Question 1

The Keynesian cross diagram shows

Accepted Answer

A)  the relationship between equilibrium income and full employment. 
B)  the relationship between aggregate demand and aggregate supply. 
C)  the relationship between equilibrium demand and the price level. 
D)  the relationship between full employment and the price level. 
A)  the relationship between equilibrium income and full employment. 
B)  the relationship between aggregate demand and aggregate supply. 
C)  the relationship between equilibrium demand and the price level. 
D)  the relationship between full employment and the price level. A

Question 2

Keynes stressed the importance of effective demand which is

Accepted Answer

A)  when business firms are effective in convincing consumers that they have a demand for certain goods. 
B)  when consumers have the desire for goods and services as well as the income to purchase these goods. 
C)  when the demand for goods and services is effective in satisfying individuals desires. 
D)  when aggregate demand is less than aggregate supply. 
A)  when business firms are effective in convincing consumers that they have a demand for certain goods. 
B)  when consumers have the desire for goods and services as well as the income to purchase these goods. 
C)  when the demand for goods and services is effective in satisfying individuals desires. 
D)  when aggregate demand is less than aggregate supply. B

Question 3

According to Classical Economics, if the demand for labor in the entire economy falls:

Accepted Answer

A)  The equilibrium wage will fall. 
B)  The supply of labor will rise. 
C)  The supply of labor will fall. 
D)  The equilibrium wage will rise. 
A)  The equilibrium wage will fall. 
B)  The supply of labor will rise. 
C)  The supply of labor will fall. 
D)  The equilibrium wage will rise. A

Question 4

According to Keynes, why might money deposited in banks not find its way to new productive investments?

Accepted Answer

A)  Banks might not be confident that the would-be investors will be able to repay the loan with interest. 
B)  Businesses might not be confident that the investments they are contemplating will be profitable. 
C)  Business conditions in general are unattractive for new investments. 
D)  All of the above. 
A)  Banks might not be confident that the would-be investors will be able to repay the loan with interest. 
B)  Businesses might not be confident that the investments they are contemplating will be profitable. 
C)  Business conditions in general are unattractive for new investments. 
D)  All of the above.

Question 5

In the Classical view of the macroeconomy, too many workers seeking work or unemployment will lead to

Accepted Answer

A)  falling wages. 
B)  rising wages. 
C)  rising interest rates. 
D)  government programs to help the unemployed. 
A)  falling wages. 
B)  rising wages. 
C)  rising interest rates. 
D)  government programs to help the unemployed.

Question 6

According to Keynesian analysis, why might lowering interest rates not work to stimulate enough investment to absorb all of planned savings in the economy?

Accepted Answer

A)  The only possible interest rate for equilibrium between savings and investment to occur would be negative. 
B)  Banks will not offer to pay lenders to borrow money. 
C)  During a recession, the outlook is for negative profits on new investment because of a lack of sufficient market demand for goods. 
D)  All of the above. 
A)  The only possible interest rate for equilibrium between savings and investment to occur would be negative. 
B)  Banks will not offer to pay lenders to borrow money. 
C)  During a recession, the outlook is for negative profits on new investment because of a lack of sufficient market demand for goods. 
D)  All of the above.

Question 7

If the interest rate rises:

Accepted Answer

A)  Savings will rise and investment will rise. 
B)  Savings will fall and investment will rise. 
C)  Savings will fall and investment will fall. 
D)  Savings will rise and investment will fall. 
A)  Savings will rise and investment will rise. 
B)  Savings will fall and investment will rise. 
C)  Savings will fall and investment will fall. 
D)  Savings will rise and investment will fall.

Question 8

Diagram 6a
  
-Diagram 6a indicates that

Accepted Answer

A)  aggregate spending and aggregate product are the same. 
B)  aggregate spending and aggregate income are the same. 
C)  aggregate product and aggregate income are the same. 
D)  aggregate spending and equilibrium income are the same. 
A)  aggregate spending and aggregate product are the same. 
B)  aggregate spending and aggregate income are the same. 
C)  aggregate product and aggregate income are the same. 
D)  aggregate spending and equilibrium income are the same.

Question 9

Diagram 6b
  
-Diagram 6b indicates that when income is greater than $6,000

Accepted Answer

A)  consumers are spending more than income. 
B)  consumers are not spending. 
C)  consumers are spending less than income. 
D)  consumers are spending exactly all of their income. 
A)  consumers are spending more than income. 
B)  consumers are not spending. 
C)  consumers are spending less than income. 
D)  consumers are spending exactly all of their income.

