Question 1

Exhibit 10-1
  
-Refer to Exhibit 10-1.At Q1,there is a tendency for Real GDP to

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  There is not enough information to answer this question. 
A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  There is not enough information to answer this question.

Question 2

Which of the following is consistent with the classical view of Say's law?

Accepted Answer

A)  Saving increases by $2 billion and investment decreases by $2 billion. 
B)  Saving increases by $2 billion and consumption rises by $2 billion. 
C)  Saving increases by $2 billion, consumption decreases by $2 billion, and investment rises by something less than $2 billion. 
D)  Saving decreases by $2 billion and consumption decreases by more than $2 billion. 
E)  none of the above 
A)  Saving increases by $2 billion and investment decreases by $2 billion. 
B)  Saving increases by $2 billion and consumption rises by $2 billion. 
C)  Saving increases by $2 billion, consumption decreases by $2 billion, and investment rises by something less than $2 billion. 
D)  Saving decreases by $2 billion and consumption decreases by more than $2 billion. 
E)  none of the above

Question 3

If the multiplier is 5,then the MPC must be

Accepted Answer

A)  1/5. 
B)  1/6. 
C)  3/4. 
D)  4/5. 
E)  2/3. 
A)  1/5. 
B)  1/6. 
C)  3/4. 
D)  4/5. 
E)  2/3.

Question 4

Keynes believed that

Accepted Answer

A)  the internal structure of the economy is extremely competitive and that wage-price flexibility exists. 
B)  monopolistic elements in the economy prevent immediate and sharp price declines in response to falling demand. 
C)  even though there are monopolistic elements in the economy, wage-price flexibility exists. 
D)  in spite of the competitiveness of the economy, wage-price flexibility does not exist. 
A)  the internal structure of the economy is extremely competitive and that wage-price flexibility exists. 
B)  monopolistic elements in the economy prevent immediate and sharp price declines in response to falling demand. 
C)  even though there are monopolistic elements in the economy, wage-price flexibility exists. 
D)  in spite of the competitiveness of the economy, wage-price flexibility does not exist.

Question 5

Two economists,Smith and Jones,are discussing the currently high unemployment rate.Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment.Jones says that it is better to take a "hands-off" approach.Which of the following is most likely to be true?

Accepted Answer

A)  Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. 
B)  Smith and Jones are most likely both classical economists with a few minor differences of opinion. 
C)  Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. 
D)  Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. 
E)  none of the above. 
A)  Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. 
B)  Smith and Jones are most likely both classical economists with a few minor differences of opinion. 
C)  Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. 
D)  Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. 
E)  none of the above.

Question 6

Using the concept of the multiplier,explain in detail how college students flocking to beach towns for spring break can positively impact the beach towns' economies.

Accepted Answer

College students on spring break will sp

Question 7

Which of the following statements is false?

Accepted Answer

A)  MPC plus MPS equals 1. 
B)  MPC is additional saving divided by additional disposable income. 
C)  The MPS is the ratio of the change in saving to the change in disposable income. 
D)  If MPC equals 0.80, autonomous consumption equals $400, and disposable income equals $600, then consumption equals $880. 
E)  none of the above 
A)  MPC plus MPS equals 1. 
B)  MPC is additional saving divided by additional disposable income. 
C)  The MPS is the ratio of the change in saving to the change in disposable income. 
D)  If MPC equals 0.80, autonomous consumption equals $400, and disposable income equals $600, then consumption equals $880. 
E)  none of the above

Question 8

Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.80,then we know that

Accepted Answer

A)  as Yd rises by $1, Co rises by $0.80. 
B)  as Yd rises by $1, C rises by $0.80. 
C)  Yd rises by $0.80. 
D)  as C0 rises by $0.80, Yd rises by $1. 
A)  as Yd rises by $1, Co rises by $0.80. 
B)  as Yd rises by $1, C rises by $0.80. 
C)  Yd rises by $0.80. 
D)  as C0 rises by $0.80, Yd rises by $1.

Question 9

Total production

Accepted Answer

A)  always equals total expenditures. 
B)  equals total expenditures in equilibrium. 
C)  is always greater than total expenditures. 
D)  is always less than total expenditures. 
A)  always equals total expenditures. 
B)  equals total expenditures in equilibrium. 
C)  is always greater than total expenditures. 
D)  is always less than total expenditures.

Question 10

Exhibit 10-2
  
-Refer to Exhibit 10-2.If autonomous consumption increases,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

Question 11

How is the multiplier expressed in terms of the MPS?

