Question 1

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____.

Accepted Answer

A)  disposable income;saving 
B)  disposable income;consumption 
C)  saving;consumption 
D)  saving;investment 
A)  disposable income;saving 
B)  disposable income;consumption 
C)  saving;consumption 
D)  saving;investment

Question 2

After the acceptance of Keynesian analysis,government:

Accepted Answer

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

Question 3

If AE = $7,600 and Y = $8,000,businesses will produce:

Accepted Answer

A)  more,raising both employment and income. 
B)  less,lowering both employment and income. 
C)  more,raising employment and lowering income. 
D)  less,lowering employment and raising income. 
A)  more,raising both employment and income. 
B)  less,lowering both employment and income. 
C)  more,raising employment and lowering income. 
D)  less,lowering employment and raising income.

Question 4

Which of the following will NOT cause an increase in the consumption schedule?

Accepted Answer

A)  James's family wealth increases. 
B)  The price of gas is expected to increase in two days. 
C)  James's family debt increases. 
D)  James's personal taxes decrease. 
A)  James's family wealth increases. 
B)  The price of gas is expected to increase in two days. 
C)  James's family debt increases. 
D)  James's personal taxes decrease.

Question 5

In the Keynesian framework,the way to fight a recession is to:

Accepted Answer

A)  cut taxes and/or increase government spending. 
B)  reduce interest rates. 
C)  increase the population with more immigration. 
D)  do nothing and wait for the economy to return to full employment on its own. 
A)  cut taxes and/or increase government spending. 
B)  reduce interest rates. 
C)  increase the population with more immigration. 
D)  do nothing and wait for the economy to return to full employment on its own.

Question 6

If the marginal propensity to consume is 0.8,full-employment output is $14 trillion,and current output is $13.5 trillion,then investment spending must _____________________ to reach full-employment output.

Accepted Answer

A)  increase by $0.5 trillion 
B)  decrease by $0.5 trillion 
C)  increase by $0.1 trillion 
D)  increase by $0.4 trillion 
A)  increase by $0.5 trillion 
B)  decrease by $0.5 trillion 
C)  increase by $0.1 trillion 
D)  increase by $0.4 trillion

Question 7

The balanced budget multiplier equals 1.

Accepted Answer

A) True 
 B)False

Question 8

Suppose full employment real GDP is $13 trillion,current real GDP is $13.2 trillion,and the marginal propensity to consume is 0.5.The inflationary gap is:

Accepted Answer

A)  $0.2 trillion. 
B)  $0.05 trillion. 
C)  -$0.2 trillion. 
D)  $0.1 trillion. 
A)  $0.2 trillion. 
B)  $0.05 trillion. 
C)  -$0.2 trillion. 
D)  $0.1 trillion.

Question 9

If consumption decreases from $600 billion to $575 billion and the marginal propensity to consume is 0.8,then equilibrium income will:

Accepted Answer

A)  fall by $25 billion. 
B)  fall by $125 billion. 
C)  rise by $25 billion. 
D)  rise by $125 billion. 
A)  fall by $25 billion. 
B)  fall by $125 billion. 
C)  rise by $25 billion. 
D)  rise by $125 billion.

Question 10

At equilibrium,if spending increases by $300 and the corresponding increase in income is $1,500,what is the multiplier?

Accepted Answer

A)  0.2 
B)  5 
C)  0.8 
D)  1 
A)  0.2 
B)  5 
C)  0.8 
D)  1

Question 11

The 45-degree line in the Keynesian model represents:

Accepted Answer

A)  AE = C. 
B)  AE = G. 
C)  AE = I. 
D)  AE = Y. 
A)  AE = C. 
B)  AE = G. 
C)  AE = I. 
D)  AE = Y.

Question 12

If the marginal propensity to consume is 0.85,how much is the spending multiplier?

Accepted Answer

A)  0.15 
B)  1.17 
C)  5.1 
D)  6.67 
A)  0.15 
B)  1.17 
C)  5.1 
D)  6.67

Question 13

John Maynard Keynes advised U.S.President Franklin Roosevelt to:

Accepted Answer

A)  balance the budget in order to reduce the interest rate. 
B)  pass the Versailles Treaty in order to eliminate Germany as a competitor. 
C)  increase government spending in order to stimulate the economy. 
D)  increase the interest rate to increase savings so investment would be stimulated. 
A)  balance the budget in order to reduce the interest rate. 
B)  pass the Versailles Treaty in order to eliminate Germany as a competitor. 
C)  increase government spending in order to stimulate the economy. 
D)  increase the interest rate to increase savings so investment would be stimulated.

Question 14

Tax changes generally have less of an impact on equilibrium income than do changes in government spending.

Accepted Answer

A) True 
 B)False

Question 15

Spending by federal,state,and local government has grown from ___ of GDP in the 1930s to more than _____ today.

Accepted Answer

A)  5%;50%. 
B)  10%;30%. 
C)  30%;70% 
D)  5%;10%. 
A)  5%;50%. 
B)  10%;30%. 
C)  30%;70% 
D)  5%;10%.

