Question 1

The economy can be in equilibrium and in a recessionary gap simultaneously.

Accepted Answer

A) True 
 B)False

Question 2

If autonomous consumption rises by $60 and,as a result,Real GDP rises by $240,then the marginal propensity to consume is

Accepted Answer

A)  0.25. 
B)  0.75. 
C)  0.05. 
D)  0.95. 
E)  none of the above 
A)  0.25. 
B)  0.75. 
C)  0.05. 
D)  0.95. 
E)  none of the above

Question 3

The economy is in equilibrium,TP = TE.Then,autonomous consumption rises.As a result,__________ rises,the __________ curve shifts __________,inventory levels unexpectedly __________,and business firms __________ the quantity of goods and services they produce.

Accepted Answer

A)  consumption; TE; downward; fall; increase 
B)  consumption; TE; upward; fall; increase 
C)  consumption; TE; upward; rise; decrease 
D)  investment; TE; upward; fall; increase 
E)  investment; TP; leftward; fall; increase 
A)  consumption; TE; downward; fall; increase 
B)  consumption; TE; upward; fall; increase 
C)  consumption; TE; upward; rise; decrease 
D)  investment; TE; upward; fall; increase 
E)  investment; TP; leftward; fall; increase

Question 4

There are no idle resources,the multiplier is operative,and autonomous spending rises.It follows that

Accepted Answer

A)  Real GDP will not increase. 
B)  Real GDP will rise. 
C)  prices will rise. 
D)  a and c 
E)  a, b, and c 
A)  Real GDP will not increase. 
B)  Real GDP will rise. 
C)  prices will rise. 
D)  a and c 
E)  a, b, and c

Question 5

Autonomous spending rises by $10 billion and Real GDP rises by $50 billion.What does the marginal propensity to save equal?

Accepted Answer

A)  0.10 
B)  0.20 
C)  0.80 
D)  0.90 
E)  0.50 
A)  0.10 
B)  0.20 
C)  0.80 
D)  0.90 
E)  0.50

Question 6

When total expenditures are greater than total production,__________ is produced than households want to buy,which leads to __________ in inventory,which signals firms that they have __________,which causes firms to increase production.

Accepted Answer

A)  less; decreases; underproduced 
B)  more; increases; underproduced 
C)  less; increases; underproduced 
D)  more; decreases; overproduced 
A)  less; decreases; underproduced 
B)  more; increases; underproduced 
C)  less; increases; underproduced 
D)  more; decreases; overproduced

Question 7

Exhibit 10-4
  
-Refer to Exhibit 10-4.If the present level of disposable income is YSd1autonomous consumption is equal to

Accepted Answer

A)  C0. 
B)  C1. 
C)  C2. 
D)  C1 - C0. 
E)  C2 - C1. 
A)  C0. 
B)  C1. 
C)  C2. 
D)  C1 - C0. 
E)  C2 - C1.

Question 8

Exhibit 10-5
  
-Refer to Exhibit 10-5. When TE is $300 billion,what happens to inventories?

Accepted Answer

A)  Inventories are at their optimum levels. 
B)  Inventories will fall, then rise above their optimum levels. 
C)  Inventories will fall below optimum levels. 
D)  Inventories will rise above optimum levels. 
A)  Inventories are at their optimum levels. 
B)  Inventories will fall, then rise above their optimum levels. 
C)  Inventories will fall below optimum levels. 
D)  Inventories will rise above optimum levels.

Question 9

Exhibit 10-9
  
-Refer to Exhibit 10-9.What is the value of the marginal propensity to save (MPS)that would correctly fill in blank (E)and the multiplier that would correctly fill in blank (F)?

Accepted Answer

A)  0.012; 0.83 
B)  0.12; 88 
C)  0.15; 15 
D)  0.15; 6.67 
A)  0.012; 0.83 
B)  0.12; 88 
C)  0.15; 15 
D)  0.15; 6.67

Question 10

Exhibit 10-7
  
-Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.95,then we know that

Accepted Answer

A)  as Yd rises by $1, Co rises by $0.95. 
B)  as Yd rises by $1, C rises by $0.95. 
C)  Yd rises by $0.95. 
D)  as C0 rises by $0.05, Yd rises by $1. 
A)  as Yd rises by $1, Co rises by $0.95. 
B)  as Yd rises by $1, C rises by $0.95. 
C)  Yd rises by $0.95. 
D)  as C0 rises by $0.05, Yd rises by $1.

Question 11

What type of relationship exists between the marginal propensity to consume (MPC)and the multiplier? Explain why this relationship exists.

Accepted Answer

The MPC and the multiplier have a direct

Question 12

Exhibit 10-1
  
-Refer to Exhibit 10-1.At Q3,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 13

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

Accepted Answer

A)  optimum inventory levels fall. 
B)  firms have underproduced. 
C)  firms increase the quantity of goods they produce. 
D)  b and c 
E)  a, b, and c 
A)  optimum inventory levels fall. 
B)  firms have underproduced. 
C)  firms increase the quantity of goods they produce. 
D)  b and c 
E)  a, b, and c

Question 14

John Maynard Keynes was a very famous economist from

Accepted Answer

A)  the United States. 
B)  England. 
C)  Germany. 
D)  Ireland. 
A)  the United States. 
B)  England. 
C)  Germany. 
D)  Ireland.

