Question 1

Automatic stabilizers will shift the government budget toward

Accepted Answer

A) a surplus during both expansions and contractions. 
B) a deficit during both expansions and contractions. 
C) a surplus during an expansion and a deficit during a contraction. 
D) a surplus during a contraction and a deficit during an expansion. 
A) a surplus during both expansions and contractions. 
B) a deficit during both expansions and contractions. 
C) a surplus during an expansion and a deficit during a contraction. 
D) a surplus during a contraction and a deficit during an expansion.

Question 2

The Keynesian analysis of fiscal policy implies that

Accepted Answer

A) fiscal policy should generally be expansionary except during periods of economic recession. 
B) fiscal policy should generally be restrictive except during inflationary booms. 
C) the federal budget should be balanced annually except during war. 
D) the federal budget should be used to maintain aggregate demand at a level consistent with full employment. 
A) fiscal policy should generally be expansionary except during periods of economic recession. 
B) fiscal policy should generally be restrictive except during inflationary booms. 
C) the federal budget should be balanced annually except during war. 
D) the federal budget should be used to maintain aggregate demand at a level consistent with full employment.

Question 3

The Great Depression provided support for Keynes' view that

Accepted Answer

A) government action was necessary to ensure interest rates remained at the equilibrium level. 
B) prolonged periods of unemployment would be present when demand is deficient. 
C) falling resource prices would bring the economy out of a recession. 
D) lower interest rates would quickly restore the full employment equilibrium of an economy. 
A) government action was necessary to ensure interest rates remained at the equilibrium level. 
B) prolonged periods of unemployment would be present when demand is deficient. 
C) falling resource prices would bring the economy out of a recession. 
D) lower interest rates would quickly restore the full employment equilibrium of an economy.

Question 4

The multiplier effect refers to the fact that a change in spending (aggregate demand)will

Accepted Answer

A) increase the money supply. 
B) cause prices to rise by some multiple of the initial increase in spending. 
C) cause nominal output to rise by some multiple of the initial increase in spending. 
D) reduce prices by some multiple of the increase in spending. 
A) increase the money supply. 
B) cause prices to rise by some multiple of the initial increase in spending. 
C) cause nominal output to rise by some multiple of the initial increase in spending. 
D) reduce prices by some multiple of the increase in spending.

Question 5

If consumption equals 800 when disposable income is 1,000,and then consumption increases to 1,000 when disposable income increases to 1,300,the marginal propensity to consume is

Accepted Answer

A) 8/10. 
B) 10/13. 
C) 2/3. 
D) 3/4. 
A) 8/10. 
B) 10/13. 
C) 2/3. 
D) 3/4.

Question 6

When an economy is operating well below its full-employment capacity and the marginal propensity to consume is 3/4,a $10 billion increase in investment will cause the equilibrium income to rise by

Accepted Answer

A) $5 billion. 
B) $10 billion. 
C) $20 billion. 
D) $40 billion. 
A) $5 billion. 
B) $10 billion. 
C) $20 billion. 
D) $40 billion.

Question 7

Within the framework of the Keynesian model,

Accepted Answer

A) changes in output rather than changes in prices direct the economy to equilibrium. 
B) changes in prices rather than changes in output direct the economy to equilibrium. 
C) changes in interest rates and resource prices will direct the economy to equilibrium. 
D) the economy will continually be in equilibrium. 
A) changes in output rather than changes in prices direct the economy to equilibrium. 
B) changes in prices rather than changes in output direct the economy to equilibrium. 
C) changes in interest rates and resource prices will direct the economy to equilibrium. 
D) the economy will continually be in equilibrium.

Question 8

Within the Keynesian model,the multiplier effect tends to

Accepted Answer

A) smooth out the up- and down- swings of the business cycle. 
B) promote price stability. 
C) magnify small changes in spending into much larger changes in output and employment. 
D) reduce the impact of an increase in investment on output and employment. 
A) smooth out the up- and down- swings of the business cycle. 
B) promote price stability. 
C) magnify small changes in spending into much larger changes in output and employment. 
D) reduce the impact of an increase in investment on output and employment.

Question 9

Mathematically,the marginal propensity to consume is

Accepted Answer

A) consumption divided by income. 
B) the change in consumption divided by the change in income. 
C) income divided by consumption. 
D) the change in income divided by the change in consumption. 
A) consumption divided by income. 
B) the change in consumption divided by the change in income. 
C) income divided by consumption. 
D) the change in income divided by the change in consumption.

Question 10

If the MPC is 3/4,the simple expenditure multiplier is

Accepted Answer

A) 4.00. 
B) 1.33. 
C) 1.75. 
D) 0.75. 
A) 4.00. 
B) 1.33. 
C) 1.75. 
D) 0.75.

Question 11

Automatic stabilizers are government programs that tend to

Accepted Answer

A) reduce the ups and downs in aggregate demand without legislative action. 
B) bring expenditures and revenues automatically into balance without legislative action. 
C) signal Congress that legislative changes are needed. 
D) increase tax collections automatically during a recession. 
A) reduce the ups and downs in aggregate demand without legislative action. 
B) bring expenditures and revenues automatically into balance without legislative action. 
C) signal Congress that legislative changes are needed. 
D) increase tax collections automatically during a recession.

