1. The Great Depression was characterized by:
- falling prices and rising real output.
- rising prices and falling real output.
- rising prices and rising real output.
- falling prices and falling real output.
2. Keynesian economics is characterized by a(n):
- model in which the short-run aggregate supply curve is vertical.
- commitment to a monetary policy rule.
- emphasis on the short run rather than the long run.
- emphasis on the long run rather than the short run.
3. Keynesian economics:
- arose as a response to rational expectations theory.
- arose as a response to monetarism.
- asserts that the business cycle arises from supply shocks, not demand shocks.
- provides a rationale for macroeconomic policy activism.
4. Keynes asserted that the Great Depression could be ended by:
- restricting imports.
- increasing the money supply.
- raising interest rates.
- using federal deficit spending to boost aggregate demand.
5. A shift from relying on fiscal policy to relying on monetary policy:
- xmakes macroeconomic policy less of a political issue.
- increases the importance of Congress in economic policy issues.
- a discretionary monetary policy should be used to offset
- the fluctuations of the business cycle.