Question 1

The spending reduction necessary to bring an overheated economy back to full employment is called the

Accepted Answer

A)  recessionary gap. 
B)  GDP gap. 
C)  inflationary gap. 
D)  gap analysis. 
A)  recessionary gap. 
B)  GDP gap. 
C)  inflationary gap. 
D)  gap analysis.

Question 2

Aggregate expenditures is equal to C + I + G - (X + M).

Accepted Answer

A) True 
 B)False

Question 3

If autonomous investment spending falls by $1,000 and the marginal propensity to consume is 0.75, the total effect on the economy is a decrease of _____ in income or output.

Accepted Answer

A)  $750 
B)  $1,000 
C)  $4,000 
D)  $7,500 
A)  $750 
B)  $1,000 
C)  $4,000 
D)  $7,500

Question 4

In the simple Keynesian model, the only two things one can do with one's income are

Accepted Answer

A)  pay taxes and spend it. 
B)  spend it and save it. 
C)  spend it and invest it. 
D)  save it and give it away. 
A)  pay taxes and spend it. 
B)  spend it and save it. 
C)  spend it and invest it. 
D)  save it and give it away.

Question 5

The Keynesian conclusion that total injections equal total withdrawals in equilibrium is consistent with the circular flow model.

Accepted Answer

A) True 
 B)False

Question 6

Assume the economy is currently experiencing aggregate expenditures greater than aggregate income. The economy will move toward equilibrium as businesses begin to produce _____, leading to _____ employment and _____ income.

Accepted Answer

A)  more; less; less 
B)  less; less; less 
C)  less; more; more 
D)  more; more; more 
A)  more; less; less 
B)  less; less; less 
C)  less; more; more 
D)  more; more; more

Question 7

How does the simple Keynesian model differ from the classical approach to analyzing savings?

Accepted Answer

The simplified Keynesian model includes

Question 8

(Table: Consumption and Savings) Based on the table, the marginal propensity to consume is _____ and the average propensity to consume _____.

Accepted Answer

A)  0.5; varies with the level of income 
B)  $5,000; is $5,000 
C)  $10,000; is $35,000 
D)  2; varies with the level of income 
A)  0.5; varies with the level of income 
B)  $5,000; is $5,000 
C)  $10,000; is $35,000 
D)  2; varies with the level of income

Question 9

The recessionary gap is the increase in aggregate spending needed to bring a depressed economy back to full employment.

Accepted Answer

A) True 
 B)False

Question 10

After the acceptance of Keynesian analysis, the government

Accepted Answer

A)  played a role in setting the interest rate only. 
B)  took actions toward macroeconomic policy that grew significantly. 
C)  reduced its role in the economy. 
D)  turned to communism as the only solution to the Great Depression. 
A)  played a role in setting the interest rate only. 
B)  took actions toward macroeconomic policy that grew significantly. 
C)  reduced its role in the economy. 
D)  turned to communism as the only solution to the Great Depression.

Question 11

Aggregate expenditures are equal to

Accepted Answer

A)  the total of consumption plus investment plus government expenditures plus exports minus imports. 
B)  the total of consumption plus investment plus government expenditures. 
C)  the total of consumption plus investment plus government expenditures plus imports minus exports. 
D)  consumption alone in a simplified Keynesian model. 
A)  the total of consumption plus investment plus government expenditures plus exports minus imports. 
B)  the total of consumption plus investment plus government expenditures. 
C)  the total of consumption plus investment plus government expenditures plus imports minus exports. 
D)  consumption alone in a simplified Keynesian model.

Question 12

Keynes believed that the economy is self-correcting.

Accepted Answer

A) True 
 B)False

Question 13

The inflationary gap is the amount of aggregate spending greater than the spending necessary to result in full employment.

Accepted Answer

A) True 
 B)False

Question 14

If disposable income increases from $250 to $300 and saving increases from $40 to $50, how much is the average propensity to save when disposable income is $300?

Accepted Answer

A)  0.10 
B)  0.133 
C)  0.167 
D)  0.2 
A)  0.10 
B)  0.133 
C)  0.167 
D)  0.2

Question 15

Exports are injections and imports are withdrawals from the domestic spending cycle.

Accepted Answer

A) True 
 B)False

Question 16

Equilibrium in the full Keynesian model requires that

Accepted Answer

A)  all injections (I + G + X) must equal all withdrawals (S + T + M). 
B)  income exceed expenditures. 
C)  expenditures exceed income. 
D)  the government budget be balanced. 
A)  all injections (I + G + X) must equal all withdrawals (S + T + M). 
B)  income exceed expenditures. 
C)  expenditures exceed income. 
D)  the government budget be balanced.

Question 17

Because the private and foreign sectors of the economy were in a deep slump during the Great Depression, Keynes suggested an increase in _____ spending.

