At low levels of employment, the Keynesian aggregate supply curve:
a. tilts downward to the right.
b. tilts upward to the right.
c. is vertical.
d. shows a constant price level.
e. shows a rising price level.
QUESTION 2Assume the economy is in short-run equilibrium at a real GDP below its potential real GDP. According to Keynesian theory, which of the following policies should be followed?
a. The Federal Reserve should increase the money supply.
b. The federal government should increase spending.
c. The federal government should do nothing because the economy will self correct to potential real GDP.
d. All of the above.
QUESTION 3Nominal values are values measured in terms of the prices at which goods and services are actually sold.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4During the Great Depression of the 1930s, the aggregate demand curve intersected the aggregate supply curve in the:
a. horizontal portion of the aggregate supply curve.
b. upward-sloping part of the aggregate supply curve.
c. vertical portion of the aggregate supply curve.
d. early years in the horizontal portion, but in the later years in the vertical portion.
e. early years in the vertical portion, but in the later years in the horizontal portion.
QUESTION 5Assume the economy is experiencing a recessionary gap. Keynesian economists would support which of the following policies:
a. Nonstabilization
b. Expansionary
c. Nonintervention
d. Fixed wage