Classical Macroeconomics 

1. According to classical economic theory, if everyone attempts to save more, falling:

A. interest rates will stimulate investment and economic growth.

B. sales revenue will cause unemployment to rise and output to fall.

C. tax collections will increase federal budget surpluses.

D. military spending will stimulate agression by foreign enemies.

2. According to Say's law:

A. demand and supply are totally independent.

B. demand creates its own supply.

C. supply creates its own demand.

D. unemployment and inflation are inversely related.

3. Flexible wages and prices are an essential part of:

A. classical macroeconomics.

B. Keynesian macroeconomics.

C. Marxian macroeconomics.

D. post-Keynesian macroeconomics.

4. According to classical economists, Aggregate Demand primarily determines:

A. levels of national output and income.

B. total production in the economy.

C. Aggregate Supply at full employment.

D. the price level.

5. Classical economists thought that:

A. flexible wages and prices were the principal causes of recessions.

B. government policies and spending were needed to keep the economy at full employment.

C. the Great Depression confirmed their view of the business cycle.

D. price, wage, and interest rate flexibility can quickly cure any tendencies for a recession.

E. communist revolutions would overthrow capitalism.

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