Question 1

Which statement is consistent with what Keynes believed about consumption and disposable income?

Accepted Answer

A)  Consumption depends upon disposable income and falls as disposable income rises.
B)  Consumption rises by the same amount as disposable income rises.
C)  Consumption rises by less than disposable income rises.
D)  Disposable income depends upon consumption. C

Question 2

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

Accepted Answer

A)  the price level is flexible
B)  no foreign sector
C)  the price level is constant until the economy reaches its full-employment level
D)  the money supply always rises
E)  b and c E

Question 3

Suppose for a given economy the multiplier is 4. A change in autonomous spending will change the economy's total spending more if the aggregate supply curve is __________ than if it is __________, ceteris paribus.

Accepted Answer

A)  horizontal; upward sloping
B)  upward sloping; horizontal
C)  upward sloping; downward sloping
D)  downward sloping; upward sloping
E)  There is not enough information to answer the question. A

Question 4

Exhibit 10-2
 
-Refer to Exhibit 10-2. Equilibrium Real GDP occurs at

Accepted Answer

A)  $3,000 billion.
B)  $1,500 billion.
C)  $7,500 billion.
D)  $4,000 billion.
E)  $4,500 billion.

Question 5

Keynes's major work, The General Theory of Employment, Interest and Money, was published during the

Accepted Answer

A)  late 1800s.
B)  mid-1700s.
C)  1930s.
D)  Panic of 1907.

Question 6

Which of the following statements would Keynes have been 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

Question 7

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

Question 8

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 
C)  below; TE > TP
D)  below; TE < TP

Question 9

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

Question 10

According to Keynes, the dollar amount households plan to save

Accepted Answer

A)  always equals the dollar amount firms plan to invest.
B)  sometimes equals the dollar amount firms plan to invest.
C)  is always greater than the dollar amount firms plan to invest.
D)  is always less than the dollar amount firms plan to invest.

Question 11

The economy is in equilibrium, TP = TE. Then, autonomous consumption rises. As a result, __________ rises, the __________ curve shifts __________, inventory levels unexpectedly __________, and business firms __________ the quantity of goods and services they produce.

Accepted Answer

A)  consumption; TE; downward; fall; increase
B)  consumption; TE; upward; fall; increase
C)  consumption; TE; upward; rise; decrease
D)  investment; TE; upward; fall; increase
E)  investment; TP; leftward; fall; increase

Question 12

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

Question 13

There are no idle resources, the multiplier is operative, and autonomous spending rises. It follows that

Accepted Answer

A)  Real GDP will not increase.
B)  Real GDP will rise.
C)  prices will rise.
D)  a and c
E)  a, b, and c

Question 14

If total production is greater than total expenditures, then business firms

Accepted Answer

A)  have underproduced.
B)  will step up production.
C)  will lower production.
D)  will experience decreases in inventory.
E)  a and b

Question 15

Exhibit 10-5
 
-Refer to Exhibit 10-5 above. The equilibrium level of Real GDP is

Accepted Answer

A)  $200 billion.
B)  $400 billion.
C)  $600 billion.
D)  $800 billion.

Question 16

Exhibit 10-6
 
-Refer to Exhibit 10-6. If total production (TP) is greater than total expenditures (TE), the economy is currently producing a level of Real GDP that is

Accepted Answer

A)  equal to or lower than Q3.
B)  equal to or greater than Q3.
C)  less than Q2.
D)  between Q2 and Q1.
E)  greater than Q3.

Question 17

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 answer of What is the general format of the...

Question 18

According to the Keynesian consumption function, an increase in disposable income will result in

Accepted Answer

A)  a decrease in consumption.
B)  an increase in consumption.
C)  a decrease in investment.
D)  an increase in investment.

Question 19

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

The answer of Using the concept of the multiplier, explain...

Question 20

Here is a consumption function: C = C0 + MPC(Yd). Which of the following is true about the consumption function?

Accepted Answer

A)  Consumption will rise if autonomous consumption or disposable income rise.
B)  Consumption will fall if autonomous consumption falls or if the MPC rises.
C)  Consumption will rise if autonomous consumption rises, MPC declines, or disposable income rises.
D)  For every $1 rise in autonomous consumption, consumption will also rise by $1.
E)  a and d

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

Which statement is consistent with what Keynes believed about consumption and disposable income?

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

Suppose for a given economy the multiplier is 4. A change in autonomous spending will change the economy's total spending more if the aggregate supply curve is than if it is , ceteris paribus.

Exhibit 10-2 -Refer to Exhibit 10-2. Equilibrium Real GDP occurs at

Keynes's major work, The General Theory of Employment, Interest and Money, was published during the

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

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

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 .

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

According to Keynes, the dollar amount households plan to save

The economy is in equilibrium, TP = TE. Then, autonomous consumption rises. As a result, rises, the curve shifts , inventory levels unexpectedly , and business firms __ the quantity of goods and services they produce.

When total production is greater than total expenditures,

There are no idle resources, the multiplier is operative, and autonomous spending rises. It follows that

If total production is greater than total expenditures, then business firms

Exhibit 10-5 -Refer to Exhibit 10-5 above. The equilibrium level of Real GDP is

Exhibit 10-6 -Refer to Exhibit 10-6. If total production (TP) is greater than total expenditures (TE) , the economy is currently producing a level of Real GDP that is

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.

According to the Keynesian consumption function, an increase in disposable income will result in

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(Y_d) . Which of the following is true about the consumption function?

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

Which statement is consistent with what Keynes believed about consumption and disposable income?

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

Suppose for a given economy the multiplier is 4. A change in autonomous spending will change the economy's total spending more if the aggregate supply curve is __________ than if it is __________, ceteris paribus.

Exhibit 10-2 -Refer to Exhibit 10-2. Equilibrium Real GDP occurs at

Keynes's major work, The General Theory of Employment, Interest and Money, was published during the

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

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

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 __________.

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

According to Keynes, the dollar amount households plan to save

The economy is in equilibrium, TP = TE. Then, autonomous consumption rises. As a result, __________ rises, the __________ curve shifts __________, inventory levels unexpectedly __________, and business firms __________ the quantity of goods and services they produce.

When total production is greater than total expenditures,

There are no idle resources, the multiplier is operative, and autonomous spending rises. It follows that

If total production is greater than total expenditures, then business firms

Exhibit 10-5 -Refer to Exhibit 10-5 above. The equilibrium level of Real GDP is

Exhibit 10-6 -Refer to Exhibit 10-6. If total production (TP) is greater than total expenditures (TE) , the economy is currently producing a level of Real GDP that is

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.

According to the Keynesian consumption function, an increase in disposable income will result in

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) . Which of the following is true about the consumption function?

Suppose for a given economy the multiplier is 4. A change in autonomous spending will change the economy's total spending more if the aggregate supply curve is than if it is , ceteris paribus.

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 .

The economy is in equilibrium, TP = TE. Then, autonomous consumption rises. As a result, rises, the curve shifts , inventory levels unexpectedly , and business firms __ the quantity of goods and services they produce.

Here is a consumption function: C = C₀ + MPC(Y_d) . Which of the following is true about the consumption function?