Question 1

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. 
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 2

Which of the following is not an aspect of Keynesian economics?

Accepted Answer

A)  Wages and prices tend to be inflexible downward. 
B)  Supply does not necessarily generate its own demand. 
C)  The interest rate is important in determining the level of investment,but not as important as other variables. 
D)  Unemployment above natural unemployment is always a brief and temporary phenomenon. 
A)  Wages and prices tend to be inflexible downward. 
B)  Supply does not necessarily generate its own demand. 
C)  The interest rate is important in determining the level of investment,but not as important as other variables. 
D)  Unemployment above natural unemployment is always a brief and temporary phenomenon.

Question 3

If an economy consumes 68 percent of any increase in disposable income,then an increase in autonomous investment of $1 billion would result in an increase in total spending of as much as

Accepted Answer

A)  $1.125 billion.. 
B)  $3.125 billion. 
C)  $5.0 billion. 
D)  $1.47 billion. 
E)  $6.8 billion. 
A)  $1.125 billion.. 
B)  $3.125 billion. 
C)  $5.0 billion. 
D)  $1.47 billion. 
E)  $6.8 billion.

Question 4

The closer the aggregate supply curve is to being horizontal,the

Accepted Answer

A)  greater the resulting change in Real GDP for a given change in autonomous spending. 
B)  smaller the resulting change in Real GDP for a given change in autonomous spending. 
C)  larger the multiplier. 
D)  smaller the multiplier. 
E)  a and c 
A)  greater the resulting change in Real GDP for a given change in autonomous spending. 
B)  smaller the resulting change in Real GDP for a given change in autonomous spending. 
C)  larger the multiplier. 
D)  smaller the multiplier. 
E)  a and c

Question 5

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 
A)  is independent of; may 
B)  is independent of; will never 
C)  depends on; may 
D)  depends on; will never

Question 6

-Refer to Exhibit 10-5.When TE is $300 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. 
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 7

Keynesian macroeconomists believe that the time it takes for falling wages and prices to eliminate a recessionary gap is __________ enough to say that the economy is __________.

Accepted Answer

A)  long; not self-regulating 
B)  long; self-regulating 
C)  short; not self-regulating 
D)  short; self-regulating 
A)  long; not self-regulating 
B)  long; self-regulating 
C)  short; not self-regulating 
D)  short; self-regulating

Question 8

Two economists,Smith and Jones,are discussing the currently high unemployment rate.Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment.Jones says that it is better to take a "hands-off" approach.Which of the following is most likely to be true?

Accepted Answer

A)  Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. 
B)  Smith and Jones are most likely both classical economists with a few minor differences of opinion. 
C)  Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. 
D)  Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. 
E)  none of the above. 
A)  Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. 
B)  Smith and Jones are most likely both classical economists with a few minor differences of opinion. 
C)  Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. 
D)  Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. 
E)  none of the above.

Question 9

Efficiency wage models imply that workers are more productive when they are paid a higher wage,as compared to when they are paid a lower wage.

Accepted Answer

A) True 
 B)False

Question 10

The economy can be in equilibrium and in a recessionary gap simultaneously.

Accepted Answer

A) True 
 B)False

Question 11

-Refer to Exhibit 10-5.When TE is $700 billion,what will firms most likely do next?

Accepted Answer

A)  Firms will increase production to increase inventories to their optimum levels. 
B)  Firms will neither increase nor decrease production since the economy is in equilibrium. 
C)  Firms will cut back production to reduce inventories to their optimum levels. 
D)  It is impossible to determine what firms are likely to do based on this information. 
A)  Firms will increase production to increase inventories to their optimum levels. 
B)  Firms will neither increase nor decrease production since the economy is in equilibrium. 
C)  Firms will cut back production to reduce inventories to their optimum levels. 
D)  It is impossible to determine what firms are likely to do based on this information.

Question 12

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. 
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 13

-Refer to Exhibit 10-4.Let Yd1 denote the present level of disposable income.An increase in disposable income is most likely to,ceteris paribus,cause a movement to point

Accepted Answer

A)  A. 
B)  B. 
C)  F. 
D)  D. 
E)  E. 
A)  A. 
B)  B. 
C)  F. 
D)  D. 
E)  E.

Question 14

John Maynard Keynes drew many economists ______________ the classical view.The classical view held that a market economy __________ regulate itself to avoid long periods of excessive unemployment.

Accepted Answer

A)  toward; can 
B)  toward; cannot 
C)  away from; can 
D)  away from; cannot 
A)  toward; can 
B)  toward; cannot 
C)  away from; can 
D)  away from; cannot

Question 15

The classical economists believed __________ determined savings,while Keynes said it was __________.

Accepted Answer

A)  interest rates; income 
B)  income; investment 
C)  investment; interest rates 
D)  interest rates; investment 
A)  interest rates; income 
B)  income; investment 
C)  investment; interest rates 
D)  interest rates; investment

Question 16

According to the efficiency wage model,firms tend to pay workers

Accepted Answer

A)  the market-clearing wage that efficiently equates labor supplied and demanded. 
B)  in excess of the market-clearing wage to provide an incentive for productivity and efficiency. 
C)  less than the market-clearing wage to assure themselves a pool of workers ready to replace workers who quit. 
D)  less than the market-clearing wage to minimize labor cost per unit of production. 
A)  the market-clearing wage that efficiently equates labor supplied and demanded. 
B)  in excess of the market-clearing wage to provide an incentive for productivity and efficiency. 
C)  less than the market-clearing wage to assure themselves a pool of workers ready to replace workers who quit. 
D)  less than the market-clearing wage to minimize labor cost per unit of production.

