Exam 23: The Keynesian Framework

In the simple Keynesian expenditure model, a marginal propensity to consume of .9 leads to an expenditure multiplier of

As part of the "wealth channel of monetary policy," a lower money supply __________ interest rates and thus __________ bond prices.

As part of the "wealth channel of monetary policy," a lower money supply __________ bond prices and thus __________ spending.

In the Keynesian model, if interest rates fall below what people consider normal, households will respond by

In the Keynesian view, the main source of economic fluctuations is

An increase in the money supply in the simple Keynesian model causes

As part of the "wealth channel of monetary policy," a higher money supply __________ interest rates and thus __________ bond prices.

Which of the following is a plausible explanation for a downward shift in the consumption function?

If consumption equals $1,000 when income is $1,000 and increases to $1,900 when income increases to $2,000, then the marginal propensity to consume is

In the Keynesian model, if interest rates rise above what people consider normal, households will respond by

__________ consumption will __________ as a result of a decrease in taxes.

If autonomous investment spending falls as a result of a decline in the expected rate of return on investment, GDP would not have to fall if the government __________ taxes or __________ government spending.

According to Keynes, it is __________ to have __________ holding money.

If consumption increases by $400 when income increases by $500, then the marginal propensity to consume is

According to Keynes,

When examining the causes of unemployment, Keynes focused on

As part of the "exchange rate effect of monetary policy," a lower money supply causes __________ of the domestic currency and thus __________ net exports.

If the aggregate supply curve is vertical, an increase in aggregate demand will

The formula for the effect of any change in autonomous spending, △A, where b equals the MPC is

In the Keynesian model, the demand for money is inversely related to