Question 1

John Maynard Keynes believed that wages may be inflexible in the downward direction.Consequently,an economy

Accepted Answer

A)   could get stuck in long-run equilibrium.
B)   could get stuck in a recessionary gap.
C)   could get stuck in an inflationary gap.
D)   would always produce more than Natural Real GDP.
E)   b and c B

Question 2

Exhibit 10-8
 
-Refer to Exhibit 10-8.The consumption function is

Accepted Answer

A)   C = 0.75(Yd) .
B)   C = $3,000 + 0.90(Yd) .
C)   C = $300 + 0.25 (Yd) .
D)   C = $300 + 0.75(Yd) . D

Question 3

Exhibit 10-8
 
-Refer to Exhibit 10-8.Autonomous consumption (C0)is equal to

Accepted Answer

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

Question 4

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

Question 5

According to Keynes,the private sector (by itself)

Accepted Answer

A)   can always move the economy out of a recessionary gap.
B)   cannot always move the economy out of a recessionary gap.
C)   can never move the economy out of a recessionary gap.
D)   can only move the economy out of a recessionary gap if the SRAS curve drops.
E)   can only move the economy out of a recessionary gap if the SRAS curve rises.

Question 6

The efficiency wage model is an explanation of wage __________ and thus a support for __________ macroeconomics.

Accepted Answer

A)   flexibility; Keynesian
B)   flexibility; classical
C)   inflexibility; Keynesian
D)   inflexibility; classical

Question 7

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.

Question 8

Exhibit 10-9
 
-Refer to Exhibit 10-9.What is the value of the marginal propensity to consume (MPC)that would correctly fill in blank (C)and the marginal propensity to save (MPS)that would correctly fill in blank (D)?

Accepted Answer

A)   0.90; 0.10
B)   0.10; 10
C)   0.90; 9
D)   0.01; 100

Question 9

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

Accepted Answer

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

Question 10

Exhibit 10-5
 
-Refer to Exhibit 10-5. When TE is $800 billion,what happens to inventories?

Accepted Answer

A)   Inventories are at their optimum levels.
B)   Inventories will fall, then rise above their optimum levels.
C)   Inventories will fall below optimum levels.
D)   Inventories will rise above optimum levels.

Question 11

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.

Question 12

Exhibit 10-6
 
-Refer to Exhibit 10-6.Which of the following is consistent with the economy producing Q??

Accepted Answer

A)   Total expenditures (T
E)   is less than total production (TP) .
B)   Firms are currently holding their optimum inventory levels.
C)   Autonomous spending is greater than zero.
D)   Total expenditures (T
E)   are equal to total production (TP) .
E)   none of the above

Question 13

Suppose the MPC = 0.60 and government purchases increase by $40 billion.In Keynesian theory,which of the following is true?

Accepted Answer

A)   The TE curve shifts downward by $40 billion and Real GDP decreases by $40 billion.
B)   The TE curve shifts upward by $40 billion, and Real GDP increases by $40 billion.
C)   The TE curve shifts downward by $40 billion, and Real GDP decreases by $100 billion.
D)   The TE curve shifts upward by $40 billion, and Real GDP increases by $100 billion.

Question 14

As portrayed in terms of total expenditures (TE)and total production (TP),discuss at least three assumptions that sum up the workings of the simple Keynesian model.

Accepted Answer

The answer of As portrayed in terms of total expenditures...

Question 15

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

Accepted Answer

A)   Real GDP and the price level.
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.
D)   Real GDP and no change in the price level for levels of Real GDP below Natural Real GDP.
E)   There is not enough information to answer the question.

Question 16

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

Question 17

On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the TE line is less than 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 
C)   below; TE > TP
D)   below; TE < TP

Question 18

If consumption is $1,230 when disposable income is $1,420,and consumption is $1,400 when disposable income is $1,620,then the marginal propensity to consume (MPC)is

Accepted Answer

A)   1.15.
B)   0.15.
C)   6.67.
D)   0.85.

Question 19

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.

Question 20

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?

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

John Maynard Keynes believed that wages may be inflexible in the downward direction.Consequently,an economy

Exhibit 10-8 -Refer to Exhibit 10-8.The consumption function is

Exhibit 10-8 -Refer to Exhibit 10-8.Autonomous consumption (C₀) is equal to

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.

According to Keynes,the private sector (by itself)

The efficiency wage model is an explanation of wage and thus a support for macroeconomics.

Consumption and disposable income are

Exhibit 10-9 -Refer to Exhibit 10-9.What is the value of the marginal propensity to consume (MPC) that would correctly fill in blank (C) and the marginal propensity to save (MPS) that would correctly fill in blank (D) ?

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

Exhibit 10-5 -Refer to Exhibit 10-5. When TE is $800 billion,what happens to inventories?

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 10-6 -Refer to Exhibit 10-6.Which of the following is consistent with the economy producing Q??

Suppose the MPC = 0.60 and government purchases increase by $40 billion.In Keynesian theory,which of the following is true?

As portrayed in terms of total expenditures (TE)and total production (TP),discuss at least three assumptions that sum up the workings of the simple Keynesian model.

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

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) .

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

If consumption is $1,230 when disposable income is $1,420,and consumption is $1,400 when disposable income is $1,620,then the marginal propensity to consume (MPC) is

The multiplier process following a drop in autonomous spending is

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

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

John Maynard Keynes believed that wages may be inflexible in the downward direction.Consequently,an economy

Exhibit 10-8 -Refer to Exhibit 10-8.The consumption function is

Exhibit 10-8 -Refer to Exhibit 10-8.Autonomous consumption (C0) is equal to

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.

According to Keynes,the private sector (by itself)

The efficiency wage model is an explanation of wage __________ and thus a support for __________ macroeconomics.

Consumption and disposable income are

Exhibit 10-9 -Refer to Exhibit 10-9.What is the value of the marginal propensity to consume (MPC) that would correctly fill in blank (C) and the marginal propensity to save (MPS) that would correctly fill in blank (D) ?

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

Exhibit 10-5 -Refer to Exhibit 10-5. When TE is $800 billion,what happens to inventories?

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 10-6 -Refer to Exhibit 10-6.Which of the following is consistent with the economy producing Q??

Suppose the MPC = 0.60 and government purchases increase by $40 billion.In Keynesian theory,which of the following is true?

As portrayed in terms of total expenditures (TE)and total production (TP),discuss at least three assumptions that sum up the workings of the simple Keynesian model.

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

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) .

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

If consumption is $1,230 when disposable income is $1,420,and consumption is $1,400 when disposable income is $1,620,then the marginal propensity to consume (MPC) is

The multiplier process following a drop in autonomous spending is

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

Exhibit 10-8 -Refer to Exhibit 10-8.Autonomous consumption (C₀) is equal to

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.

The efficiency wage model is an explanation of wage and thus a support for macroeconomics.

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