Question 1

Exhibit 10-6
  
-Refer to Exhibit 10-6.If investment increases,it follows that

Accepted Answer

A)  the TE curve will shift upward, possibly passing through point 2. 
B)  the TE curve will shift downward, possibly passing through point 3. 
C)  the TE curve will not change but the economy will move from point 1 to point 3. 
D)  the TE curve will not change but the economy will move from point 1 to point 2. 
E)  At the new equilibrium position, Real GDP will necessarily be Q1. 
A)  the TE curve will shift upward, possibly passing through point 2. 
B)  the TE curve will shift downward, possibly passing through point 3. 
C)  the TE curve will not change but the economy will move from point 1 to point 3. 
D)  the TE curve will not change but the economy will move from point 1 to point 2. 
E)  At the new equilibrium position, Real GDP will necessarily be Q1.

Question 2

Exhibit 10-7
  
-Here is a consumption function: C = C0 + MPC(Yd).If C0= $300,then we know that

Accepted Answer

A)  if Yd rises by $1, then Co rises by $1. 
B)  if Yd rises by $1, then C rises by $300. 
C)  as C0 rises by $15, C rises by $15. 
D)  as C0 rises by $15, Yd rises by $15. 
A)  if Yd rises by $1, then Co rises by $1. 
B)  if Yd rises by $1, then C rises by $300. 
C)  as C0 rises by $15, C rises by $15. 
D)  as C0 rises by $15, Yd rises by $15.

Question 3

Which of the following is good evidence against the classical view of Say's law?

Accepted Answer

A)  Investment does not always rise as interest rates fall. 
B)  Consumption falls by the amount that saving increases. 
C)  Exports are usually greater than imports. 
D)  People save more at higher interest rates than lower interest rates. 
E)  none of the above 
A)  Investment does not always rise as interest rates fall. 
B)  Consumption falls by the amount that saving increases. 
C)  Exports are usually greater than imports. 
D)  People save more at higher interest rates than lower interest rates. 
E)  none of the above

Question 4

The work of John Maynard Keynes led to a major revolution in economic thought.

Accepted Answer

A) True 
 B)False

Question 5

Discuss how the Great Depression contributed to the development of Keynesian economics.

Accepted Answer

During the Great Depression,high levels

Question 6

Exhibit 10-1
  
-Refer to Exhibit 10-1.At all points on the 45-degree line,

Accepted Answer

A) TP = Real GDP. B) TP > Real GDP. C) TP < Real GDP. D) all of the above are possible. A) TP = Real GDP. B) TP > Real GDP. C) TP < Real GDP. D) all of the above are possible.

Question 7

Economist Brown believes that changes in aggregate demand affect only the price level,and economist Black believes that changes in aggregate demand affect only Real GDP. What does the aggregate supply (AS)curve look like for each economist?

Accepted Answer

A)  For economist Brown the AS curve is vertical and for economist Black the AS curve is horizontal. 
B)  For economist Brown the AS curve is horizontal and for economist Black the AS curve is vertical. 
C)  For economist Brown the AS curve is upward sloping and for economist Black the AS curve is downward sloping. 
D)  For economist Brown the AS curve is downward sloping and for economist Black the AS curve is upward sloping. 
A)  For economist Brown the AS curve is vertical and for economist Black the AS curve is horizontal. 
B)  For economist Brown the AS curve is horizontal and for economist Black the AS curve is vertical. 
C)  For economist Brown the AS curve is upward sloping and for economist Black the AS curve is downward sloping. 
D)  For economist Brown the AS curve is downward sloping and for economist Black the AS curve is upward sloping.

Question 8

Exhibit 10-7
  
-John Maynard Keynes wrote which of the following?

Accepted Answer

A)  Das Kapital 
B)  The Scope and Method of Political Economy 
C)  Wealth of Nations 
D)  The General Theory of Employment, Interest and Money 
E)  all of the above 
A)  Das Kapital 
B)  The Scope and Method of Political Economy 
C)  Wealth of Nations 
D)  The General Theory of Employment, Interest and Money 
E)  all of the above

Question 9

According to efficiency wage models,labor productivity depends on

Accepted Answer

A)  the number of employees at a firm; the smaller the number of employees, the more productive each employee is. 
B)  the amount of capital that employees have to work with. 
C)  the wage rate the firm pays its employees; a cut in wages can cause labor productivity to decline. 
D)  whether or not the economy is currently producing Natural Real GDP. 
E)  none of the above 
A)  the number of employees at a firm; the smaller the number of employees, the more productive each employee is. 
B)  the amount of capital that employees have to work with. 
C)  the wage rate the firm pays its employees; a cut in wages can cause labor productivity to decline. 
D)  whether or not the economy is currently producing Natural Real GDP. 
E)  none of the above

Question 10

Here is a consumption function: C = C0 + MPC(Yd).The C0 term is usually defined as

Accepted Answer

A)  autonomous consumption. 
B)  point-zero consumption. 
C)  mandatory consumption. 
D)  propensitory consumption. 
E)  none of the above 
A)  autonomous consumption. 
B)  point-zero consumption. 
C)  mandatory consumption. 
D)  propensitory consumption. 
E)  none of the above

Question 11

The consumption function is a function showing the relationship between consumption and

Accepted Answer

A)  disposable income. 
B)  exports. 
C)  interest rates. 
D)  investment. 
A)  disposable income. 
B)  exports. 
C)  interest rates. 
D)  investment.

