Top 80+ Solved Macroeconomics, Theories and Policies 2 MCQ Questions Answer
Q. According to the basic classical model, an increase in the money supply will cause
a. employment to increase.
b. the price level to increase.
c. output to increase.
d. investment to increase.
Q. Why does a temporary decrease in government purchases decrease labour supply in theclassical model?
a. the fall in government spending decreases labour demand, decreasing the real wage, and so people decrease their labour supply.
b. the decrease in current or future taxes needed to pay for the decrease in government purchases increases people\s wealth.
c. people prefer to work less when the government is doing less for them.
d. decreased government purchases make people worse off, so they work less hours.