Question 1

Who would be most likely to agree that "People do not always save more as interest rates rise"?

Accepted Answer

A) a classical economist 
B) John Maynard Keynes 
C) an efficiency wage theorist 
D) a and b 
E) a,b,and c 
A) a classical economist 
B) John Maynard Keynes 
C) an efficiency wage theorist 
D) a and b 
E) a,b,and c B

Question 2

The larger the marginal propensity to save,

Accepted Answer

A) the smaller the multiplier. 
B) the larger the multiplier. 
C) the smaller the change in Real GDP,given a change in autonomous consumption. 
D) a and c 
E) none of the above 
A) the smaller the multiplier. 
B) the larger the multiplier. 
C) the smaller the change in Real GDP,given a change in autonomous consumption. 
D) a and c 
E) none of the above D

Question 3

The more nearly horizontal the aggregate supply curve,the

Accepted Answer

A) greater the change in Real GDP for a given change in autonomous spending. 
B) smaller the change in Real GDP for a given change in autonomous spending. 
C) larger the multiplier. 
D) smaller the multiplier. 
E) a and c 
A) greater the change in Real GDP for a given change in autonomous spending. 
B) smaller the change in Real GDP for a given change in autonomous spending. 
C) larger the multiplier. 
D) smaller the multiplier. 
E) a and c A

Question 4

In a simple Keynesian model,the aggregate supply curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 5

Given that the economy is operating in the horizontal section of the aggregate supply curve in the simple Keynesian model,an increase in autonomous spending will ____________________ (assuming that the economy remains in the horizontal section of the aggregate supply curve).

Accepted Answer

A) increase Real GDP and raise the price level 
B) decrease Real GDP and raise the price level 
C) increase Real GDP and leave the price level unchanged 
D) increase Real GDP and lower the price level 
A) increase Real GDP and raise the price level 
B) decrease Real GDP and raise the price level 
C) increase Real GDP and leave the price level unchanged 
D) increase Real GDP and lower the price level

Question 6

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 7

If households purchase $60,000 worth of consumer goods and firms produce $50,000 worth of consumer goods,then

Accepted Answer

A) inventory changes are -$10,000. 
B) inventory changes are +$10,000. 
C) new capital goods expenditures (by firms)are $10,000. 
D) consumer goods expenditures are $10,000. 
A) inventory changes are -$10,000. 
B) inventory changes are +$10,000. 
C) new capital goods expenditures (by firms)are $10,000. 
D) consumer goods expenditures are $10,000.

Question 8

Exhibit 10-5  
-Refer to Exhibit 10-5 When TE is $700 billion,what state is the economy in?

Accepted Answer

A) TE  TP,individuals are buying more output than firms produce. 
C) TE = TP,the economy is in equilibrium. 
D) TE  TP,individuals are buying less output than firms produce. 
A) TE  TP,individuals are buying more output than firms produce. 
C) TE = TP,the economy is in equilibrium. 
D) TE  TP,individuals are buying less output than firms produce.

Question 9

Here is a consumption function: C = C0 + MPC(Yd).If consumption is $2,000,MPC =0.75,and disposable income is $2,000,what does autonomous consumption equal?

Accepted Answer

A) $950 
B) $3,500 
C) $500 
D) $4,500 
E) none of the above 
A) $950 
B) $3,500 
C) $500 
D) $4,500 
E) none of the above

Question 10

In the simple Keynesian model,there are three simplifying assumptions.One of these assumptions is:

Accepted Answer

A) no consumption 
B) no investment 
C) no exports or imports 
D) a and b 
E) a,b,and c 
A) no consumption 
B) no investment 
C) no exports or imports 
D) a and b 
E) a,b,and c

Question 11

The efficiency wage model contains the assumption that labor productivity __________ the wage rate,so that a firm maximizing its profits __________ pay workers an above-market wage rate.

Accepted Answer

A) is independent of;may 
B) is independent of;will never 
C) depends on;may 
D) depends on;will never 
A) is independent of;may 
B) is independent of;will never 
C) depends on;may 
D) depends on;will never

Question 12

John Maynard Keynes wrote which of the following?

Accepted Answer

A) Das Kapital 
B) The Scope and Method of Political Economy 
C) Wealth of Nations 
D) The General Theory of Employment,Interest and Money 
E) all of the above 
A) Das Kapital 
B) The Scope and Method of Political Economy 
C) Wealth of Nations 
D) The General Theory of Employment,Interest and Money 
E) all of the above

Question 13

The answer is: 1/(1 - MPC).What is the question?

Accepted Answer

A) What is the marginal propensity to save? 
B) What is the efficiency wage model? 
C) What does consumption equal if the economy is in equilibrium? 
D) What is the multiplier? 
E) What does disposable income equal if the economy is in equilibrium? 
A) What is the marginal propensity to save? 
B) What is the efficiency wage model? 
C) What does consumption equal if the economy is in equilibrium? 
D) What is the multiplier? 
E) What does disposable income equal if the economy is in equilibrium?