Question 15

If we graph the consumption function such that it starts above the origin,this is because we are assuming that

Accepted Answer

A)  the MPC is positive. 
B)  the MPS is positive. 
C)  autonomous consumption is positive. 
D)  induced consumption is positive. 
A)  the MPC is positive. 
B)  the MPS is positive. 
C)  autonomous consumption is positive. 
D)  induced consumption is positive.

Question 16

The Keynesian aggregate supply curve is

Accepted Answer

A)  vertical. 
B)  upward sloping. 
C)  horizontal until Natural Real GDP (QN) and vertical at QN. 
D)  sometimes upward sloping and sometimes horizontal. 
E)  downward sloping. 
A)  vertical. 
B)  upward sloping. 
C)  horizontal until Natural Real GDP (QN) and vertical at QN. 
D)  sometimes upward sloping and sometimes horizontal. 
E)  downward sloping.

Question 17

Inventory levels unexpectedly rise and firms cutback on production.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)  TP is equal to TE. 
D)  TP is equal to TE minus the rise in inventories above the optimum inventory level. 
E)  none of the above 
A)  TP is greater than TE. 
B)  TP is less than TE. 
C)  TP is equal to TE. 
D)  TP is equal to TE minus the rise in inventories above the optimum inventory level. 
E)  none of the above

Question 18

Exhibit 10-1
  
-Refer to Exhibit 10-1.At Q2,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 19

Here is a consumption function: C = C0 + MPC(Yd).If consumption is $3,300,MPC =0.85,and disposable income is $2,100,what does autonomous consumption equal?

Accepted Answer

A)  $899.15 
B)  $450 
C)  $1,515 
D)  $4,785 
E)  none of the above 
A)  $899.15 
B)  $450 
C)  $1,515 
D)  $4,785 
E)  none of the above

Question 20

Keynes assumed consumption is

Accepted Answer

A)  inversely related to the rate of interest. 
B)  directly related to disposable income. 
C)  directly related to investment. 
D)  less than disposable income. 
E)  both b and d 
A)  inversely related to the rate of interest. 
B)  directly related to disposable income. 
C)  directly related to investment. 
D)  less than disposable income. 
E)  both b and d

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

The economy can be in equilibrium and in a recessionary gap simultaneously.

If autonomous consumption rises by $60 and,as a result,Real GDP rises by $240,then the marginal propensity to consume is

The economy is in equilibrium,TP = TE.Then,autonomous consumption rises.As a result,__________ rises,the __________ curve shifts __________,inventory levels unexpectedly __________,and business firms __________ the quantity of goods and services they produce.

There are no idle resources,the multiplier is operative,and autonomous spending rises.It follows that

Autonomous spending rises by $10 billion and Real GDP rises by $50 billion.What does the marginal propensity to save equal?

When total expenditures are greater than total production,__________ is produced than households want to buy,which leads to __________ in inventory,which signals firms that they have __________,which causes firms to increase production.

Exhibit 10-4 -Refer to Exhibit 10-4.If the present level of disposable income is YSd1autonomous consumption is equal to

Exhibit 10-5 -Refer to Exhibit 10-5. When TE is $300 billion,what happens to inventories?

Exhibit 10-9 -Refer to Exhibit 10-9.What is the value of the marginal propensity to save (MPS)that would correctly fill in blank (E)and the multiplier that would correctly fill in blank (F)?

Exhibit 10-7 -Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.95,then we know that

What type of relationship exists between the marginal propensity to consume (MPC)and the multiplier? Explain why this relationship exists.

Exhibit 10-1 -Refer to Exhibit 10-1.At Q3,there is a tendency for Real GDP to

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

John Maynard Keynes was a very famous economist from

If we graph the consumption function such that it starts above the origin,this is because we are assuming that

The Keynesian aggregate supply curve is

Inventory levels unexpectedly rise and firms cutback on production.Which of the following is consistent with these two occurrences?

Exhibit 10-1 -Refer to Exhibit 10-1.At Q2,there is a tendency for Real GDP to

Here is a consumption function: C = C0 + MPC(Yd).If consumption is $3,300,MPC =0.85,and disposable income is $2,100,what does autonomous consumption equal?

Keynes assumed consumption is

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

The economy is in equilibrium,TP = TE.Then,autonomous consumption rises.As a result, rises,the curve shifts ,inventory levels unexpectedly ,and business firms __ the quantity of goods and services they produce.

When total expenditures are greater than total production, is produced than households want to buy,which leads to in inventory,which signals firms that they have __,which causes firms to increase production.

Exhibit 10-4 -Refer to Exhibit 10-4.If the present level of disposable income is YS_d1autonomous consumption is equal to

Exhibit 10-7 -Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.95,then we know that

Exhibit 10-1 -Refer to Exhibit 10-1.At Q₃,there is a tendency for Real GDP to

Exhibit 10-1 -Refer to Exhibit 10-1.At Q₂,there is a tendency for Real GDP to

Here is a consumption function: C = C₀ + MPC(Y_d).If consumption is $3,300,MPC =0.85,and disposable income is $2,100,what does autonomous consumption equal?