Question 12

Keynes believed that saving is more responsive to changes in income than to changes in interest rates.

Accepted Answer

A) True 
 B)False

Question 13

Keynes's major work,The General Theory of Employment,Interest and Money,was published during the

Accepted Answer

A)  late 1800s. 
B)  mid-1700s. 
C)  1930s. 
D)  Panic of 1907. 
A)  late 1800s. 
B)  mid-1700s. 
C)  1930s. 
D)  Panic of 1907.

Question 14

When the MPC = 0.6,the multiplier is

Accepted Answer

A)  0.40. 
B)  2.50. 
C)  1.67. 
D)  6.00. 
A)  0.40. 
B)  2.50. 
C)  1.67. 
D)  6.00.

Question 15

Describe Keynes' criticism of Say's law in a money economy.

Accepted Answer

In order for Say's law to hold in a mone

Question 16

What is the general format of the consumption function? Explain what each term means and use the consumption function to explain the three different ways that consumption can increase.

Accepted Answer

The general consumption formula is: C =

Question 17

If total production is less than total expenditures,then business firms

Accepted Answer

A)  have overproduced. 
B)  will cut back on production. 
C)  will raise production. 
D)  will experience increases in inventory. 
E)  a and d 
A)  have overproduced. 
B)  will cut back on production. 
C)  will raise production. 
D)  will experience increases in inventory. 
E)  a and d

Question 18

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts __________,the AD curve shifts __________,and Real GDP __________.

Accepted Answer

A)  downward; leftward; decreases 
B)  downward; rightward; decreases 
C)  upward; rightward; increases 
D)  upward; leftward; increases 
A)  downward; leftward; decreases 
B)  downward; rightward; decreases 
C)  upward; rightward; increases 
D)  upward; leftward; increases

Question 19

The total expenditure (TE)curve has the same slope as the __________ curve.

Accepted Answer

A)  C (consumption) 
B)  I (investment) 
C)  G (government purchases) 
D)  NE (net exports) 
A)  C (consumption) 
B)  I (investment) 
C)  G (government purchases) 
D)  NE (net exports)

Question 20

The economy is in equilibrium,TP = TE,and Real GDP is $4,000 billion.The MPC is 0.60,the multiplier is operative,and idle resources exist at each expenditure round.Autonomous investment spending rises by $13 billion.As a result,the __________ curve shifts __________,inventory levels unexpectedly __________,business firms __________ the quantity of goods and services they produce,and Real GDP __________ by __________.

Accepted Answer

A)  TE, downward, rise, increase, rises, $32.5 billion 
B)  TE, upward, fall, increase, rises, $101.5 billion 
C)  TE, upward, fall, decrease, rises, $32.5 billion 
D)  TE, upward, fall, increase, rises, $32.5 billion 
E)  TP, upward, fall, increase, rises, $101.5 billion 
A)  TE, downward, rise, increase, rises, $32.5 billion 
B)  TE, upward, fall, increase, rises, $101.5 billion 
C)  TE, upward, fall, decrease, rises, $32.5 billion 
D)  TE, upward, fall, increase, rises, $32.5 billion 
E)  TP, upward, fall, increase, rises, $101.5 billion

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

Exhibit 10-6 -Refer to Exhibit 10-6.If investment increases,it follows that

Exhibit 10-7 -Here is a consumption function: C = C0 + MPC(Yd).If C0= $300,then we know that

Which of the following is good evidence against the classical view of Say's law?

The work of John Maynard Keynes led to a major revolution in economic thought.

Discuss how the Great Depression contributed to the development of Keynesian economics.

Exhibit 10-1 -Refer to Exhibit 10-1.At all points on the 45-degree line,

Economist Brown believes that changes in aggregate demand affect only the price level,and economist Black believes that changes in aggregate demand affect only Real GDP. What does the aggregate supply (AS)curve look like for each economist?

Exhibit 10-7 -John Maynard Keynes wrote which of the following?

According to efficiency wage models,labor productivity depends on

Here is a consumption function: C = C0 + MPC(Yd).The C0 term is usually defined as

The consumption function is a function showing the relationship between consumption and

Keynes believed that saving is more responsive to changes in income than to changes in interest rates.

Keynes's major work,The General Theory of Employment,Interest and Money,was published during the

When the MPC = 0.6,the multiplier is

Describe Keynes' criticism of Say's law in a money economy.

What is the general format of the consumption function? Explain what each term means and use the consumption function to explain the three different ways that consumption can increase.

If total production is less than total expenditures,then business firms

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts __________,the AD curve shifts __________,and Real GDP __________.

The total expenditure (TE)curve has the same slope as the __________ curve.

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 10-7 -Here is a consumption function: C = C₀ + MPC(Y_d).If C₀= $300,then we know that

Here is a consumption function: C = C₀ + MPC(Y_d).The C₀ term is usually defined as

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts ,the AD curve shifts ,and Real GDP __.