Question 12

Within the framework of the Keynesian model,if spending is abnormally low,

Accepted Answer

A) the economy will be in equilibrium at full employment,but inflation will be high. 
B) equilibrium output will be less than the full-employment rate of output. 
C) the equilibrium output rate will exceed the economy's full-employment capacity. 
D) the actual rate of unemployment will be less than the natural rate of unemployment. 
A) the economy will be in equilibrium at full employment,but inflation will be high. 
B) equilibrium output will be less than the full-employment rate of output. 
C) the equilibrium output rate will exceed the economy's full-employment capacity. 
D) the actual rate of unemployment will be less than the natural rate of unemployment.

Question 13

When an economy expands into an economic boom,automatic stabilizers will tend to

Accepted Answer

A) enlarge the budget deficit (or reduce the surplus). 
B) reduce the budget deficit (or increase the surplus). 
C) ensure that the budget will remain in balance. 
D) reduce the supply of money and,thereby,retard aggregate demand. 
A) enlarge the budget deficit (or reduce the surplus). 
B) reduce the budget deficit (or increase the surplus). 
C) ensure that the budget will remain in balance. 
D) reduce the supply of money and,thereby,retard aggregate demand.

Question 14

According to the Keynesian model,in what ways will expansionary fiscal policy stimulate aggregate demand?

Accepted Answer

The two components of expansionary fisca

Question 15

The expenditure multiplier indicates that

Accepted Answer

A) changes in investment,government,or consumption spending can trigger much larger changes in output. 
B) an increase in saving will cause output to rise by a multiple of the additional saving. 
C) a market economy will be more stable than classical economists thought. 
D) the marginal propensity to consume is greater than one. 
A) changes in investment,government,or consumption spending can trigger much larger changes in output. 
B) an increase in saving will cause output to rise by a multiple of the additional saving. 
C) a market economy will be more stable than classical economists thought. 
D) the marginal propensity to consume is greater than one.

Question 16

Which of the following would a Keynesian economist be most likely to stress?

Accepted Answer

A) Supply creates its own demand. 
B) Businesses will not produce goods and services if they do not think people will buy them. 
C) You cannot spend your way out of a recession. 
D) When the unemployment rate is high,wage rates will fall. 
E) A dollar saved is a dollar earned;a high rate of saving is the key to prosperity. 
A) Supply creates its own demand. 
B) Businesses will not produce goods and services if they do not think people will buy them. 
C) You cannot spend your way out of a recession. 
D) When the unemployment rate is high,wage rates will fall. 
E) A dollar saved is a dollar earned;a high rate of saving is the key to prosperity.

Question 17

When aggregate demand exceeds current output,Keynesian analysis indicates that

Accepted Answer

A) unplanned inventory accumulation will cause output to rise. 
B) unplanned inventory accumulation will cause output to fall. 
C) unplanned inventory reductions will cause output to rise. 
D) unplanned inventory reductions will cause output to fall. 
A) unplanned inventory accumulation will cause output to rise. 
B) unplanned inventory accumulation will cause output to fall. 
C) unplanned inventory reductions will cause output to rise. 
D) unplanned inventory reductions will cause output to fall.

Question 18

When the unemployment rate is low,the impact of additional spending on real output will

Accepted Answer

A) be larger than when the unemployment rate is high. 
B) be smaller than when the unemployment rate is high. 
C) be the same as when the unemployment rate is high. 
D) place downward pressure on the general level of prices,leading to deflation. 
A) be larger than when the unemployment rate is high. 
B) be smaller than when the unemployment rate is high. 
C) be the same as when the unemployment rate is high. 
D) place downward pressure on the general level of prices,leading to deflation.

Question 19

When the economy enters a recession,automatic stabilizers create

Accepted Answer

A) higher taxes. 
B) more discretionary spending. 
C) larger budget deficits. 
D) larger budget surpluses. 
A) higher taxes. 
B) more discretionary spending. 
C) larger budget deficits. 
D) larger budget surpluses.

Exam 11: Fiscal Policy: the Keynesian View and Historical Perspective

Automatic stabilizers will shift the government budget toward

The Keynesian analysis of fiscal policy implies that

The Great Depression provided support for Keynes' view that

The multiplier effect refers to the fact that a change in spending (aggregate demand)will

If consumption equals 800 when disposable income is 1,000,and then consumption increases to 1,000 when disposable income increases to 1,300,the marginal propensity to consume is

When an economy is operating well below its full-employment capacity and the marginal propensity to consume is 3/4,a $10 billion increase in investment will cause the equilibrium income to rise by

Within the framework of the Keynesian model,

Within the Keynesian model,the multiplier effect tends to

Mathematically,the marginal propensity to consume is

If the MPC is 3/4,the simple expenditure multiplier is

Automatic stabilizers are government programs that tend to

Within the framework of the Keynesian model,if spending is abnormally low,

When an economy expands into an economic boom,automatic stabilizers will tend to

According to the Keynesian model,in what ways will expansionary fiscal policy stimulate aggregate demand?

The expenditure multiplier indicates that

Which of the following would a Keynesian economist be most likely to stress?

When aggregate demand exceeds current output,Keynesian analysis indicates that

When the unemployment rate is low,the impact of additional spending on real output will

When the economy enters a recession,automatic stabilizers create

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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