Question 1

Which of the following statements is false?

Accepted Answer

A)  Keynes believed that the level of investment depends on more than just the interest rate. 
B)  Saving is the difference between disposable income and consumption. 
C)  Keynes believed that saving is more responsive to changes in income than to changes in the interest rate. 
D)  According to Keynes, wage rates may fall too quickly when the economy is in a recessionary gap. 
A)  Keynes believed that the level of investment depends on more than just the interest rate. 
B)  Saving is the difference between disposable income and consumption. 
C)  Keynes believed that saving is more responsive to changes in income than to changes in the interest rate. 
D)  According to Keynes, wage rates may fall too quickly when the economy is in a recessionary gap.

Question 2

Explain how the Keynesian view differs from the classical view with respect to saving. Explain further how the two views differ with respect to investment.

Accepted Answer

Classical economists believed that the a

Question 3

Efficiency wage models imply that workers are more productive when they are paid a higher wage,as compared to when they are paid a lower wage.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 10-5
  
-Refer to Exhibit 10-5. When TE is $300 billion,what will firms most likely firms do next?

Accepted Answer

A)  Firms will increase production to increase inventories to their optimum levels. 
B)  Firms will neither increase nor decrease production since the economy is in equilibrium. 
C)  Firms will cut back production to reduce inventories to their optimum levels. 
D)  It is impossible to determine what firms are likely to do based on this information. 
A)  Firms will increase production to increase inventories to their optimum levels. 
B)  Firms will neither increase nor decrease production since the economy is in equilibrium. 
C)  Firms will cut back production to reduce inventories to their optimum levels. 
D)  It is impossible to determine what firms are likely to do based on this information.

Question 5

Exhibit 10-1
  
-Refer to Exhibit 10-1.At Q1,

Accepted Answer

A)  TE > TP, and there are decreases in inventory. 
B)  TP > TE, and there are increases in inventory. 
C)  TE = TP, and there are no changes in inventory. 
D)  TE > TP, and there are increases in inventory. 
A)  TE > TP, and there are decreases in inventory. 
B)  TP > TE, and there are increases in inventory. 
C)  TE = TP, and there are no changes in inventory. 
D)  TE > TP, and there are increases in inventory.

Question 6

Which of the following is a basic point that Keynes made about consumption?

Accepted Answer

A)  Consumption and disposal income are inversely related. 
B)  When disposable income changes, consumption changes by a greater amount. 
C)  Consumption is dependent upon disposable income. 
D)  b and c 
E)  all of the above 
A)  Consumption and disposal income are inversely related. 
B)  When disposable income changes, consumption changes by a greater amount. 
C)  Consumption is dependent upon disposable income. 
D)  b and c 
E)  all of the above

Question 7

According to Keynes,aggregate demand could be too low in an economy.What does this mean?

Accepted Answer

A)  It means there is not enough purchasing power in the economy to maintain stable prices. 
B)  It means there are too many of some goods produced and too few of other goods produced. 
C)  It means spending in the economy is too low to bring about full employment. 
D)  It means that wages may get stuck in a recessionary gap because there is not enough demand (in the economy) to increase them. 
E)  none of the above 
A)  It means there is not enough purchasing power in the economy to maintain stable prices. 
B)  It means there are too many of some goods produced and too few of other goods produced. 
C)  It means spending in the economy is too low to bring about full employment. 
D)  It means that wages may get stuck in a recessionary gap because there is not enough demand (in the economy) to increase them. 
E)  none of the above

Question 8

Classical economists used efficiency wage models to support their belief in a self-regulating economy.

Accepted Answer

A) True 
 B)False

Question 9

The more nearly horizontal the aggregate supply curve,the

Accepted Answer

A)  greater the change in Real GDP for a given change in autonomous spending. 
B)  smaller the change in Real GDP for a given change in autonomous spending. 
C)  larger the multiplier. 
D)  smaller the multiplier. 
E)  a and c 
A)  greater the change in Real GDP for a given change in autonomous spending. 
B)  smaller the change in Real GDP for a given change in autonomous spending. 
C)  larger the multiplier. 
D)  smaller the multiplier. 
E)  a and c

Question 10

Exhibit 10-6
  
-Refer to Exhibit 10-6.If total production (TP)is greater than total expenditures (TE),the economy is currently producing a level of Real GDP that is

Accepted Answer

A)  equal to or lower than Q3. 
B)  equal to or greater than Q3. 
C)  less than Q2. 
D)  between Q2 and Q1. 
E)  greater than Q3. 
A)  equal to or lower than Q3. 
B)  equal to or greater than Q3. 
C)  less than Q2. 
D)  between Q2 and Q1. 
E)  greater than Q3.

Question 11

If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,168,the marginal propensity to consume is __________ percent.