Question 10

Diagram 6b
  
-Diagram 6b indicates that

Accepted Answer

A)  consumption is unrelated to income. 
B)  consumption is positively related to income. 
C)  consumption is inversely related to income. 
D)  consumption is constant. 
A)  consumption is unrelated to income. 
B)  consumption is positively related to income. 
C)  consumption is inversely related to income. 
D)  consumption is constant.

Question 11

Diagram 6a
  
-Diagram 6a indicates that

Accepted Answer

A)  equilibrium income is above full employment. 
B)  equilibrium income is below full employment. 
C)  equilibrium income is the same as full employment. 
D)  equilibrium income is the same as aggregate spending. 
A)  equilibrium income is above full employment. 
B)  equilibrium income is below full employment. 
C)  equilibrium income is the same as full employment. 
D)  equilibrium income is the same as aggregate spending.

Question 12

Aggregate Demand and Aggregate Supply

Accepted Answer

A)  Explain why the economy sometimes goes into recession 
B)  Are drawn like traditional supply and demand curves only with the price level on the vertical axis 
C)  Are drawn like traditional supply and demand curves only with REAL GDP on the vertical axis 
D)  All of the above 
A)  Explain why the economy sometimes goes into recession 
B)  Are drawn like traditional supply and demand curves only with the price level on the vertical axis 
C)  Are drawn like traditional supply and demand curves only with REAL GDP on the vertical axis 
D)  All of the above

Question 13

Diagram 6b
  
-Diagram 6b indicates that

Accepted Answer

A)  consumption increases faster than income. 
B)  income is always less than consumption. 
C)  consumption is always less than income. 
D)  income increases faster than consumption. 
A)  consumption increases faster than income. 
B)  income is always less than consumption. 
C)  consumption is always less than income. 
D)  income increases faster than consumption.

Question 14

According to Keynesian analysis of investment and savings, what element is left out of the classical solution to excess of planned savings over planned investment?

Accepted Answer

A)  The effect of lower consumption on investment. 
B)  The effect of lower interest rates on savings. 
C)  The effect of lower interest rates on investment. 
D)  The effect of lower savings on consumption 
A)  The effect of lower consumption on investment. 
B)  The effect of lower interest rates on savings. 
C)  The effect of lower interest rates on investment. 
D)  The effect of lower savings on consumption

Question 15

Aggregate demand is defined as

Accepted Answer

A)  the total dollar amount of goods and services that consumers, investors, foreigners, and governments plan to buy at a given price level. 
B)  the total dollar amount of goods and services that business produces and plans to sell at a given price level. 
C)  the demand for a materials used in concrete. 
D)  the demand for all the various types of goods and services consumed by a household. 
A)  the total dollar amount of goods and services that consumers, investors, foreigners, and governments plan to buy at a given price level. 
B)  the total dollar amount of goods and services that business produces and plans to sell at a given price level. 
C)  the demand for a materials used in concrete. 
D)  the demand for all the various types of goods and services consumed by a household.

Question 16

If the interest rate falls:

Accepted Answer

A)  Savings will rise and investment will rise. 
B)  Savings will fall and investment will fall. 
C)  Savings will rise and investment will fall. 
D)  Savings will fall and investment will rise. 
A)  Savings will rise and investment will rise. 
B)  Savings will fall and investment will fall. 
C)  Savings will rise and investment will fall. 
D)  Savings will fall and investment will rise.

Question 17

According to Classical Economics, the reasons all savings will be invested is

Accepted Answer

A)  the government will make rules to force that to happen. 
B)  savings will be deposited in banks and lent to investors. 
C)  people only save money to invest it. 
D)  All of the above 
A)  the government will make rules to force that to happen. 
B)  savings will be deposited in banks and lent to investors. 
C)  people only save money to invest it. 
D)  All of the above

Question 18

Aggregate supply is defined as

Accepted Answer

A)  the total output that business produces and plans to sell at a given price level. 
B)  the total dollar amount of goods and services that consumers, investors, foreigners, and governments plan to buy at a given price level. 
C)  the total quantity of goods that sellers would like to sell during a given period, at various prices, holding other things constant. 
D)  the total quantity of goods that buyers would like to buy during a given period, at various prices, holding other things constant. 
A)  the total output that business produces and plans to sell at a given price level. 
B)  the total dollar amount of goods and services that consumers, investors, foreigners, and governments plan to buy at a given price level. 
C)  the total quantity of goods that sellers would like to sell during a given period, at various prices, holding other things constant. 
D)  the total quantity of goods that buyers would like to buy during a given period, at various prices, holding other things constant.

