Classical and Keynesian Economics Quiz

Who is considered the father of Classical Economics?

• John Maynard Keynes

• Adam Smith

• Karl Marx

• Milton Friedman

According to Classical Economics, the economy is always at or near:

• Recession

• Full employment

• Inflation

• Stagflation

Classical economists believe in:

• Government intervention in markets

• Laissez-faire (free markets with minimal government interference)

• Heavy taxation to control inflation

• Centralized economic planning

Say’s Law states that:

• Demand creates its own supply

• Supply creates its own demand

• Government must regulate supply

• Prices are always flexible

Classical economists argue that wages and prices are:

• Sticky downward

• Flexible and adjust quickly

• Controlled by the government

• Unrelated to employment

Keynesian Economics was developed in response to:

• The Industrial Revolution

• The Great Depression

• World War I

• The Dot-com Bubble

Keynes argued that aggregate demand is influenced by all EXCEPT:

• Consumption

• Investment

• Government spending

• Long-run supply

According to Keynes, wages and prices are:

• Always flexible

• Sticky downward

• Irrelevant to unemployment

• Determined only by supply

Keynesian Economics supports:

• Minimal government intervention

• Fiscal policy (government spending and taxation) to manage demand

• Strict monetary policy only

• Complete central planning

The "Paradox of Thrift" suggests that:

• Saving more leads to higher economic growth

• Increased saving during a recession reduces demand and worsens the downturn

• Investment is always equal to savings

• Government should never save money