Question 1

An increase in the interest rate

Accepted Answer

A) reduces planned investment but increases unplanned investment by increasing inventories. 
B) reduces planned investment as well as unexplained investment by reducing inventories. 
C) has no impact on planned investment because it is autonomous. 
D) changes inventories in a way that cannot be predicted. 
A) reduces planned investment but increases unplanned investment by increasing inventories. 
B) reduces planned investment as well as unexplained investment by reducing inventories. 
C) has no impact on planned investment because it is autonomous. 
D) changes inventories in a way that cannot be predicted.

Question 2

In the simple Keynesian model,equilibrium exists when

Accepted Answer

A) actual investment equals realized investment. 
B) exports equal imports. 
C) savings is equal to government spending plus desired investment minus taxes. 
D) national product is equal to consumption minus desired investment plus government spending. 
E) None of the above 
A) actual investment equals realized investment. 
B) exports equal imports. 
C) savings is equal to government spending plus desired investment minus taxes. 
D) national product is equal to consumption minus desired investment plus government spending. 
E) None of the above

Question 3

In the equation Y = (1/1 - b + v)(a + I + G + X − u),the term (1/1 - b + v)is referred to as the

Accepted Answer

A) level of autonomous expenditures. 
B) autonomous expenditure multiplier. 
C) balanced budget multiplier. 
D) tax multiplier. 
A) level of autonomous expenditures. 
B) autonomous expenditure multiplier. 
C) balanced budget multiplier. 
D) tax multiplier.

Question 4

The short-run refers to a period

Accepted Answer

A) of a few days. 
B) when prices and wages cannot fully adjust. 
C) of a few years. 
D) during which trend cannot change. 
E) of analysis used in the classical model 
A) of a few days. 
B) when prices and wages cannot fully adjust. 
C) of a few years. 
D) during which trend cannot change. 
E) of analysis used in the classical model

Question 5

In the simple Keynesian model (no money market)assume that equilibrium output falls short of potential output by 300 units and the MPC = 0.8.The size of the tax cut needed to reach full employment is

Accepted Answer

A) 30. 
B) 60. 
C) 75. 
D) 300. 
A) 30. 
B) 60. 
C) 75. 
D) 300.

Question 6

Income has risen in the simple Keynesian model.This could be the result of:,

Accepted Answer

A) an equal increase in government spending and taxes. 
B) an increase in unplanned investment. 
C) an increase in taxes 
D) a decrease in autonomous consumption. 
E) none of the above 
A) an equal increase in government spending and taxes. 
B) an increase in unplanned investment. 
C) an increase in taxes 
D) a decrease in autonomous consumption. 
E) none of the above

Question 7

In the Keynesian model,exogenous variables include

Accepted Answer

A) planned investment. 
B) taxes. 
C) planned inventories and government spending. 
D) planned investment and government spending. 
E) all of the above 
A) planned investment. 
B) taxes. 
C) planned inventories and government spending. 
D) planned investment and government spending. 
E) all of the above

Question 8

Total planned expenditure is composed as

Accepted Answer

A) planned investment. 
B) planned government spending and taxes. 
C) total investment,total consumption,and government spending. 
D) planned investment,planned government spending,and planned taxes. 
A) planned investment. 
B) planned government spending and taxes. 
C) total investment,total consumption,and government spending. 
D) planned investment,planned government spending,and planned taxes.

Question 9

Compared to the closed economy Keynesian model,the open economy model in which imports are a function of income has an investment multiplier that is

Accepted Answer

A) smaller. 
B) larger. 
C) equal. 
D) equal to 1. 
A) smaller. 
B) larger. 
C) equal. 
D) equal to 1.

Question 10

If the government decreases spending and taxes by 1,000 units and the marginal propensity to consume is .9,then

Accepted Answer

A) more information is needed. 
B) output will decrease by 900. 
C) output will decrease by 10,000. 
D) output will increase by 10,000. 
A) more information is needed. 
B) output will decrease by 900. 
C) output will decrease by 10,000. 
D) output will increase by 10,000.

Question 11

The Keynesian explanation of the Great Depression focuses on

Accepted Answer

A) large rises in government spending. 
B) large increases in taxes 
C) large increases in planned investment. 
D) an increase in expectations. 
A) large rises in government spending. 
B) large increases in taxes 
C) large increases in planned investment. 
D) an increase in expectations.

Question 12

Keynes believed that an important source of instability in the economy was instability

Accepted Answer

A) of private investment demand. 
B) in the marginal propensity to consume (b). 
C) of expectations. 
D) in tax collections. 
E) Both a and c 
A) of private investment demand. 
B) in the marginal propensity to consume (b). 
C) of expectations. 
D) in tax collections. 
E) Both a and c

Question 13

If the consumption function is given by C = 100 + .6(Y-T)and planned investment is 150,government spending is 50,and T is 100,then equilibrium income is

Accepted Answer

A) 600 
B) 750 
C) 400 
D) 350 
A) 600 
B) 750 
C) 400 
D) 350

Question 14

An increase in taxes

Accepted Answer

A) reduces income by more than the total fall in consumption. 
B) reduces income by the same amount as the total fall in consumption. 
C) reduces income and consumption by the same amount as taxes fall. 
D) reduces income by the amount of the initial fall in consumption. 
A) reduces income by more than the total fall in consumption. 
B) reduces income by the same amount as the total fall in consumption. 
C) reduces income and consumption by the same amount as taxes fall. 
D) reduces income by the amount of the initial fall in consumption.

Question 15

Which of the following is FALSE?

