Question

18. Which of the following policies would come from a Marxist view of the economy? (a) government stabilization through changing spending, taxes, and interest rates since the economy will not automatically restore full employment. b) a socialist economy with government ownership of banks and businesses since economic instability is based on the exploitation of workers. (c) the need to regulate the banking system to avoid financial crisis. (d) laissez-faire or free market policies since the economy will tend towards full employment on its own. 19. The trade-off" between unemployment and inflation means that: (a) when inflation goes up, unemployment tends to go up too. (b) when inflation goes up, unemployment tends to go down (c) when inflation changes, unemployment tends to stay the same. (d) unemployed workers pay higher prices than workers with jobs. 20. When unemployment and inflation both go up at the same time, this is called: (a) a depression stagflation (c) uninflation (d) a recession 21. The economics of Says Law would be best described as: a) supply creates its own demand so that a general lack of demand is not possible. (b) a vicious cycle of less spending leading to less production, fewer jobs, less income and a drop in spending leading to a long recession can happen. (c) workers are exploited, limiting consumption, while profits are reinvested, increasing the capacity to produce, leading to crisis of overproduction. (d) financial deregulation can lead to speculation and a boom and bust in asset prices leading to a financial crisis. 22. A Keynesian view of economics would be be best described as: a supply creates its own demand so that a general lack of demand is not possible. (b) a vicious cycle of less spending leading to less production, fewer jobs, less income and a drop in spending leading to a long recession can happen. (c) workers are exploited, limiting consumption, while profits are reinvested, increasing the capacity to produce, leading to crisis of overproduction. (d) financial deregulation can lead to speculation and a boom and bust in asset prices leading to a financial crisis. d ubitud Please be sure to answer all parts of questions 23 and 24 on your test sheet:

Answer 1

Answer 18. b. A socialist economy with government ownership of banks and business since economic instability is based on the exploitation of workers

reason- Marx believed in socialist economy where government decides whats best for the economy. So their is no private ownership of business.

Answer 19. when inflation goes up , unemployment goes down.

reason- According to Phillips curve, there is inverse relationship between inflation rate and unemployment rate.

Answer 20. stagflation

Reason- Period of High inflation, high unemployment and sluggish growth rate is known as stagflation.

Answer 21. Supply creates its own demand.

reason- Say's law states that production of a good creates demand for another good which is used in the production.

Answer 22. a vicious cycle of less spending,....

Reason- Keynes believed that during recession, government should increase spending in order to get the wconony going.