Question 1

Which of the following is consistent with Keynes's view of Say's law?

Accepted Answer

A) Saving increases by $3 billion,consumption falls by $3 billion,and investment rises by $3 billion. 
B) Consumption rises by $3 billion and saving rises by more than $3 billion. 
C) Saving rises by $3 billion,consumption falls by $3 billion,and investment rises by something less than $3 billion. 
D) Saving rises by $3 billion,consumption falls by $3 billion,and investment rises by $6 billion. 
E) none of the above 
A) Saving increases by $3 billion,consumption falls by $3 billion,and investment rises by $3 billion. 
B) Consumption rises by $3 billion and saving rises by more than $3 billion. 
C) Saving rises by $3 billion,consumption falls by $3 billion,and investment rises by something less than $3 billion. 
D) Saving rises by $3 billion,consumption falls by $3 billion,and investment rises by $6 billion. 
E) none of the above

Question 2

The consumption function is a function showing the relationship between consumption and

Accepted Answer

A) disposable income. 
B) exports. 
C) interest rates. 
D) investment. 
A) disposable income. 
B) exports. 
C) interest rates. 
D) investment.

Question 3

Exhibit 10-2  
-Refer to Exhibit 10-2.If autonomous investment decreases,the TE curve will shift ____________ and the new level of equilibrium Real GDP will be ___________ than $4,500.

Accepted Answer

A) downward;greater 
B) downward;less 
C) upward;less 
D) upward;greater 
A) downward;greater 
B) downward;less 
C) upward;less 
D) upward;greater

Question 4

Exhibit 10-7  
-Refer to Exhibit 10-7.If autonomous consumption increases,which of the following is possible?

Accepted Answer

A) The AD curve will shift rightward from AD1 to AD2,the price level will remain constant,and Real GDP will rise. 
B) The AD curve will shift leftward from AD4 to AD3,the price level will fall,and Real GDP will remain constant. 
C) The AD curve will shift rightward from AD3 to AD4,the price level will remain constant,and Real GDP will rise. 
D) The AD curve will shift rightward from AD1 to AD2, the price level will rise,and Real GDP will remain constant. 
A) The AD curve will shift rightward from AD1 to AD2,the price level will remain constant,and Real GDP will rise. 
B) The AD curve will shift leftward from AD4 to AD3,the price level will fall,and Real GDP will remain constant. 
C) The AD curve will shift rightward from AD3 to AD4,the price level will remain constant,and Real GDP will rise. 
D) The AD curve will shift rightward from AD1 to AD2, the price level will rise,and Real GDP will remain constant.

Question 5

Two economists,Smith and Jones,are discussing the currently high unemployment rate.Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment.Jones says that it is better to take a "hands-off" approach.Which of the following is most likely to be true?

Accepted Answer

A) Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. 
B) Smith and Jones are most likely both classical economists with a few minor differences of opinion. 
C) Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. 
D) Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. 
E) none of the above. 
A) Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. 
B) Smith and Jones are most likely both classical economists with a few minor differences of opinion. 
C) Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. 
D) Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. 
E) none of the above.

Question 6

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts __________,the AD curve shifts __________,and Real GDP __________.

Accepted Answer

A) downward;leftward;decreases 
B) downward;rightward;decreases 
C) upward;rightward;increases 
D) upward;leftward;increases 
A) downward;leftward;decreases 
B) downward;rightward;decreases 
C) upward;rightward;increases 
D) upward;leftward;increases

Question 7

John Maynard Keynes was a very famous economist from

Accepted Answer

A) the United States. 
B) England. 
C) Germany. 
D) Ireland. 
A) the United States. 
B) England. 
C) Germany. 
D) Ireland.

Question 8

The horizontal investment curve used to derive the TE curve implies that investment is

Accepted Answer

A) directly related to Real GDP. 
B) indirectly related to Real GDP. 
C) independent of Real GDP. 
D) sometimes directly and sometimes indirectly related to Real GDP,depending upon whether it is planned capital or planned inventory investment. 
A) directly related to Real GDP. 
B) indirectly related to Real GDP. 
C) independent of Real GDP. 
D) sometimes directly and sometimes indirectly related to Real GDP,depending upon whether it is planned capital or planned inventory investment.

Question 9

Exhibit 10-5  
-Refer to Exhibit 10-5.When TE is $300 billion,what will firms most likely firms do next?

Accepted Answer

A) Firms will increase production to increase inventories to their optimum levels. 
B) Firms will neither increase nor decrease production since the economy is in equilibrium. 
C) Firms will cut back production to reduce inventories to their optimum levels. 
D) It is impossible to determine what firms are likely to do based on this information. 
A) Firms will increase production to increase inventories to their optimum levels. 
B) Firms will neither increase nor decrease production since the economy is in equilibrium. 
C) Firms will cut back production to reduce inventories to their optimum levels. 
D) It is impossible to determine what firms are likely to do based on this information.

Question 10

On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the TE line exceeds the vertical distance to the 45-degree line.This level of Real GDP is __________ its equilibrium level,with __________.

Accepted Answer

A) above;TE > TP B) above;TE TP D) below;TE < TP A) above;TE > TP B) above;TE TP D) below;TE < TP

Question 11

Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.75,then we know that

Accepted Answer

A) as Yd rises by $1,Co rises by $0.75. 
B) as Yd rises by $1,C rises by $0.75. 
C) Yd rises by $0.75. 
D) as C0 rises by $0.75,Yd rises by $1. 
A) as Yd rises by $1,Co rises by $0.75. 
B) as Yd rises by $1,C rises by $0.75. 
C) Yd rises by $0.75. 
D) as C0 rises by $0.75,Yd rises by $1.

