Quiz on Classic Economics

What does classic economics assert about the aggregate demand curve?

• It is horizontal.

• It is upward sloping.

• It is vertical at full employment.

• It is left to right and downward sloping.

According to classic economics, what is the role of the government?

• To provide subsidies to all sectors.

• To keep a stable stock of money to finance aggregate demand.

• To regulate foreign trade.

• To control prices in the market.

What happens to the aggregate demand curve if consumer confidence increases?

• It becomes vertical.

• It shifts to the left.

• It remains unchanged.

• It shifts to the right.

What is the assumption of classic theory regarding the economy's interaction with the foreign sector?

• It relies on foreign investments.

• It has free trade agreements.

• It is an open economy.

• It is a closed economy.

What effect do lower price levels have on investment according to classic economics?

• They increase the cost of raw materials.

• They decrease the cost of borrowing.

• They lead to higher interest rates.

• They have no effect on investment.

What is the classic short-run aggregate supply (SRAS) curve assumed to be?

• Flat.

• Upward sloping.

• Downward sloping.

• Vertical.

What causes the aggregate supply curve to shift to the left?

• Technological advancements.

• Increased consumer spending.

• Government subsidies.

• High raw material prices.

What is the expected outcome if the economy is operating at full capacity in the long run?

• Increased unemployment.

• Rising price levels with increased aggregate demand.

• Decreased consumer spending.

• A decrease in government spending.

What happens to the aggregate demand when government spending increases?

• It remains unchanged.

• It decreases.

• It shifts to the left.

• It shifts to the right.

What is the classic theory's view on the elasticity of the supply of factors of production?

• It is inelastic in the short term.

• It is elastic in the short term.

• It is variable.

• It is perfectly elastic.