1. One factor which did not influence the levels of real output and employment in the classical system was the

a. stock of capital.
b. level of technology.
c. the price level.
d. size of the labor force.

2. The classical economists attacked the mercantilist propositions that

a. state action was necessary to direct the capitalist system.
b. money had no intrinsic value.
c. output was completely supply-determined.
d. the wealth of a nation was closely linked to the country's stock of precious metals.
e. Both a and d

3. Which of the following is not consistent with perfect competition?

a. Workers bargain individually for their wages.
b. Labor demand is determined by real wages and the marginal product of labor.
c. The marginal product of labor is diminishing.
d. Workers have no influence on their wages but accept them as given.
e. None of the above.

4. The supply of labor in the classical system is a function of the

a. marginal product of labor.
b. real wage.
c. the public's preference for leisure.
d. money wage.
e. b and c

5. The author of The Wealth of Nations; The author of the General Theory

a. David Ricardo; John Maynard Keynes.
b. Adam Smith; A. C. Pigou.
c. Adam Smith; David Ricardo
d. Adam Smith; John Maynard Keynes.*
e. Adam Smith; John Stuart Mills.

6. In the classical macroeconomic model, a decrease in the real wage would cause

a. a decrease in the marginal product of labor and an increase in the quantity demanded for labor.
b. an increase in the marginal product of labor and an increase in the quantity demanded for labor.
c. no change in the quantity demanded for labor.
d. an increase in both the supply of and demand for labor.

7. As the real wage increases, assuming that the substitution effect dominates, then

a. individuals move to lower indifference curves and consume less leisure.
b. individuals move to higher indifference curves and consume less leisure.
c. individuals move to higher indifference curves and consume more leisure.
d. individuals stay on the same indifference curve and consume more leisure.

8. Technological change that increases the marginal productivity of labor in the classical model would cause

a. labor demand, output and the price level to rise.
b. labor demand to fall, the price level to fall, and output to rise.
c. labor demand, output and employment to rise.
d. output to rise but labor demand to fall.

9. A production function relates

a. the level of output to the level of technology.
b. the price level to the level of aggregate output.
c. aggregate output to the level of inputs and technology.
d. aggregate demand to aggregate supply.

10. If the demand for labor is plotted against the money wage, with the money wage on the vertical axis, then

a. an increase in the price level will cause the labor demand schedule to shift to the right.
b. an increase in the money wage will cause the labor demand schedule to shift to the left.
c. an increase in the money wage will cause the labor demand schedule to shift to the right.
d. the labor demand schedule will be upward sloping.

11. The marginal product of labor is

a. the value of output for an addition dollar's worth of input.
b. output divided by the quantity of labor.
c. the additional output produced by adding an additional unit of labor.
d. the price of the output produced by increasing labor.

12. In the classical model, a decrease in immigration would

a. decrease labor supply, increase the real wage, and decrease output.
b. increase labor supply and the real wage, and decrease output.
c. increase labor demand and the real wage, and increase output.
d. reduce real wages and reduce output.

13. In the classical model, and increase in tax on firms that hired labor would

a. decrease labor demand and the real wage and increase output.
b. decrease labor supply, increase the real wage, and decrease output.
c. decrease labor demand, decrease the real wage, and decrease output.
d. reduce real wages and increase output.

14. Which of the following factors will not determine output and employment in the classical model?

a. Taxes that affect the incentive to work or hire labor
b. The level of government spending
c. The quantity of capital
d. Preferences for leisure
e. None of the above

15. In the classical model,

a. firms are assumed to be perfect competitors who choose their output level so as to maximize profits.
b. the perfectly competitive firm will increase output until the marginal cost of producing one unit of output equals the marginal revenue received from the sale of that particular unit of output.
c. marginal revenue is equal to product price for the perfectly competitive firm.
d. All of the above
e. None of the above