Post Keynesian Economics

Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by all of the following EXCEPT:

• lowering taxes

• decreasing regulation

• increasing regulation

• allowing free trade

A basis of supply-side economics is the _______ curve, a theoretical relationship between rates of taxation and government revenue.

• Phillips

• Laffer

• Hicks

• Kuznets

The Laffer curve suggests that when the tax level is too high, _____ tax rates will boost government revenue through higher economic growth

• higher

• constant

• lower

• variable

F. A. Hayek, was an Austrian-British economist and philosopher who is best known for his defence of ___________.

• classical liberalism

• Marxism

• Socialism

• Capitalism

The life-cycle hypothesis (LCH) states that individuals seek to smooth _______ throughout their lifetime.

• consumption

• saving

• income

• investment

According to Friedman, individuals hold money for only _______ purposes.

• precautionary

• transaction

• speculative

• emergency

The Phillips curve states that in the short run, inflation and unemployment __________.

• are not related

• have a direct relationship

• have an inverse relationship

• have a erratic relationship

The long run Phillips curve is __________.

• positively sloped

• negatively sloped

• vertical on the unemployment rate axis

• horizontal from the inflation rate axis

New Keynesian theories rely on _______ of wages and prices to explain why involuntary unemployment exists and why ______ policy has such a strong influence on economic activity.

• flexibility; monetary

• flexibility; fiscal

• stickiness; monetary

• stickiness; fiscal

According to New classical economists view, when the demand for goods falls, the prices and wages are inflexible and do not fall immediately (leading to a drop in production and layoffs of workers) because of all of the following EXCEPT.

• Adjusting prices is costly with “menu costs”.

• Adjusting prices is time consuming.

• Not everyone in the economy sets prices at the same time.

• Coordination problems can arise in the setting of wages and prices.