Question 14

Exhibit 10-1  
-Refer to Exhibit 10-1.At Q1,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 15

According to the efficiency wage model,firms tend to pay workers

Accepted Answer

A) the market-clearing wage that efficiently equates labor supplied and demanded. 
B) in excess of the market-clearing wage to provide an incentive for productivity and efficiency. 
C) less than the market-clearing wage to assure themselves a pool of workers ready to replace workers who quit. 
D) less than the market-clearing wage to minimize labor cost per unit of production. 
A) the market-clearing wage that efficiently equates labor supplied and demanded. 
B) in excess of the market-clearing wage to provide an incentive for productivity and efficiency. 
C) less than the market-clearing wage to assure themselves a pool of workers ready to replace workers who quit. 
D) less than the market-clearing wage to minimize labor cost per unit of production.

Question 16

In the simple Keynesian model,the aggregate supply curve has a horizontal segment at levels of output below the level of natural Real GDP and a vertical segment at the level of natural Real GDP.

Accepted Answer

A) True 
 B)False

Question 17

Given the following data,what is the distance from the origin to the point where the total expenditures (TE)curve cuts the vertical axis?
C = $800 + 0.85Yd
I = $350
G = $420

Accepted Answer

A) $1,570 
B) $1,150 
C) $1,220 
D) $770 
E) ​$1,220.85 
A) $1,570 
B) $1,150 
C) $1,220 
D) $770 
E) ​$1,220.85

Question 18

The economy is in equilibrium,TP = TE.Then,net exports fall.As a result,the __________ curve shifts __________,inventory levels unexpectedly __________,and business firms __________ the quantity of good and services they produce.

Accepted Answer

A) TE;upward;rise;increase 
B) TP;rightward;rise;decrease 
C) TE;downward;rise;decrease 
D) TE;downward;rise;increase 
E) none of the above 
A) TE;upward;rise;increase 
B) TP;rightward;rise;decrease 
C) TE;downward;rise;decrease 
D) TE;downward;rise;increase 
E) none of the above

Question 19

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

Question 20

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

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

Who would be most likely to agree that "People do not always save more as interest rates rise"?

The larger the marginal propensity to save,

The more nearly horizontal the aggregate supply curve,the

In a simple Keynesian model,the aggregate supply curve is upward sloping.

Given that the economy is operating in the horizontal section of the aggregate supply curve in the simple Keynesian model,an increase in autonomous spending will ____________________ (assuming that the economy remains in the horizontal section of the aggregate supply curve).

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.

If households purchase $60,000 worth of consumer goods and firms produce $50,000 worth of consumer goods,then

Exhibit 10-5 -Refer to Exhibit 10-5 When TE is $700 billion,what state is the economy in?

Here is a consumption function: C = C0 + MPC(Yd).If consumption is $2,000,MPC =0.75,and disposable income is $2,000,what does autonomous consumption equal?

In the simple Keynesian model,there are three simplifying assumptions.One of these assumptions is:

The efficiency wage model contains the assumption that labor productivity __________ the wage rate,so that a firm maximizing its profits __________ pay workers an above-market wage rate.

John Maynard Keynes wrote which of the following?

The answer is: 1/(1 - MPC).What is the question?

Exhibit 10-1 -Refer to Exhibit 10-1.At Q1,there is a tendency for Real GDP to

According to the efficiency wage model,firms tend to pay workers

In the simple Keynesian model,the aggregate supply curve has a horizontal segment at levels of output below the level of natural Real GDP and a vertical segment at the level of natural Real GDP.

Given the following data,what is the distance from the origin to the point where the total expenditures (TE)curve cuts the vertical axis? C = $800 + 0.85Yd I = $350 G = $420

The economy is in equilibrium,TP = TE.Then,net exports fall.As a result,the __________ curve shifts __________,inventory levels unexpectedly __________,and business firms __________ the quantity of good and services they produce.

Keynes assumed consumption is

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

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

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Macroeconomic Measurements, part I: Prices and Unemployment

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Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

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Here is a consumption function: C = C₀ + MPC(Y_d).If consumption is $2,000,MPC =0.75,and disposable income is $2,000,what does autonomous consumption equal?

The efficiency wage model contains the assumption that labor productivity the wage rate,so that a firm maximizing its profits pay workers an above-market wage rate.

Exhibit 10-1 -Refer to Exhibit 10-1.At Q₁,there is a tendency for Real GDP to

The economy is in equilibrium,TP = TE.Then,net exports fall.As a result,the curve shifts ,inventory levels unexpectedly ,and business firms the quantity of good and services they produce.