Accepted Answer

A) As the interest rate falls,planned expenditure must be greater than actual expenditure. 
B) As the interest rate falls,planned expenditure rises. 
C) As the interest rate falls,the IS curve shifts to the right. 
D) As the interest rate falls,planned expenditure can be greater than actual expenditure. 
A) As the interest rate falls,planned expenditure must be greater than actual expenditure. 
B) As the interest rate falls,planned expenditure rises. 
C) As the interest rate falls,the IS curve shifts to the right. 
D) As the interest rate falls,planned expenditure can be greater than actual expenditure.

Question 16

An increase in the demand for our exports

Accepted Answer

A) increases aggregate demand and income by the amount of the investment multiplier. 
B) increases imports as well,having no impact on aggregate demand. 
C) increases aggregate demand and income by less than the amount of the investment multiplier. 
D) does not impact aggregate demand because this is consumption by foreign countries. 
A) increases aggregate demand and income by the amount of the investment multiplier. 
B) increases imports as well,having no impact on aggregate demand. 
C) increases aggregate demand and income by less than the amount of the investment multiplier. 
D) does not impact aggregate demand because this is consumption by foreign countries.

Question 17

In the Keynesian consumption function

Accepted Answer

A) consumption is a constant fraction of income. 
B) the marginal propensity to consume is constant. 
C) disposable income determines consumption. 
D) All of the above 
E) None of the above 
A) consumption is a constant fraction of income. 
B) the marginal propensity to consume is constant. 
C) disposable income determines consumption. 
D) All of the above 
E) None of the above

Question 18

If the government wishes to increase its spending on goods and services by $10 billion without increasing the overall level of aggregate demand,it should

Accepted Answer

A) increase taxes by $10 billion. 
B) decrease taxes by $10 billion. 
C) increase taxes by more than $10 billion. 
D) increase taxes,but by less than $10 billion. 
E) leave tax receipts unchanged. 
A) increase taxes by $10 billion. 
B) decrease taxes by $10 billion. 
C) increase taxes by more than $10 billion. 
D) increase taxes,but by less than $10 billion. 
E) leave tax receipts unchanged.

Question 19

Using the simple Keynesian model,consider the case where taxes are lump-sum.Compared to the model without taxes,the investment multiplier in this model will

Accepted Answer

A) not change. 
B) be larger. 
C) be smaller. 
D) be equal to 1. 
A) not change. 
B) be larger. 
C) be smaller. 
D) be equal to 1.

Question 20

Both Keynesians and supply-siders believe that tax cuts

Accepted Answer

A) will increase income by increasing aggregate supply. 
B) will increase income by increasing aggregate demand. 
C) will increase income but for different reasons. 
D) will increase income in the Keynesian model but decrease income in the Supply-side model. 
A) will increase income by increasing aggregate supply. 
B) will increase income by increasing aggregate demand. 
C) will increase income but for different reasons. 
D) will increase income in the Keynesian model but decrease income in the Supply-side model.

An increase in the interest rate

In the simple Keynesian model,equilibrium exists when

In the equation Y = (1/1 - b + v)(a + I + G + X − u),the term (1/1 - b + v)is referred to as the

The short-run refers to a period

In the simple Keynesian model (no money market)assume that equilibrium output falls short of potential output by 300 units and the MPC = 0.8.The size of the tax cut needed to reach full employment is

Income has risen in the simple Keynesian model.This could be the result of:,

In the Keynesian model,exogenous variables include

Total planned expenditure is composed as

Compared to the closed economy Keynesian model,the open economy model in which imports are a function of income has an investment multiplier that is

If the government decreases spending and taxes by 1,000 units and the marginal propensity to consume is .9,then

The Keynesian explanation of the Great Depression focuses on

Keynes believed that an important source of instability in the economy was instability

If the consumption function is given by C = 100 + .6(Y-T)and planned investment is 150,government spending is 50,and T is 100,then equilibrium income is

An increase in taxes

Which of the following is FALSE?

An increase in the demand for our exports

In the Keynesian consumption function

If the government wishes to increase its spending on goods and services by $10 billion without increasing the overall level of aggregate demand,it should

Using the simple Keynesian model,consider the case where taxes are lump-sum.Compared to the model without taxes,the investment multiplier in this model will

Both Keynesians and supply-siders believe that tax cuts

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

Exam 5: Keynesian System I: the Role of Aggregate Demand

An increase in the interest rate

In the simple Keynesian model,equilibrium exists when

In the equation Y = (1/1 - b + v)(a + I + G + X − u),the term (1/1 - b + v)is referred to as the

The short-run refers to a period

In the simple Keynesian model (no money market)assume that equilibrium output falls short of potential output by 300 units and the MPC = 0.8.The size of the tax cut needed to reach full employment is

Income has risen in the simple Keynesian model.This could be the result of:,

In the Keynesian model,exogenous variables include

Total planned expenditure is composed as

Compared to the closed economy Keynesian model,the open economy model in which imports are a function of income has an investment multiplier that is

If the government decreases spending and taxes by 1,000 units and the marginal propensity to consume is .9,then

The Keynesian explanation of the Great Depression focuses on

Keynes believed that an important source of instability in the economy was instability

If the consumption function is given by C = 100 + .6(Y-T)and planned investment is 150,government spending is 50,and T is 100,then equilibrium income is

An increase in taxes

Which of the following is FALSE?

An increase in the demand for our exports

In the Keynesian consumption function

If the government wishes to increase its spending on goods and services by $10 billion without increasing the overall level of aggregate demand,it should

Using the simple Keynesian model,consider the case where taxes are lump-sum.Compared to the model without taxes,the investment multiplier in this model will

Both Keynesians and supply-siders believe that tax cuts

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters