The Great Recession - Intermediate Macro Exam 2

Question 1

According to the Keynesians, which of the following is a reason aggregate demand fell in 2008?

Answer 1

Unemployment and lower income, resulting from a drop in consumer spending and investment, meant governments took in less in tax revenue. This caused government spending to drop.

Question 2

According to the real business cycle theorists, why was recovery so slow?

Answer 2

Policy uncertainty.
Higher taxes.

Question 3

According to market monetarists, what caused aggregate demand to fall in 2008?

Answer 3

Fed policy was not expansionary enough.

Question 4

According to the Austrians, which of the following was not a cause of the Great Recession?

Answer 4

Housing price controls distorted price signals.