Question 12

For Say's law to hold in a money economy,

Accepted Answer

A) funds invested must give rise to an equal amount of funds spent. 
B) funds saved must give rise to an equal amount of funds invested. 
C) funds spent must give rise to an equal amount of output produced. 
D) interest rates must fall when saving decreases. 
E) b and c 
A) funds invested must give rise to an equal amount of funds spent. 
B) funds saved must give rise to an equal amount of funds invested. 
C) funds spent must give rise to an equal amount of output produced. 
D) interest rates must fall when saving decreases. 
E) b and c

Question 13

The marginal propensity to consume plus the marginal propensity to save is always

Accepted Answer

A) equal to zero. 
B) greater than zero but less than one. 
C) equal to one. 
D) greater than one. 
A) equal to zero. 
B) greater than zero but less than one. 
C) equal to one. 
D) greater than one.

Question 14

In the real world,we should expect the multiplier process to work itself out

Accepted Answer

A) almost instantaneously. 
B) within a few days. 
C) within about one month. 
D) over many months,perhaps even years. 
A) almost instantaneously. 
B) within a few days. 
C) within about one month. 
D) over many months,perhaps even years.

Question 15

The multiplier process following a drop in autonomous spending is

Accepted Answer

A) just as powerful as for a rise in autonomous spending. 
B) more powerful than for a rise in autonomous spending. 
C) less powerful than for a rise in autonomous spending. 
D) nonexistent,because the multiplier applies only to a rise in autonomous spending. 
A) just as powerful as for a rise in autonomous spending. 
B) more powerful than for a rise in autonomous spending. 
C) less powerful than for a rise in autonomous spending. 
D) nonexistent,because the multiplier applies only to a rise in autonomous spending.

Question 16

Discuss how the Great Depression contributed to the development of Keynesian economics.

Accepted Answer

During the Great Depression,high levels

Question 17

If total production (TP)is greater than total expenditures (TE),it follows that

Accepted Answer

A) producers have produced more than individuals buy. 
B) optimum inventory levels rise. 
C) firms have underproduced. 
D) actual inventory levels unexpectedly rise. 
E) a and d 
A) producers have produced more than individuals buy. 
B) optimum inventory levels rise. 
C) firms have underproduced. 
D) actual inventory levels unexpectedly rise. 
E) a and d

Question 18

The more firms that pay efficiency wages,the

Accepted Answer

A) more likely the economy will get stuck in a recessionary gap. 
B) less likely the economy will get stuck in a recessionary gap. 
C) more likely the economy will get stuck in an inflationary gap. 
D) more likely (over time)the economy will produce Natural Real GDP. 
E) b and c 
A) more likely the economy will get stuck in a recessionary gap. 
B) less likely the economy will get stuck in a recessionary gap. 
C) more likely the economy will get stuck in an inflationary gap. 
D) more likely (over time)the economy will produce Natural Real GDP. 
E) b and c

Question 19

Which of the following statements is false?

Accepted Answer

A) Keynes believed that the level of investment depends on more than just the interest rate. 
B) Saving is the difference between disposable income and consumption. 
C) Keynes believed that saving is more responsive to changes in income than to changes in the interest rate. 
D) According to Keynes,wage rates may fall too quickly when the economy is in a recessionary gap. 
A) Keynes believed that the level of investment depends on more than just the interest rate. 
B) Saving is the difference between disposable income and consumption. 
C) Keynes believed that saving is more responsive to changes in income than to changes in the interest rate. 
D) According to Keynes,wage rates may fall too quickly when the economy is in a recessionary gap.

Question 20

What is the general format of the consumption function? Explain what each term means and use the consumption function to explain the three different ways that consumption can increase.

Accepted Answer

The general consumption formula is: C =

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

Which of the following is consistent with Keynes's view of Say's law?

The consumption function is a function showing the relationship between consumption and

Exhibit 10-2 -Refer to Exhibit 10-2.If autonomous investment decreases,the TE curve will shift ____________ and the new level of equilibrium Real GDP will be ___________ than $4,500.

Exhibit 10-7 -Refer to Exhibit 10-7.If autonomous consumption increases,which of the following is possible?

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts __________,the AD curve shifts __________,and Real GDP __________.

John Maynard Keynes was a very famous economist from

The horizontal investment curve used to derive the TE curve implies that investment is

Exhibit 10-5 -Refer to Exhibit 10-5.When TE is $300 billion,what will firms most likely firms do next?

On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the TE line exceeds the vertical distance to the 45-degree line.This level of Real GDP is __________ its equilibrium level,with __________.

Here is a consumption function: C = C0 + MPC(Yd).If MPC is 0.75,then we know that

For Say's law to hold in a money economy,

The marginal propensity to consume plus the marginal propensity to save is always

In the real world,we should expect the multiplier process to work itself out

The multiplier process following a drop in autonomous spending is

Discuss how the Great Depression contributed to the development of Keynesian economics.

If total production (TP)is greater than total expenditures (TE),it follows that

The more firms that pay efficiency wages,the

Which of the following statements is false?

What is the general format of the consumption function? Explain what each term means and use the consumption function to explain the three different ways that consumption can increase.

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 10-2 -Refer to Exhibit 10-2.If autonomous investment decreases,the TE curve will shift __ and the new level of equilibrium Real GDP will be _ than $4,500.

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts ,the AD curve shifts ,and Real GDP __.

On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the TE line exceeds the vertical distance to the 45-degree line.This level of Real GDP is its equilibrium level,with .

Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.75,then we know that