Question 19

If every business in the economy cuts their employees' wages, total profits in the economy will rise.

Accepted Answer

A) True 
 B)False

Question 20

According to Keynes, people are unemployed because

Accepted Answer

A)  They prefer leisure to work at the current wage rate. 
B)  They are waiting around for a better job that pays a higher wage than the job they could get. 
C)  There are an insufficient number of jobs available at the prevailing wage. 
D)  They are just plain lazy and don't want to work. 
A)  They prefer leisure to work at the current wage rate. 
B)  They are waiting around for a better job that pays a higher wage than the job they could get. 
C)  There are an insufficient number of jobs available at the prevailing wage. 
D)  They are just plain lazy and don't want to work.

The Keynesian cross diagram shows

Keynes stressed the importance of effective demand which is

According to Classical Economics, if the demand for labor in the entire economy falls:

According to Keynes, why might money deposited in banks not find its way to new productive investments?

In the Classical view of the macroeconomy, too many workers seeking work or unemployment will lead to

According to Keynesian analysis, why might lowering interest rates not work to stimulate enough investment to absorb all of planned savings in the economy?

If the interest rate rises:

Diagram 6a -Diagram 6a indicates that

Diagram 6b -Diagram 6b indicates that when income is greater than $6,000

Diagram 6b -Diagram 6b indicates that

Diagram 6a -Diagram 6a indicates that

Aggregate Demand and Aggregate Supply

Diagram 6b -Diagram 6b indicates that

According to Keynesian analysis of investment and savings, what element is left out of the classical solution to excess of planned savings over planned investment?

Aggregate demand is defined as

If the interest rate falls:

According to Classical Economics, the reasons all savings will be invested is

Aggregate supply is defined as

If every business in the economy cuts their employees' wages, total profits in the economy will rise.

According to Keynes, people are unemployed because

What Is Macroeconomics and the Evolution of Capitalism

The Classical View of the Macro-Economy

The Keynesian Revolution

National Income Accounting

Introduction to Economic Growth

Introduction to Business Cycles

Investment and Profit, and the Multiplier

Consumer Spending, and Credit and Interest

Housing Bubble, Financial Crisis, and Government Spending, Taxes, and Deficits

The Trade Gap

Business Cycles

Globalization and the Spread of Instability

Inflation

Monetary Policy, Financial Regulation, and Debates Over Monetary Policy

Fiscal Policy: How to Stimulate the Economy

Fiscal Policy: Austerians and Deficit Hawks V Stimulus

A Road to Full Employment

Filters

Exam 5: Classical and Keynesian Graphical Analysis

The Keynesian cross diagram shows

Keynes stressed the importance of effective demand which is

According to Classical Economics, if the demand for labor in the entire economy falls:

According to Keynes, why might money deposited in banks not find its way to new productive investments?

In the Classical view of the macroeconomy, too many workers seeking work or unemployment will lead to

According to Keynesian analysis, why might lowering interest rates not work to stimulate enough investment to absorb all of planned savings in the economy?

If the interest rate rises:

Diagram 6a -Diagram 6a indicates that

Diagram 6b -Diagram 6b indicates that when income is greater than $6,000

Diagram 6b -Diagram 6b indicates that

Diagram 6a -Diagram 6a indicates that

Aggregate Demand and Aggregate Supply

Diagram 6b -Diagram 6b indicates that

According to Keynesian analysis of investment and savings, what element is left out of the classical solution to excess of planned savings over planned investment?

Aggregate demand is defined as

If the interest rate falls:

According to Classical Economics, the reasons all savings will be invested is

Aggregate supply is defined as

If every business in the economy cuts their employees' wages, total profits in the economy will rise.

According to Keynes, people are unemployed because

What Is Macroeconomics and the Evolution of Capitalism

The Classical View of the Macro-Economy

The Keynesian Revolution

National Income Accounting

Introduction to Economic Growth

Introduction to Business Cycles

Investment and Profit, and the Multiplier

Consumer Spending, and Credit and Interest

Housing Bubble, Financial Crisis, and Government Spending, Taxes, and Deficits

The Trade Gap

Business Cycles

Globalization and the Spread of Instability

Inflation

Monetary Policy, Financial Regulation, and Debates Over Monetary Policy

Fiscal Policy: How to Stimulate the Economy

Fiscal Policy: Austerians and Deficit Hawks V Stimulus

A Road to Full Employment

Filters