Accepted Answer

A)  8 
B)  85 
C)  15 
D)  92 
A)  8 
B)  85 
C)  15 
D)  92

Question 12

The two major curves or lines in the TE-TP diagram are:

Accepted Answer

A)  the total expenditure curve and the 45-degree line. 
B)  the supply and demand curves. 
C)  the total expenditures and national income curves. 
D)  the total production and national income curves. 
A)  the total expenditure curve and the 45-degree line. 
B)  the supply and demand curves. 
C)  the total expenditures and national income curves. 
D)  the total production and national income curves.

Question 13

If households purchase $60,000 worth of consumer goods and firms produce $50,000 worth of consumer goods,then

Accepted Answer

A)  inventory changes are -$10,000. 
B)  inventory changes are +$10,000. 
C)  new capital goods expenditures (by firms) are $10,000. 
D)  consumer goods expenditures are $10,000. 
A)  inventory changes are -$10,000. 
B)  inventory changes are +$10,000. 
C)  new capital goods expenditures (by firms) are $10,000. 
D)  consumer goods expenditures are $10,000.

Question 14

The ratio of the change in consumption to the change in income is called the

Accepted Answer

A)  marginal utility of consumption. 
B)  average utility of consumption. 
C)  marginal propensity to consume. 
D)  average propensity to consume. 
A)  marginal utility of consumption. 
B)  average utility of consumption. 
C)  marginal propensity to consume. 
D)  average propensity to consume.

Question 15

If total production is greater than total expenditures,

Accepted Answer

A)  there will be an increase in saving. 
B)  there will be an increase in inventories. 
C)  firms will then increase production. 
D)  firms will then increase prices. 
A)  there will be an increase in saving. 
B)  there will be an increase in inventories. 
C)  firms will then increase production. 
D)  firms will then increase prices.

Question 16

When the economy is in equilibrium,

Accepted Answer

A)  there are increases in inventory. 
B)  there are decreases in inventory. 
C)  total expenditures equal total production. 
D)  people want to buy more than will be produced. 
A)  there are increases in inventory. 
B)  there are decreases in inventory. 
C)  total expenditures equal total production. 
D)  people want to buy more than will be produced.

Question 17

Which of the following statements is false?

Accepted Answer

A)  Keynes believed that monopolistic elements in the economy will prevent immediate price declines. 
B)  Keynes believed that during periods of high unemployment, labor unions will prevent wages from falling fast enough to restore full employment. 
C)  Keynes believed that interest rate flexibility will ensure that saving is equal to investment. 
D)  Keynes did not believe in Say's law. 
A)  Keynes believed that monopolistic elements in the economy will prevent immediate price declines. 
B)  Keynes believed that during periods of high unemployment, labor unions will prevent wages from falling fast enough to restore full employment. 
C)  Keynes believed that interest rate flexibility will ensure that saving is equal to investment. 
D)  Keynes did not believe in Say's law.

Question 18

Exhibit 10-2
  
-Refer to Exhibit 10-2.If autonomous investment decreases,the TE curve will shift ____________ and the new level of equilibrium Real GDP will be ___________ than $4,500.

Accepted Answer

A)  downward; greater 
B)  downward; less 
C)  upward; less 
D)  upward; greater 
A)  downward; greater 
B)  downward; less 
C)  upward; less 
D)  upward; greater

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

Which of the following statements is false?

Explain how the Keynesian view differs from the classical view with respect to saving. Explain further how the two views differ with respect to investment.

Efficiency wage models imply that workers are more productive when they are paid a higher wage,as compared to when they are paid a lower wage.

Exhibit 10-5 -Refer to Exhibit 10-5. When TE is $300 billion,what will firms most likely firms do next?

Exhibit 10-1 -Refer to Exhibit 10-1.At Q1,

Which of the following is a basic point that Keynes made about consumption?

According to Keynes,aggregate demand could be too low in an economy.What does this mean?

Classical economists used efficiency wage models to support their belief in a self-regulating economy.

The more nearly horizontal the aggregate supply curve,the

Exhibit 10-6 -Refer to Exhibit 10-6.If total production (TP)is greater than total expenditures (TE),the economy is currently producing a level of Real GDP that is

If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,168,the marginal propensity to consume is __________ percent.

The two major curves or lines in the TE-TP diagram are:

If households purchase $60,000 worth of consumer goods and firms produce $50,000 worth of consumer goods,then

The ratio of the change in consumption to the change in income is called the

If total production is greater than total expenditures,

When the economy is in equilibrium,

Which of the following statements is false?

Exhibit 10-2 -Refer to Exhibit 10-2.If autonomous investment decreases,the TE curve will shift ____________ and the new level of equilibrium Real GDP will be ___________ than $4,500.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Exhibit 10-1 -Refer to Exhibit 10-1.At Q₁,

Exhibit 10-2 -Refer to Exhibit 10-2.If autonomous investment decreases,the TE curve will shift __ and the new level of equilibrium Real GDP will be _ than $4,500.