Question 1

The work of John Maynard Keynes led to a major revolution in economic thought.

Accepted Answer

A) True 
 B)False

Question 2

Many economists argue that the labor market may take a long time for wages to adjust to new equilibrium level.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is good evidence against the classical view of Say's law?

Accepted Answer

A) Investment does not always rise as interest rates fall. 
B) Consumption falls by the amount that saving increases. 
C) Exports are usually greater than imports. 
D) People save more at higher interest rates than lower interest rates. 
E) none of the above 
A) Investment does not always rise as interest rates fall. 
B) Consumption falls by the amount that saving increases. 
C) Exports are usually greater than imports. 
D) People save more at higher interest rates than lower interest rates. 
E) none of the above

Question 4

In the Keynesian analysis of changes from one Real GDP level to another,which of the following plays a critical role?

Accepted Answer

A) changes in prices 
B) the relationship between optimum inventory levels and current inventory levels 
C) the long-run aggregate supply (LRAS)curve 
D) the relationship between total expenditures (T
E) and the aggregate demand (A
D) curve 
E) none of the above 
A) changes in prices 
B) the relationship between optimum inventory levels and current inventory levels 
C) the long-run aggregate supply (LRAS)curve 
D) the relationship between total expenditures (T
E) and the aggregate demand (A
D) curve 
E) none of the above

Question 5

If we graph the consumption function such that it cuts the vertical axis at a point above the origin,this is because we are assuming that

Accepted Answer

A) the MPC is positive. 
B) the MPS is positive. 
C) autonomous consumption is positive. 
D) induced consumption is positive. 
A) the MPC is positive. 
B) the MPS is positive. 
C) autonomous consumption is positive. 
D) induced consumption is positive.

Question 6

When total production is greater than total expenditures,

Accepted Answer

A) the economy is in disequilibrium. 
B) there are increases in inventory. 
C) total output will decrease. 
D) all of the above 
A) the economy is in disequilibrium. 
B) there are increases in inventory. 
C) total output will decrease. 
D) all of the above

Question 7

Exhibit 10-1  
-Refer to Exhibit 10-1.At all points on the 45-degree line,

Accepted Answer

A) TP = Real GDP. B) TP > Real GDP. C) TP < Real GDP. D) all of the above are possible. A) TP = Real GDP. B) TP > Real GDP. C) TP < Real GDP. D) all of the above are possible.

Question 8

The economy can be in equilibrium and in a recessionary gap simultaneously.

Accepted Answer

A) True 
 B)False

Question 9

The two major curves or lines in the TE-TP diagram are:

Accepted Answer

A) the total expenditure curve and the 45-degree line. 
B) the supply and demand curves. 
C) the total expenditures and national income curves. 
D) the total production and national income curves. 
A) the total expenditure curve and the 45-degree line. 
B) the supply and demand curves. 
C) the total expenditures and national income curves. 
D) the total production and national income curves.

Question 10

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 11

Exhibit 10-1  
-Refer to Exhibit 10-1.At Q2,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 12

In the simple Keynesian model,an increase in aggregate demand leads to an increase in

Accepted Answer

A) Real GDP and the price level at all levels of Real GDP. 
B) the price level and no change in Real GDP for levels of Real GDP below Natural Real GDP. 
C) the price level and a decrease in Real GDP at all levels of GDP. 
D) Real GDP and no change in the price level for levels of Real GDP below Natural Real GDP. 
A) Real GDP and the price level at all levels of Real GDP. 
B) the price level and no change in Real GDP for levels of Real GDP below Natural Real GDP. 
C) the price level and a decrease in Real GDP at all levels of GDP. 
D) Real GDP and no change in the price level for levels of Real GDP below Natural Real GDP.

Question 13

Which of the following is a basic point that Keynes made about consumption?

Accepted Answer

A) Consumption and disposal income are inversely related. 
B) When disposable income changes,consumption changes by a greater amount. 
C) Consumption is dependent upon disposable income. 
D) b and c 
E) all of the above 
A) Consumption and disposal income are inversely related. 
B) When disposable income changes,consumption changes by a greater amount. 
C) Consumption is dependent upon disposable income. 
D) b and c 
E) all of the above

Question 14

Using the concept of the multiplier,explain in detail how college students flocking to beach towns for spring break can positively impact the beach towns' economies.

Accepted Answer

College students on spring break will sp

Question 15

Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.80,then we know that

Accepted Answer

A) as Yd rises by $1,Co rises by $0.80. 
B) as Yd rises by $1,C rises by $0.80. 
C) Yd rises by $0.80. 
D) as C0 rises by $0.80,Yd rises by $1. 
A) as Yd rises by $1,Co rises by $0.80. 
B) as Yd rises by $1,C rises by $0.80. 
C) Yd rises by $0.80. 
D) as C0 rises by $0.80,Yd rises by $1.

Question 16

Exhibit 10-5  
-Refer to Exhibit 10-5 When TE is $200 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 17

Consumption and disposable income are

Accepted Answer

A) indirectly related. 
B) directly related. 
C) not related. 
D) sometimes directly and sometimes indirectly related,depending upon whether consumption is planned or unplanned. 
A) indirectly related. 
B) directly related. 
C) not related. 
D) sometimes directly and sometimes indirectly related,depending upon whether consumption is planned or unplanned.

Question 18

Describe Keynes' criticism of Say's law in a money economy.

Accepted Answer

In order for Say's law to hold in a mone

Question 19

The marginal propensity to save (MPS)can be found using the equation: (1 - MPC).

Accepted Answer

A) True 
 B)False

Question 20

If total production is greater than total expenditures,

Accepted Answer

A) there will be an increase in saving. 
B) there will be an increase in inventories. 
C) firms will then increase production. 
D) firms will then increase prices. 
A) there will be an increase in saving. 
B) there will be an increase in inventories. 
C) firms will then increase production. 
D) firms will then increase prices.

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

The work of John Maynard Keynes led to a major revolution in economic thought.

Many economists argue that the labor market may take a long time for wages to adjust to new equilibrium level.

Which of the following is good evidence against the classical view of Say's law?

In the Keynesian analysis of changes from one Real GDP level to another,which of the following plays a critical role?

If we graph the consumption function such that it cuts the vertical axis at a point above the origin,this is because we are assuming that

When total production is greater than total expenditures,

Exhibit 10-1 -Refer to Exhibit 10-1.At all points on the 45-degree line,

The economy can be in equilibrium and in a recessionary gap simultaneously.

The two major curves or lines in the TE-TP diagram are:

Which of the following statements is true?

Exhibit 10-1 -Refer to Exhibit 10-1.At Q2,there is a tendency for Real GDP to

In the simple Keynesian model,an increase in aggregate demand leads to an increase in

Which of the following is a basic point that Keynes made about consumption?

Using the concept of the multiplier,explain in detail how college students flocking to beach towns for spring break can positively impact the beach towns' economies.

Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.80,then we know that

Exhibit 10-5 -Refer to Exhibit 10-5 When TE is $200 billion,what state is the economy in?

Consumption and disposable income are

Describe Keynes' criticism of Say's law in a money economy.

The marginal propensity to save (MPS)can be found using the equation: (1 - MPC).

If total production is greater than total expenditures,

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: 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

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

Filters

Exhibit 10-1 -Refer to Exhibit 10-1.At Q₂,there is a tendency for Real GDP to

Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.80,then we know that