Question 1

The marginal propensity to consume (MPC)refers to the proportion of disposable income that is spent on consumption.

Accepted Answer

A) True 
 B)False

Question 2

Here is a consumption function: C = C0 + MPC(Yd).If C0 = $200,then we know that

Accepted Answer

A)  if Yd is zero,C will be $200. 
B)  when Yd rises,C rises by $200. 
C)  when Yd falls,C falls by MPC times C0. 
D)  C will always equal C0. 
A)  if Yd is zero,C will be $200. 
B)  when Yd rises,C rises by $200. 
C)  when Yd falls,C falls by MPC times C0. 
D)  C will always equal C0.

Question 3

When there is economy-wide equilibrium,there is a tendency for

Accepted Answer

A)  total output to rise. 
B)  total output to fall. 
C)  total output to remain unchanged. 
D)  prices to fall. 
E)  prices to rise. 
A)  total output to rise. 
B)  total output to fall. 
C)  total output to remain unchanged. 
D)  prices to fall. 
E)  prices to rise.

Question 4

Explain the sequence of events that occurs in the economy once total production (TP)is less than total expenditure (TE).

Accepted Answer

If TP is less than TE,it indicates that

Question 5

-Refer to Exhibit 10-4.If the present level of disposable income is Yd1,autonomous consumption is equal to

Accepted Answer

A)  C0. 
B)  C1. 
C)  C2. 
D)  C1 - C0. 
E)  C2 - C1. 
A)  C0. 
B)  C1. 
C)  C2. 
D)  C1 - C0. 
E)  C2 - C1.

Question 6

How does the classical position on saving differ from Keynes's position?

Accepted Answer

A)  Classical position: people save more at lower interest rates.Keynes's position: people save less at lower interest rates. 
B)  Classical position: changes in the interest rate are irrelevant to saving decisions.Keynes's position: saving is directly related to the interest rate. 
C)  Classical position: saving is directly related to the interest rate.Keynes's position: at times,saving may be inversely related to the interest rate. 
D)  Classical position: saving can be inversely related to the interest rate.Keynes's position: consumption rises as saving rises. 
E)  none of the above 
A)  Classical position: people save more at lower interest rates.Keynes's position: people save less at lower interest rates. 
B)  Classical position: changes in the interest rate are irrelevant to saving decisions.Keynes's position: saving is directly related to the interest rate. 
C)  Classical position: saving is directly related to the interest rate.Keynes's position: at times,saving may be inversely related to the interest rate. 
D)  Classical position: saving can be inversely related to the interest rate.Keynes's position: consumption rises as saving rises. 
E)  none of the above

Question 7

Discuss how the Great Depression contributed to the development of Keynesian economics.

Accepted Answer

During the Great Depression,high levels

Question 8

The two major curves or lines in the TE-TP diagram are:

Accepted Answer

A)  the total expenditure curve and the 45-degree line. 
B)  the supply and demand curves. 
C)  the total expenditures and national income curves. 
D)  the total production and national income curves. 
A)  the total expenditure curve and the 45-degree line. 
B)  the supply and demand curves. 
C)  the total expenditures and national income curves. 
D)  the total production and national income curves.

Question 9

Keynes held that saving is more responsive to changes in income than to changes in the interest rate.

Accepted Answer

A) True 
 B)False

Question 10

If income rises from $12,000 to $12,400 and consumption rises from $11,800 to $12,176,the marginal propensity to consume is __________ percent.

Accepted Answer

A)  8 
B)  85 
C)  16 
D)  94 
A)  8 
B)  85 
C)  16 
D)  94

Question 11

Most economists think that the Keynesian position is that

Accepted Answer

A)  the wage rate will never fall and the price level will never adjust downward if the economy is in a recessionary gap. 
B)  the time required before wages and prices adjust downward is short enough for the economy to be called self-regulating. 
C)  the time required before wages and prices adjust downward is long enough for the economy to exist in a recessionary gap for a long time. 
D)  the time required before wages and prices adjust downward if the economy is in a recessionary gap is rather long,but short enough for the economy to be considered self-regulating. 
A)  the wage rate will never fall and the price level will never adjust downward if the economy is in a recessionary gap. 
B)  the time required before wages and prices adjust downward is short enough for the economy to be called self-regulating. 
C)  the time required before wages and prices adjust downward is long enough for the economy to exist in a recessionary gap for a long time. 
D)  the time required before wages and prices adjust downward if the economy is in a recessionary gap is rather long,but short enough for the economy to be considered self-regulating.