Question 16

Firms decide how much to invest by comparing the rate of return on their projects with:

Accepted Answer

A)  their total profit. 
B)  the productivity of the workers assigned to the projects. 
C)  the interest rate. 
D)  before-tax rate of return. 
A)  their total profit. 
B)  the productivity of the workers assigned to the projects. 
C)  the interest rate. 
D)  before-tax rate of return.

Question 17

Suppose the economy has more saving than investment.In the simple Keynesian model,how would the economy achieve equilibrium,assuming that desired investment is fixed?

Accepted Answer

If there is more saving than investing,t

Question 18

Negative saving,by definition,is impossible.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the marginal propensity to consume in Economia is 0.75.People feel increasing confidence in their economy and spend $5 billion more on vacations.Equilibrium income will rise by:

Accepted Answer

A)  $75 billion. 
B)  $4 billion. 
C)  $5 billion. 
D)  $20 billion. 
A)  $75 billion. 
B)  $4 billion. 
C)  $5 billion. 
D)  $20 billion.

Question 20

In Keynesian macroeconomic equilibrium,pressures on the economy to move to a different income exist.

Accepted Answer

A) True 
 B)False

The 45-degree line in the Keynesian model represents a set of points where _ equals _.

After the acceptance of Keynesian analysis,government:

If AE = $7,600 and Y = $8,000,businesses will produce:

Which of the following will NOT cause an increase in the consumption schedule?

In the Keynesian framework,the way to fight a recession is to:

If the marginal propensity to consume is 0.8,full-employment output is $14 trillion,and current output is $13.5 trillion,then investment spending must _____________________ to reach full-employment output.

The balanced budget multiplier equals 1.

Suppose full employment real GDP is $13 trillion,current real GDP is $13.2 trillion,and the marginal propensity to consume is 0.5.The inflationary gap is:

If consumption decreases from $600 billion to $575 billion and the marginal propensity to consume is 0.8,then equilibrium income will:

At equilibrium,if spending increases by $300 and the corresponding increase in income is $1,500,what is the multiplier?

The 45-degree line in the Keynesian model represents:

If the marginal propensity to consume is 0.85,how much is the spending multiplier?

John Maynard Keynes advised U.S.President Franklin Roosevelt to:

Tax changes generally have less of an impact on equilibrium income than do changes in government spending.

Spending by federal,state,and local government has grown from _ of GDP in the 1930s to more than ___ today.

Firms decide how much to invest by comparing the rate of return on their projects with:

Suppose the economy has more saving than investment.In the simple Keynesian model,how would the economy achieve equilibrium,assuming that desired investment is fixed?

Negative saving,by definition,is impossible.

Suppose the marginal propensity to consume in Economia is 0.75.People feel increasing confidence in their economy and spend $5 billion more on vacations.Equilibrium income will rise by:

In Keynesian macroeconomic equilibrium,pressures on the economy to move to a different income exist.

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 Macroeconomic

Filters

Exam 8: Aggregate Expenditures

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____.

After the acceptance of Keynesian analysis,government:

If AE = $7,600 and Y = $8,000,businesses will produce:

Which of the following will NOT cause an increase in the consumption schedule?

In the Keynesian framework,the way to fight a recession is to:

If the marginal propensity to consume is 0.8,full-employment output is $14 trillion,and current output is $13.5 trillion,then investment spending must _____________________ to reach full-employment output.

The balanced budget multiplier equals 1.

Suppose full employment real GDP is $13 trillion,current real GDP is $13.2 trillion,and the marginal propensity to consume is 0.5.The inflationary gap is:

If consumption decreases from $600 billion to $575 billion and the marginal propensity to consume is 0.8,then equilibrium income will:

At equilibrium,if spending increases by $300 and the corresponding increase in income is $1,500,what is the multiplier?

The 45-degree line in the Keynesian model represents:

If the marginal propensity to consume is 0.85,how much is the spending multiplier?

John Maynard Keynes advised U.S.President Franklin Roosevelt to:

Tax changes generally have less of an impact on equilibrium income than do changes in government spending.

Spending by federal,state,and local government has grown from ___ of GDP in the 1930s to more than _____ today.

Firms decide how much to invest by comparing the rate of return on their projects with:

Suppose the economy has more saving than investment.In the simple Keynesian model,how would the economy achieve equilibrium,assuming that desired investment is fixed?

Negative saving,by definition,is impossible.

Suppose the marginal propensity to consume in Economia is 0.75.People feel increasing confidence in their economy and spend $5 billion more on vacations.Equilibrium income will rise by:

In Keynesian macroeconomic equilibrium,pressures on the economy to move to a different income exist.

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 Macroeconomic

Filters

The 45-degree line in the Keynesian model represents a set of points where _ equals _.

Spending by federal,state,and local government has grown from _ of GDP in the 1930s to more than ___ today.