Exam 10: Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

John Maynard Keynes believed that wages may be inflexible in the downward direction.Consequently,an economy

Exhibit 10-8 -Refer to Exhibit 10-8.The consumption function is

Exhibit 10-8 -Refer to Exhibit 10-8.Autonomous consumption (C₀)is equal to

The efficiency wage model contains the assumption that labor productivity __________ the wage rate,so that a firm maximizing its profits __________ pay workers an above-market wage rate.

According to Keynes,the private sector (by itself)

The efficiency wage model is an explanation of wage __________ and thus a support for __________ macroeconomics.

Consumption and disposable income are

Exhibit 10-9 -Refer to Exhibit 10-9.What is the value of the marginal propensity to consume (MPC)that would correctly fill in blank (C)and the marginal propensity to save (MPS)that would correctly fill in blank (D)?

Exhibit 10-5 -Refer to Exhibit 10-5 When TE is $700 billion,what state is the economy in?

Exhibit 10-5 -Refer to Exhibit 10-5. When TE is $800 billion,what happens to inventories?

Government purchases rise by $100 billion and the MPC is equal 0.75.Assuming that idle resources exist at each expenditure round,and the multiplier is operative,the change in Real GDP equals

Exhibit 10-6 -Refer to Exhibit 10-6.Which of the following is consistent with the economy producing Q??

Suppose the MPC = 0.60 and government purchases increase by $40 billion.In Keynesian theory,which of the following is true?

As portrayed in terms of total expenditures (TE)and total production (TP),discuss at least three assumptions that sum up the workings of the simple Keynesian model.

In the simple Keynesian model,an increase in aggregate demand leads to an increase in

Given that the economy is operating in the horizontal section of the aggregate supply curve in the simple Keynesian model,an increase in autonomous spending will ____________________ (assuming that the economy remains in the horizontal section of the aggregate supply curve).

On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the TE line is less than the vertical distance to the 45-degree line.This Real GDP is __________ its equilibrium level,with __________.

If consumption is $1,230 when disposable income is $1,420,and consumption is $1,400 when disposable income is $1,620,then the marginal propensity to consume (MPC)is

The multiplier process following a drop in autonomous spending is

The answer is: 1/(1 - MPC).What is the question?