Question 1

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.

Question 2

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.

Question 3

Exhibit 10-1 1, 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." class="answers-bank-image d-inline" rel="preload" >
-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.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 10-4 0A. B)  C0A divided by AF. C)  AF divided by C0F. D)  C0F divided by AF. E)  none of the above" class="answers-bank-image d-inline" rel="preload" >
-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 C

Question 6

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 7

Exhibit 10-8
 o) is equal to A)  $3 B)  $30 C)  $300. D)  $3,000." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 10-8.Autonomous consumption (Co) is equal to

Accepted Answer

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

Question 8

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

Question 9

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

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 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 11

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 C

Question 12

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

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

John Maynard Keynes was a very famous economist from

Accepted Answer

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

Question 16

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

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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.

Question 19

Exhibit 10-7 2 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" class="answers-bank-image d-inline" rel="preload" >
-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 B

Question 20

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

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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 __________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Keynes assumed consumption is

Correct AnswerverifiedShow Answer

John Maynard Keynes was a very famous economist from

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

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

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C

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

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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.

Correct Answer
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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.

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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 .

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C

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

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B

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