Question 1

Exhibit 10-4  
-Refer to Exhibit 10-4.Marginal propensity to consume is equal to

Accepted Answer

A)  AF divided by C0A. 
B)  C0A divided by AF. 
C)  AF divided by C0F. 
D)  C0F divided by AF. 
E)  none of the above 
A)  AF divided by C0A. 
B)  C0A divided by AF. 
C)  AF divided by C0F. 
D)  C0F divided by AF. 
E)  none of the above C

Question 2

Exhibit 10-7  
-Refer to Exhibit 10-7.If investment decreases,which of the following is possible?

Accepted Answer

A)  The AD curve shifts leftward from AD2 to AD1,the price level falls,and Real GDP remains constant. 
B)  The AD curve shifts leftward from AD4 to AD3,the price level falls,and Real GDP remains constant. 
C)  The AD curve shifts rightward from AD1 to AD2,the price level remains constant,and Real GDP rises. 
D)  The AD curve shifts rightward from AD3 to AD4,the price level rises,and Real GDP remains constant. 
E)  c and d 
A)  The AD curve shifts leftward from AD2 to AD1,the price level falls,and Real GDP remains constant. 
B)  The AD curve shifts leftward from AD4 to AD3,the price level falls,and Real GDP remains constant. 
C)  The AD curve shifts rightward from AD1 to AD2,the price level remains constant,and Real GDP rises. 
D)  The AD curve shifts rightward from AD3 to AD4,the price level rises,and Real GDP remains constant. 
E)  c and d B

Question 3

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 C

Question 4

A rise in MPC makes the total expenditures (TE)curve __________ and __________ the multiplier.

Accepted Answer

A)  steeper;raises 
B)  steeper;lowers 
C)  flatter;raises 
D)  flatter;lowers 
A)  steeper;raises 
B)  steeper;lowers 
C)  flatter;raises 
D)  flatter;lowers

Question 5

If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,168,the marginal propensity to consume is __________ percent.

Accepted Answer

A)  8 
B)  85 
C)  15 
D)  92 
A)  8 
B)  85 
C)  15 
D)  92

Question 6

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 7

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 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 8

Exhibit 10-8
  
-Refer to Exhibit 10-8.Autonomous consumption (Co)is equal to

Accepted Answer

A)  $3 
B)  $30 
C)  $300. 
D)  $3,000. 
A)  $3 
B)  $30 
C)  $300. 
D)  $3,000.

Question 9

A consumption function is a statement that shows the relationship between interest rates and consumption.

Accepted Answer

A) True 
 B)False

Question 10

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 11

The horizontal investment curve used to derive the TE curve means 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 12

Exhibit 10-8
  
-Refer to Exhibit 10-8.When disposable income equals $500,saving equals

Accepted Answer

A)  $125. 
B)  $500. 
C)  $175. 
D)  -$175. 
A)  $125. 
B)  $500. 
C)  $175. 
D)  -$175.

Question 13

The part of consumption that is dependent on disposable income is called autonomous consumption.

Accepted Answer

A) True 
 B)False

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

Question 15

When total expenditures are greater than total production,__________ is produced than households want to buy,which leads to __________ in inventory,which signals firms that they have __________,which causes firms to increase production.

Accepted Answer

A)  less;decreases;underproduced 
B)  more;increases;underproduced 
C)  less;increases;underproduced 
D)  more;decreases;overproduced 
A)  less;decreases;underproduced 
B)  more;increases;underproduced 
C)  less;increases;underproduced 
D)  more;decreases;overproduced

Question 16

According to Keynes,the economy is inherently unstable and may get stuck in a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Government purchases rise by $100 billion and the MPC is equal 0.75.Assuming that idle resources exist at each expenditure round,and the multiplier is operative,the change in Real GDP equals

Accepted Answer

A)  $40 billion. 
B)  $75 billion. 
C)  $400 billion. 
D)  $750 billion. 
E)  $250 billion. 
A)  $40 billion. 
B)  $75 billion. 
C)  $400 billion. 
D)  $750 billion. 
E)  $250 billion.

Question 19

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

Accepted Answer

A)  TE > TP,and there are decreases in inventory. 
B)  TP > TE,and there are increases in inventory. 
C)  TE = TP,and there are no changes in inventory. 
D)  TE > TP,and there are increases in inventory. 
A)  TE > TP,and there are decreases in inventory. 
B)  TP > TE,and there are increases in inventory. 
C)  TE = TP,and there are no changes in inventory. 
D)  TE > TP,and there are increases in inventory.

Question 20

Which of the following statements would Keynes be most likely to agree with?

Accepted Answer

A)  Saving is more responsive to changes in interest rates than to changes in income. 
B)  Say's law holds in both a barter and money economy. 
C)  The internal structure of the economy is not always competitive enough to allow prices to fall. 
D)  Investment is exclusively dependent upon the interest rate. 
E)  none of the above 
A)  Saving is more responsive to changes in interest rates than to changes in income. 
B)  Say's law holds in both a barter and money economy. 
C)  The internal structure of the economy is not always competitive enough to allow prices to fall. 
D)  Investment is exclusively dependent upon the interest rate. 
E)  none of the above

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

Exhibit 10-4 -Refer to Exhibit 10-4.Marginal propensity to consume is equal to

Exhibit 10-7 -Refer to Exhibit 10-7.If investment decreases,which of the following is possible?

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

A rise in MPC makes the total expenditures (TE)curve __________ and __________ the multiplier.

If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,168,the marginal propensity to consume is __________ percent.

Keynes assumed consumption is

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 Real GDP is __________ its equilibrium level,with __________.

Exhibit 10-8 -Refer to Exhibit 10-8.Autonomous consumption (Co)is equal to

A consumption function is a statement that shows the relationship between interest rates and consumption.

John Maynard Keynes was a very famous economist from

The horizontal investment curve used to derive the TE curve means investment is

Exhibit 10-8 -Refer to Exhibit 10-8.When disposable income equals $500,saving equals

The part of consumption that is dependent on disposable income is called autonomous consumption.

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

When total expenditures are greater than total production,__________ is produced than households want to buy,which leads to __________ in inventory,which signals firms that they have __________,which causes firms to increase production.

According to Keynes,the economy is inherently unstable and may get stuck in a recessionary gap.

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.

Government purchases rise by $100 billion and the MPC is equal 0.75.Assuming that idle resources exist at each expenditure round,and the multiplier is operative,the change in Real GDP equals

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

Which of the following statements would Keynes be most likely to agree with?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, Prices and Unemployment

Macroeconomic Measurements, 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

Agriculture: Problems, policies, and Unintended Effects

Filters

A rise in MPC makes the total expenditures (TE)curve and the multiplier.

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 Real GDP is its equilibrium level,with .

Exhibit 10-8 -Refer to Exhibit 10-8.Autonomous consumption (C_o)is equal to

When total expenditures are greater than total production, is produced than households want to buy,which leads to in inventory,which signals firms that they have __,which causes firms to increase production.

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 10-1 -Refer to Exhibit 10-1.At Q₁,