Classical Theory Quiz

If there is an advancement of technology within an economy then,

• The aggregate demand curve will shift to the right

• The short run aggregate supply curve will shift to the right

• The long run aggregate supply curve will shift to the right

• The long run aggregate supply curve will shift to the left

What is the fundamental principle of the classical theory?

• Laissez-faire approach

• Government intervention is necessary

• Prices are sticky

• Savings will never be equal to investment

The Classical doctrine is based on three firmly held beliefs. Which of the following are not one of these beliefs?

• Supply creates its own demand

• Prices, wages and interest rates are sticky

• Prices, wages and interest rates are flexible

• Savings is equal to investment

In which year did the classical theory emerge?

• 1930

• 1750

• 1980

• 1630

If the wage rate is higher than the equilibrium wage rate, what is the market condition that exist?

• Shortage of labour

• Demand pull inflation

• Surplus of labour

• Cost push inflation

According to the classicalist, what chain reaction will occur if their is a shortage of labour?

• wages will increase-more workers will offer their services- more people will be employed- equilibrium will be attained

• wages will decrease- less persons will offer their services- less people will be employed- equilibrium will be achieved.

• wages will increase-less workers will offer their services- more people will be employed- equilibrium will be attained

• wages will decrease- more persons will offer their services- more people will be employed- equilibrium will be achieved.

Why is the short run aggregate supply curve upward sloping?

• The law of equi-marginal utility

• Says Law

• The law of diminishing utility

• The law of diminishing returns

According to the classicalist, which chain reaction will occur if their is a surplus of loanable funds in the money market?

• Banks will increase the rate of interest-demand for loanable funds will increase- savings will decrease- equilibrium will be ascertained.

• Banks will lower the rate of interest-demand for loanable funds will increase- savings will increase- equilibrium will be ascertained.

• Banks will lower the rate of interest-demand for loanable funds will increase- savings will decrease- equilibrium will be ascertained.

• Banks will increase the rate of interest-demand for loanable funds will decrease- savings will decrease- equilibrium will be ascertained.

If the interest rate increases as a result of an increase in the demand for money, then

• The aggregate demand curve will shift to the right

• The aggregate demand curve will shift to the left

• The aggregate demand curve will contract

• The aggregate demand curve will extend

If there is a decrease in the rate of taxation then,

• The aggregate demand curve will shift to the right.

• The aggregate demand curve will shift to the left.

• The aggregate demand curve will contract.

• The aggregate demand curve will extend.