SOLVED

22.1Â Â Classical Economics 1) The two cornerstones of Classical economics are the Quantity Theory and A) Liquidity Preference Theory. B) disequilibrium analysis. C) Say’s Law. D) the Phillips Curve. 2) Say’s law A) explains the role of money. B) deals with interest rates, employment, and production. C) was accepted and praised by John Maynard Keynes. D) None of the above. 3) According to Say’s law A) the economy will suffer from underemployment when total spending is insufficient to justify production at full employment. B) the economy will never suffer from unemployment or underconsumption. C) money is neutral with respect to the real sector of the economy. D) the production function defines the total demand for goods and services. 4) Which of the following statements is inconsistent with Say’s Law? A) The economy has flexible wages and prices. B) The economy will produces at the full employment level of output. C) The economy has an environment of “laissez faire.” D) The economy’s level of saving depends solely on the level of income. 5) In the Classical interest theory, saving and investment determine A) the price level. B) unemployment. C) the money supply. D) interest rates. 6) According to Classical interest rate theory, falling interest rates will A) increase the demand for money. B) decrease the demand for money. C) decrease investment expenditures. D) decrease the saving rate. 7) In the Classical view, rising interest rates reduce A) government spending. B) saving. C) velocity. D) investment. 8) In the Classical view, falling interest rates increase A) government spending. B) saving. C) velocity. D) investment. 9) According to Classical interest rate theory, rising interest rates will A) increase the demand for money. B) decrease the demand for money. C) increase investment expenditures. D) increase the saving rate. 10) According to Classical interest rate theory, which of the following will increase the equilibrium interest rate? A) A decrease in investment B) A decrease in saving C) An increase in money demand D) A decrease in money demand