Question

14. Which of the following statements would be inconsistent with Say’s law?

A given value of supply must create an equivalent value of demand in the economy.

The economy has flexible prices and wages.

The best way to foster an economy is through government stimulus spending.

15. What is one of the cornerstones on which neoclassical economics is built?

Aggregate demand determines the size of the economy.

Prices and wages lend themselves to stickiness.

Unemployment is mostly cyclical.

Prices and wages will adjust in a flexible manner.

18. Which of the following factors are excluded from shifting the aggregate demand curve?

a cut in personal income tax rates

high consumer confidence

increased defense spending

an increase in the price level

20. From a neoclassical perspective, which of the following would most likely be viewed as an element that undermines long-run productivity growth in the economy?

government stimulus spending

cyclical unemployment

tax cuts on business capital investment

Answer 1

Question 4

Say's law is an classical economics law.

This law states that supply creates its own demand.

This law assumes that prices and wages are fully flexible.

Also, classical economists are against the government intervention in the economy.

So,

The statement that the best way to foster an economy is through government stimulus spending would be inconsistent with Say's law.

Hence, the correct answer is the option (3).

Question 18

Aggregate demand curve indicates the aggregate quantity demanded of all final goods and services at each given price level in the economy.

So, change in price level lead to movement along the aggregate demand curve and not the shift in the demand curve.

Thus,

An increase in the price level is excluded from factors that shift the aggregate demand curve.

Hence, the correct answer is the option (4).