Accepted Answer

A)  1 - MPS 
B)  1/MPS 
C)  1/(1 - MPS) 
D)  1/(1 + MPS) 
A)  1 - MPS 
B)  1/MPS 
C)  1/(1 - MPS) 
D)  1/(1 + MPS)

Question 12

Exhibit 10-4
  
-Refer to Exhibit 10-4.Let Yd1 denote the present level of disposable income.An increase in disposable income is likely to,ceteris paribus,cause a movement to point

Accepted Answer

A)  A. 
B)  B. 
C)  F. 
D)  D. 
E)  E. 
A)  A. 
B)  B. 
C)  F. 
D)  D. 
E)  E.

Question 13

When total production is greater than total expenditures,

Accepted Answer

A)  the economy is in disequilibrium. 
B)  there are increases in inventory. 
C)  total output will decrease. 
D)  all of the above 
A)  the economy is in disequilibrium. 
B)  there are increases in inventory. 
C)  total output will decrease. 
D)  all of the above

Question 14

If autonomous consumption rises by $20 and,as a result,Real GDP rises by $200,then the multiplier is

Accepted Answer

A)  4. 
B)  5. 
C)  6. 
D)  10. 
E)  none of the above 
A)  4. 
B)  5. 
C)  6. 
D)  10. 
E)  none of the above

Question 15

If total production (TP)is greater than total expenditures (TE),it follows that

Accepted Answer

A)  producers have produced more than individuals buy. 
B)  optimum inventory levels rise. 
C)  firms have underproduced. 
D)  actual inventory levels unexpectedly rise. 
E)  a and d 
A)  producers have produced more than individuals buy. 
B)  optimum inventory levels rise. 
C)  firms have underproduced. 
D)  actual inventory levels unexpectedly rise. 
E)  a and d

Question 16

Exhibit 10-5
  
-Refer to Exhibit 10-5. When TE is $700 billion,what will firms most likely 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 17

Inventory levels unexpectedly fall and firms increase the quantity of goods and services they produce.Which of the following is consistent with these two occurrences?

Accepted Answer

A)  TP is greater than TE. 
B)  TP is less than TE. 
C)  TE is equal to TP minus the rise in inventories above the optimum inventory level. 
D)  TP is equal to TE. 
E)  b and c 
A)  TP is greater than TE. 
B)  TP is less than TE. 
C)  TE is equal to TP minus the rise in inventories above the optimum inventory level. 
D)  TP is equal to TE. 
E)  b and c

Question 18

The marginal propensity to consume plus the marginal propensity to save is

Accepted Answer

A)  equal to zero. 
B)  greater than zero but less than one. 
C)  equal to one. 
D)  greater than one. 
A)  equal to zero. 
B)  greater than zero but less than one. 
C)  equal to one. 
D)  greater than one.

Question 19

An increase in autonomous consumption,an increase in disposable income,or a decrease in the marginal propensity to consume can all increase consumption.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 10-2
  
-Refer to Exhibit 10-2.At M,

Accepted Answer

A)  TP = TE. 
B)  TP > TE. 
C)  TE > TP. 
D)  the relationship between TP and TE cannot be determined. 
A)  TP = TE. 
B)  TP > TE. 
C)  TE > TP. 
D)  the relationship between TP and TE cannot be determined.

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

Exhibit 10-1 -Refer to Exhibit 10-1.At Q1,there is a tendency for Real GDP to

Which of the following is consistent with the classical view of Say's law?

If the multiplier is 5,then the MPC must be

Keynes believed that

Using the concept of the multiplier,explain in detail how college students flocking to beach towns for spring break can positively impact the beach towns' economies.

Which of the following statements is false?

Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.80,then we know that

Total production

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

How is the multiplier expressed in terms of the MPS?

Exhibit 10-4 -Refer to Exhibit 10-4.Let Yd1 denote the present level of disposable income.An increase in disposable income is likely to,ceteris paribus,cause a movement to point

When total production is greater than total expenditures,

If autonomous consumption rises by $20 and,as a result,Real GDP rises by $200,then the multiplier is

If total production (TP)is greater than total expenditures (TE),it follows that

Exhibit 10-5 -Refer to Exhibit 10-5. When TE is $700 billion,what will firms most likely do next?

Inventory levels unexpectedly fall and firms increase the quantity of goods and services they produce.Which of the following is consistent with these two occurrences?

The marginal propensity to consume plus the marginal propensity to save is

An increase in autonomous consumption,an increase in disposable income,or a decrease in the marginal propensity to consume can all increase consumption.

Exhibit 10-2 -Refer to Exhibit 10-2.At M,

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,there is a tendency for Real GDP to

Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.80,then we know that

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

Exhibit 10-4 -Refer to Exhibit 10-4.Let Yd₁ denote the present level of disposable income.An increase in disposable income is likely to,ceteris paribus,cause a movement to point