries such as the US
What does macro equilibrium output tell us about the economy's output level, price level
and rate of unemployment if it occurs in:
Did the Federal Reserve Bank help struggling banks during the Great Depression? What
was the outcome of Roosevelt's tight money policy?
What justification did Margaret Thatcher use for ending all government subsidies to the
coal mining industry?
Define the term "nationalization." Which industries in Britain were nationalized?
Term 8 of 56
Who was John Maynard Keynes? What role did he play in influencing the economic systems
adopted by post-WWII Europe and N. America?
Margaret Thatcher. He authored "The Road to Serfdom". was an economist of the Austrian
School noted for his defense of free-market capitalism against a perceived rising tide of
socialist thought in the mid-20th century.
The FDIC was established to insure savers' deposits in the event of their banks failed.
Deposits were insured up to a maximum of $100,000 per deposit.
He was a lawyer, British politician, Tory cabinet member. Regarded as "power of the throne
and mad monk". He created Thatcherism. He told people of Britain that the government
was doing too much. Criticized mixed economy
He taught at Oxford University. Routinely played the stock market. Keynes developed a
new school of economic thought which was focused on recessions and depressions and the
cause of recessions and depressions: namely, insufficient spending on the nation's output.
He advocated that government should play an activist role in managing the economy
through the use of fiscal policy.
56 Multiple choice questions
Definition 1 of 56
It is total spending/total output/Real GDP that will be done at various price levels. It is negatively
sloped. Why? Because as the price level rises, demand and purchasing power of one's nominal
income falls. As price levels rise, people need to borrow more money, which will cause interest
rates to rise, which will make it more expensive for businesses to borrow money, so Ig spending
will fall, which will cause a decrease in quantity demanded/AD/Real GDP. As domestic price level
rises higher than foreign price levels, the demand for foreign/imports will rise, causing a decrease
in Net Exports, which will cause a decrease quantity demanded of Real GDP.
What are the 3 regions of the aggregate supply curve (AS)?
What are the 5 sources of market failure?
What is the meaning of macro equilibrium output?
What is the definition of aggregate demand (AD)?
Definition 2 of 56
Income inequality arises because of differences among individuals in their attitudes toward work,
ambition, priorities in life, knowledge, skills and talents. Government can use its power to tax to
redistribute income. It will tax high-income households at a higher rate and redirect a portion of
this group's money to low-income households. In a market economy, the marketplace acts like a
mirror that reflects back one's efforts & talents. The more talent & effort you put out into the
market, the more you tend to get back from the market.
4) Income Inequality/Equity:
During the Great Depression, what happened to the US banking industry? Why did this
happen? Did a regulatory agency exist at the time to protect depositors' money if banks
failed?
What is the definition of aggregate supply (AS)? How is it graphed?
What is the definition of aggregate demand (AD)?
,Term 3 of 56
What is meant by "market failure"?
A Market Failure occurs whenever the pricing system or market mechanism fails to produce
the mix of output desired by society.
1) Lack of access to timely, accurate, complete info. 2) Public Goods. 3) Externalities 4)
Income Inequality/Equity 5) Market Power.
total market value of final goods and services that could be produced in a given time
period at full employment=natural rate of unemployment
1) Great Depression, 2) German Hyperinflation of 1922-23, 3) devastation of WWII and
Bretton Woods Accord, and 4) Soviet expansionist aggression post-WWII.
Definition 4 of 56
Fabian Socialists= not atheists, based socialism on Christian principles, religion is not evil,
capitalism is not evil, ET is not evil, BUT Gov't can do better job of taking care of citizens.
Transition towards central planning can be done w/o the need for violence by compensating
owners fair market price for their assets
How did high marginal tax rates impact entrepreneurship and incentives to innovate in
Britain?
Explain Keynesian fiscal policy. What are the 3 tools it uses to manage the macro
economy?
What is the definition of aggregate demand (AD)?
How do "Fabian socialists" differ from "Marxist socialists or communists"?
,Term 5 of 56
In Britain's mixed economy, how high did the marginal tax rate get for high income earners'
earned income? And on their unearned income?
24%
Aggregate supply & aggregate demand don't necessarily intersect at a macro equilibrium
output that provides full employment nor capacity production. Therefore, government
should use fiscal policy to increase aggregate demand and restore full employment output.
horizontal, short-run, and vertical regions
83%, 98%
Term 6 of 56
Who are the "Fabian socialists"? What political party were they affiliated with?
The SEC was established to 1) establish and enforce a set of rules on accounting practices,
2) prohibit insider-trading, and 3) establish and enforce protocol for reporting the financial
condition of publicly-traded firms. In short, it was designed to provide accurate, timely,
complete information to prospective investors, so that they could make well-informed
investment decisions.
Fabians were British socialists who wanted to replace the "scramble for private gain" with
"collective welfare" and "socialism". They were associated with the Labour Party
Many savers lost their life savings when their banks failed.
The FDIC was established to insure savers' deposits in the event of their banks failed.
Deposits were insured up to a maximum of $100,000 per deposit.
, Definition 7 of 56
Cost-benefit analysis showed it cost more to mine coal in Britain than it would cost to pipe in
crude oil & gas from the bottom of the North Sea; and it also cost more than importing coal from
other coal-producing countries such as the US
What does macro equilibrium output tell us about the economy's output level, price level
and rate of unemployment if it occurs in:
Did the Federal Reserve Bank help struggling banks during the Great Depression? What
was the outcome of Roosevelt's tight money policy?
What justification did Margaret Thatcher use for ending all government subsidies to the
coal mining industry?
Define the term "nationalization." Which industries in Britain were nationalized?
Term 8 of 56
Who was John Maynard Keynes? What role did he play in influencing the economic systems
adopted by post-WWII Europe and N. America?
Margaret Thatcher. He authored "The Road to Serfdom". was an economist of the Austrian
School noted for his defense of free-market capitalism against a perceived rising tide of
socialist thought in the mid-20th century.
The FDIC was established to insure savers' deposits in the event of their banks failed.
Deposits were insured up to a maximum of $100,000 per deposit.
He was a lawyer, British politician, Tory cabinet member. Regarded as "power of the throne
and mad monk". He created Thatcherism. He told people of Britain that the government
was doing too much. Criticized mixed economy
He taught at Oxford University. Routinely played the stock market. Keynes developed a
new school of economic thought which was focused on recessions and depressions and the
cause of recessions and depressions: namely, insufficient spending on the nation's output.
He advocated that government should play an activist role in managing the economy
through the use of fiscal policy.