Question 17

Keynes believed that

Accepted Answer

A)  the internal structure of the economy is extremely competitive and that wage-price flexibility exists. 
B)  monopolistic elements in the economy prevent immediate and sharp price declines in response to falling demand. 
C)  even though there are monopolistic elements in the economy,wage-price flexibility exists. 
D)  in spite of the competitiveness of the economy,wage-price flexibility does not exist. 
A)  the internal structure of the economy is extremely competitive and that wage-price flexibility exists. 
B)  monopolistic elements in the economy prevent immediate and sharp price declines in response to falling demand. 
C)  even though there are monopolistic elements in the economy,wage-price flexibility exists. 
D)  in spite of the competitiveness of the economy,wage-price flexibility does not exist.

Question 18

If Keynes's theory is correct,wage rates may be _______________ in a _____________ direction which means that the __________ curve will not shift to the __________ to remove the economy from a recessionary gap as it would in a self-regulating economy.

Accepted Answer

A)  inflexible; downward; AD; right 
B)  flexible; upward; SRAS; right 
C)  flexible; downward; AD; right 
D)  inflexible; upward; SRAS; left 
E)  inflexible; downward; SRAS; right 
A)  inflexible; downward; AD; right 
B)  flexible; upward; SRAS; right 
C)  flexible; downward; AD; right 
D)  inflexible; upward; SRAS; left 
E)  inflexible; downward; SRAS; right

Question 19

Inventory levels unexpectedly fall and as a result firms increase the quantity of goods and services they produce.Which of the following is consistent with these two occurrences?

Accepted Answer

A)  TP is greater than TE. 
B)  TP is less than TE. 
C)  TE is equal to TP minus the rise in inventories above the optimum inventory level. 
D)  TP is equal to TE. 
E)  b and c 
A)  TP is greater than TE. 
B)  TP is less than TE. 
C)  TE is equal to TP minus the rise in inventories above the optimum inventory level. 
D)  TP is equal to TE. 
E)  b and c

Question 20

Which of the following statements is false?

Accepted Answer

A)  MPC plus MPS equals 1. 
B)  MPC is additional saving divided by additional disposable income. 
C)  The MPS is the ratio of the change in saving to the change in disposable income. 
D)  If MPC equals 0.80,autonomous consumption equals $400,and disposable income equals $600,then consumption equals $880. 
E)  none of the above 
A)  MPC plus MPS equals 1. 
B)  MPC is additional saving divided by additional disposable income. 
C)  The MPS is the ratio of the change in saving to the change in disposable income. 
D)  If MPC equals 0.80,autonomous consumption equals $400,and disposable income equals $600,then consumption equals $880. 
E)  none of the above

Exam 10: Monopoly

According to Keynes,the dollar amount households plan to save

Which of the following is not an aspect of Keynesian economics?

If an economy consumes 68 percent of any increase in disposable income,then an increase in autonomous investment of $1 billion would result in an increase in total spending of as much as

The closer the aggregate supply curve is to being horizontal,the

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.

-Refer to Exhibit 10-5.When TE is $300 billion,what happens to inventories?

Keynesian macroeconomists believe that the time it takes for falling wages and prices to eliminate a recessionary gap is __________ enough to say that the economy is __________.

Efficiency wage models imply that workers are more productive when they are paid a higher wage,as compared to when they are paid a lower wage.

The economy can be in equilibrium and in a recessionary gap simultaneously.

-Refer to Exhibit 10-5.When TE is $700 billion,what will firms most likely do next?

Consumption and disposable income are

-Refer to Exhibit 10-4.Let Yd1 denote the present level of disposable income.An increase in disposable income is most likely to,ceteris paribus,cause a movement to point

John Maynard Keynes drew many economists ______________ the classical view.The classical view held that a market economy __________ regulate itself to avoid long periods of excessive unemployment.

The classical economists believed __________ determined savings,while Keynes said it was __________.

According to the efficiency wage model,firms tend to pay workers

Keynes believed that

If Keynes's theory is correct,wage rates may be _______________ in a _____________ direction which means that the __________ curve will not shift to the __________ to remove the economy from a recessionary gap as it would in a self-regulating economy.

Inventory levels unexpectedly fall and as a result firms increase the quantity of goods and services they produce.Which of the following is consistent with these two occurrences?

Which of the following statements is false?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

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.

Keynesian macroeconomists believe that the time it takes for falling wages and prices to eliminate a recessionary gap is enough to say that the economy is .

-Refer to Exhibit 10-4.Let Yd₁ denote the present level of disposable income.An increase in disposable income is most likely to,ceteris paribus,cause a movement to point

John Maynard Keynes drew many economists ____ the classical view.The classical view held that a market economy regulate itself to avoid long periods of excessive unemployment.

The classical economists believed determined savings,while Keynes said it was .

If Keynes's theory is correct,wage rates may be _________ in a _ direction which means that the curve will not shift to the ______ to remove the economy from a recessionary gap as it would in a self-regulating economy.