Question 1

When the MPC = 0.9,the multiplier is

Accepted Answer

A)  0.20. 
B)  1.25. 
C)  2.50. 
D)  5.00. 
E)  10.00. 
A)  0.20. 
B)  1.25. 
C)  2.50. 
D)  5.00. 
E)  10.00.

Question 2

When there is economy-wide equilibrium,there is a tendency for

Accepted Answer

A)  total output to rise. 
B)  total output to fall. 
C)  total output to remain unchanged. 
D)  prices to fall. 
E)  prices to rise. 
A)  total output to rise. 
B)  total output to fall. 
C)  total output to remain unchanged. 
D)  prices to fall. 
E)  prices to rise.

Question 3

A decline in housing prices can help to push the economy into a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 10-3
  
-Refer to Exhibit 10-3.The multiplier is

Accepted Answer

A)  4. 
B)  5. 
C)  10. 
D)  1. 
E)  none of the above 
A)  4. 
B)  5. 
C)  10. 
D)  1. 
E)  none of the above

Question 5

Keynes argued that

Accepted Answer

A)  monopolistic elements in the economy will prevent an immediate sharp fall in prices as a result of decreasing demand. 
B)  wages and prices are not flexible in a downward direction. 
C)  a and b 
D)  none of the above 
A)  monopolistic elements in the economy will prevent an immediate sharp fall in prices as a result of decreasing demand. 
B)  wages and prices are not flexible in a downward direction. 
C)  a and b 
D)  none of the above

Question 6

Exhibit 10-2
  
-Refer to Exhibit 10-2.Equilibrium Real GDP occurs at

Accepted Answer

A)  $3,000 billion. 
B)  $1,500 billion. 
C)  $7,500 billion. 
D)  $4,000 billion. 
E)  $4,500 billion. 
A)  $3,000 billion. 
B)  $1,500 billion. 
C)  $7,500 billion. 
D)  $4,000 billion. 
E)  $4,500 billion.

Question 7

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

Accepted Answer

A)  Saving increases by $3 billion, consumption falls by $3 billion, and investment rises by $3 billion. 
B)  Consumption rises by $3 billion and saving rises by more than $3 billion. 
C)  Saving rises by $3 billion, consumption falls by $3 billion, and investment rises by something less than $3 billion. 
D)  Saving rises by $3 billion, consumption falls by $3 billion, and investment rises by $6 billion. 
E)  none of the above 
A)  Saving increases by $3 billion, consumption falls by $3 billion, and investment rises by $3 billion. 
B)  Consumption rises by $3 billion and saving rises by more than $3 billion. 
C)  Saving rises by $3 billion, consumption falls by $3 billion, and investment rises by something less than $3 billion. 
D)  Saving rises by $3 billion, consumption falls by $3 billion, and investment rises by $6 billion. 
E)  none of the above

Question 8

Exhibit 10-4
  
-Refer to Exhibit 10-4.Marginal propensity to consume is equal to

Accepted Answer

A)  AF divided by C0A 
B)  C0A divided by AF. 
C)  AF divided by C0F. 
D)  C0F divided by AF. 
E)  none of the above 
A)  AF divided by C0A 
B)  C0A divided by AF. 
C)  AF divided by C0F. 
D)  C0F divided by AF. 
E)  none of the above

Question 9

When total expenditure (TE)exceeds total production (TP),inventory levels rise unexpectedly,which sends a signal to firms that they have overproduced,so they cut back on production.

Accepted Answer

A) True 
 B)False

Question 10

Keynesian macroeconomists believe that the time it takes for falling wages and prices to eliminate a recessionary gap is __________ enough to say that the economy is __________.

Accepted Answer

A)  long; not self-regulating 
B)  long; self-regulating 
C)  short; not self-regulating 
D)  short; self-regulating 
A)  long; not self-regulating 
B)  long; self-regulating 
C)  short; not self-regulating 
D)  short; self-regulating

Question 11

When the MPC = 0.80,the multiplier is

Accepted Answer

A)  5.00. 
B)  0.25. 
C)  4.00. 
D)  7.50. 
A)  5.00. 
B)  0.25. 
C)  4.00. 
D)  7.50.

Question 12

A rise in MPC makes the total expenditures (TE)curve __________ and __________ the multiplier.

Accepted Answer

A)  steeper; raises 
B)  steeper; lowers 
C)  flatter; raises 
D)  flatter; lowers 
A)  steeper; raises 
B)  steeper; lowers 
C)  flatter; raises 
D)  flatter; lowers

Question 13

Which of the following statements is true?