Accepted Answer

A)  investment 
B)  government 
C)  consumption 
D)  import 
A)  investment 
B)  government 
C)  consumption 
D)  import

Question 18

If the amount of spending in an economy declines by $1,000 and the marginal propensity to consume is 0.8, the effect on the economy is a change of _____ in income or output.

Accepted Answer

A)  $800 
B)  $1,000 
C)  $1,000.0 
D)  $5,000 
A)  $800 
B)  $1,000 
C)  $1,000.0 
D)  $5,000

Question 19

The larger a country's marginal propensity to consume, the lower is the value of its multiplier.

Accepted Answer

A) True 
 B)False

Question 20

Which of these would NOT shift the investment demand schedule?

Accepted Answer

A)  a change in interest rates 
B)  a change in operating costs 
C)  a change in technology 
D)  a change in expectations 
A)  a change in interest rates 
B)  a change in operating costs 
C)  a change in technology 
D)  a change in expectations

The spending reduction necessary to bring an overheated economy back to full employment is called the

Aggregate expenditures is equal to C + I + G - (X + M).

If autonomous investment spending falls by $1,000 and the marginal propensity to consume is 0.75, the total effect on the economy is a decrease of _____ in income or output.

In the simple Keynesian model, the only two things one can do with one's income are

The Keynesian conclusion that total injections equal total withdrawals in equilibrium is consistent with the circular flow model.

Assume the economy is currently experiencing aggregate expenditures greater than aggregate income. The economy will move toward equilibrium as businesses begin to produce ___, leading to _ employment and ___ income.

How does the simple Keynesian model differ from the classical approach to analyzing savings?

(Table: Consumption and Savings) Based on the table, the marginal propensity to consume is _ and the average propensity to consume _.

The recessionary gap is the increase in aggregate spending needed to bring a depressed economy back to full employment.

After the acceptance of Keynesian analysis, the government

Aggregate expenditures are equal to

Keynes believed that the economy is self-correcting.

The inflationary gap is the amount of aggregate spending greater than the spending necessary to result in full employment.

If disposable income increases from $250 to $300 and saving increases from $40 to $50, how much is the average propensity to save when disposable income is $300?

Exports are injections and imports are withdrawals from the domestic spending cycle.

Equilibrium in the full Keynesian model requires that

Because the private and foreign sectors of the economy were in a deep slump during the Great Depression, Keynes suggested an increase in _____ spending.

If the amount of spending in an economy declines by $1,000 and the marginal propensity to consume is 0.8, the effect on the economy is a change of _____ in income or output.

The larger a country's marginal propensity to consume, the lower is the value of its multiplier.

Which of these would NOT shift the investment demand schedule?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

Exam 8: Aggregate Expenditures

The spending reduction necessary to bring an overheated economy back to full employment is called the

Aggregate expenditures is equal to C + I + G - (X + M).

If autonomous investment spending falls by $1,000 and the marginal propensity to consume is 0.75, the total effect on the economy is a decrease of _____ in income or output.

In the simple Keynesian model, the only two things one can do with one's income are

The Keynesian conclusion that total injections equal total withdrawals in equilibrium is consistent with the circular flow model.

Assume the economy is currently experiencing aggregate expenditures greater than aggregate income. The economy will move toward equilibrium as businesses begin to produce _____, leading to _____ employment and _____ income.

How does the simple Keynesian model differ from the classical approach to analyzing savings?

(Table: Consumption and Savings) Based on the table, the marginal propensity to consume is _____ and the average propensity to consume _____.

The recessionary gap is the increase in aggregate spending needed to bring a depressed economy back to full employment.

After the acceptance of Keynesian analysis, the government

Aggregate expenditures are equal to

Keynes believed that the economy is self-correcting.

The inflationary gap is the amount of aggregate spending greater than the spending necessary to result in full employment.

If disposable income increases from $250 to $300 and saving increases from $40 to $50, how much is the average propensity to save when disposable income is $300?

Exports are injections and imports are withdrawals from the domestic spending cycle.

Equilibrium in the full Keynesian model requires that

Because the private and foreign sectors of the economy were in a deep slump during the Great Depression, Keynes suggested an increase in _____ spending.

If the amount of spending in an economy declines by $1,000 and the marginal propensity to consume is 0.8, the effect on the economy is a change of _____ in income or output.

The larger a country's marginal propensity to consume, the lower is the value of its multiplier.

Which of these would NOT shift the investment demand schedule?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

Assume the economy is currently experiencing aggregate expenditures greater than aggregate income. The economy will move toward equilibrium as businesses begin to produce ___, leading to _ employment and ___ income.

(Table: Consumption and Savings) Based on the table, the marginal propensity to consume is _ and the average propensity to consume _.