Accepted Answer

A)  When TP = TE (total production = total expenditures), the economy is necessarily producing Natural Real GDP. 
B)  When TP is greater than TE, inventory levels unexpectedly fall. 
C)  When TE is greater than TP, inventory levels unexpectedly rise. 
D)  b and c 
E)  none of the above 
A)  When TP = TE (total production = total expenditures), the economy is necessarily producing Natural Real GDP. 
B)  When TP is greater than TE, inventory levels unexpectedly fall. 
C)  When TE is greater than TP, inventory levels unexpectedly rise. 
D)  b and c 
E)  none of the above

Question 14

Describe the three basic points that Keynes made regarding consumption. Briefly explain why consumption was such a main concern in the Keynesian model.

Accepted Answer

The three basic points that Keynes made

Question 15

In reality,idle resources must exist in the economy in order for the multiplier process to lead to an increase in Real GDP.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 10-2
  
-Refer to Exhibit 10-2.Which of the following is correct about point M?

Accepted Answer

A)  TE is $4,500 billion and TP is only $1,500 billion. 
B)  TP is $4,500 billion and TE is only $1,500 billion. 
C)  TE is $7,500 and TP is only $5,500 billion. 
D)  TP is only $7,500 billion and TE is only $5,500 billion. 
E)  TE is $3,000 billion and TP is only $1,500 billion. 
A)  TE is $4,500 billion and TP is only $1,500 billion. 
B)  TP is $4,500 billion and TE is only $1,500 billion. 
C)  TE is $7,500 and TP is only $5,500 billion. 
D)  TP is only $7,500 billion and TE is only $5,500 billion. 
E)  TE is $3,000 billion and TP is only $1,500 billion.

Question 17

One similarity between the beliefs of the classical economists and Keynes is that increased saving would necessarily stimulate an equal amount of increased investment spending.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is true?

Accepted Answer

A)  Keynes believed wages are inflexible downward but prices (of goods and services) are flexible. 
B)  Keynes believed an economy could get stuck in a recessionary gap. 
C)  Keynes originated the idea of efficiency wages. 
D)  Keynes believed the economy is self-regulating. 
E)  b and c 
A)  Keynes believed wages are inflexible downward but prices (of goods and services) are flexible. 
B)  Keynes believed an economy could get stuck in a recessionary gap. 
C)  Keynes originated the idea of efficiency wages. 
D)  Keynes believed the economy is self-regulating. 
E)  b and c

Question 19

Exhibit 10-8
  
-Refer to Exhibit 10-8.When disposable income equals $2,000,saving equals

Accepted Answer

A)  $1,800. 
B)  $2,100. 
C)  $200. 
D)  -$200. 
A)  $1,800. 
B)  $2,100. 
C)  $200. 
D)  -$200.

Question 20

The change in disposable income is $200 and the change in saving is $50.What is the marginal propensity to consume (MPC)?

Accepted Answer

A)  0.25 
B)  0.50 
C)  0.66 
D)  0.75 
E)  There is not enough information to answer the question. 
A)  0.25 
B)  0.50 
C)  0.66 
D)  0.75 
E)  There is not enough information to answer the question.

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

When the MPC = 0.9,the multiplier is

When there is economy-wide equilibrium,there is a tendency for

A decline in housing prices can help to push the economy into a recessionary gap.

Exhibit 10-3 -Refer to Exhibit 10-3.The multiplier is

Keynes argued that

Exhibit 10-2 -Refer to Exhibit 10-2.Equilibrium Real GDP occurs at

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

Exhibit 10-4 -Refer to Exhibit 10-4.Marginal propensity to consume is equal to

When total expenditure (TE)exceeds total production (TP),inventory levels rise unexpectedly,which sends a signal to firms that they have overproduced,so they cut back on production.

Keynesian macroeconomists believe that the time it takes for falling wages and prices to eliminate a recessionary gap is __________ enough to say that the economy is __________.

When the MPC = 0.80,the multiplier is

A rise in MPC makes the total expenditures (TE)curve __________ and __________ the multiplier.

Which of the following statements is true?

Describe the three basic points that Keynes made regarding consumption. Briefly explain why consumption was such a main concern in the Keynesian model.

In reality,idle resources must exist in the economy in order for the multiplier process to lead to an increase in Real GDP.

Exhibit 10-2 -Refer to Exhibit 10-2.Which of the following is correct about point M?

One similarity between the beliefs of the classical economists and Keynes is that increased saving would necessarily stimulate an equal amount of increased investment spending.

Which of the following statements is true?

Exhibit 10-8 -Refer to Exhibit 10-8.When disposable income equals $2,000,saving equals

The change in disposable income is $200 and the change in saving is $50.What is the marginal propensity to consume (MPC)?

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

Keynesian macroeconomists believe that the time it takes for falling wages and prices to eliminate a recessionary gap is enough to say that the economy is .

A rise in MPC makes the total expenditures (TE)curve and the multiplier.