Question 12

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

Question 13

Here is a consumption function: C = C0 + MPC(Yd).If consumption is $3,000,MPC =0.80,and disposable income is $2,900,what does autonomous consumption equal?

Accepted Answer

A)  $100 
B)  $5,900 
C)  $680 
D)  $500 
E)  none of the above 
A)  $100 
B)  $5,900 
C)  $680 
D)  $500 
E)  none of the above

Question 14

In the Keynesian analysis of changes from one Real GDP level to another,which of the following plays a critical role?

Accepted Answer

A)  changes in prices 
B)  the relationship between optimum inventory levels and current inventory levels 
C)  the long-run aggregate supply (LRAS)curve 
D)  the relationship between total expenditures (T
E) and the aggregate demand (A
D) curve 
E)  none of the above 
A)  changes in prices 
B)  the relationship between optimum inventory levels and current inventory levels 
C)  the long-run aggregate supply (LRAS)curve 
D)  the relationship between total expenditures (T
E) and the aggregate demand (A
D) curve 
E)  none of the above

Question 15

-Refer to Exhibit 10-9.What is the value of the marginal propensity to consume (MPC)that would correctly fill in blank (G)and the value of the multiplier that would correctly fill in blank (H)?

Accepted Answer

A)  0.80; 20 
B)  0.80; 5 
C)  0.20; 0.80 
D)  0.50; 0.50 
E)  There is not enough information given to answer this question. 
A)  0.80; 20 
B)  0.80; 5 
C)  0.20; 0.80 
D)  0.50; 0.50 
E)  There is not enough information given to answer this question.

Question 16

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)  over many months,perhaps even years. 
A)  almost instantaneously. 
B)  within a few days. 
C)  within about one month. 
D)  over many months,perhaps even years.

Question 17

Which of the following is good evidence against the classical view of Say's law?

Accepted Answer

A)  Investment does not always rise as interest rates fall. 
B)  Consumption falls by the amount that saving increases. 
C)  Exports are usually greater than imports. 
D)  People save more at higher interest rates than lower interest rates. 
E)  none of the above 
A)  Investment does not always rise as interest rates fall. 
B)  Consumption falls by the amount that saving increases. 
C)  Exports are usually greater than imports. 
D)  People save more at higher interest rates than lower interest rates. 
E)  none of the above

Question 18

Classical economists used efficiency wage models to support their belief in a self-regulating economy.

Accepted Answer

A) True 
 B)False

Question 19

John Maynard Keynes was a very famous economist from

Accepted Answer

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

Question 20

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

Exam 10: Monopoly

The marginal propensity to consume (MPC)refers to the proportion of disposable income that is spent on consumption.

Here is a consumption function: C = C0 + MPC(Yd).If C0 = $200,then we know that

When there is economy-wide equilibrium,there is a tendency for

Explain the sequence of events that occurs in the economy once total production (TP)is less than total expenditure (TE).

-Refer to Exhibit 10-4.If the present level of disposable income is Yd1,autonomous consumption is equal to

How does the classical position on saving differ from Keynes's position?

Discuss how the Great Depression contributed to the development of Keynesian economics.

The two major curves or lines in the TE-TP diagram are:

Keynes held that saving is more responsive to changes in income than to changes in the interest rate.

If income rises from $12,000 to $12,400 and consumption rises from $11,800 to $12,176,the marginal propensity to consume is __________ percent.

Most economists think that the Keynesian position is that

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

Here is a consumption function: C = C0 + MPC(Yd).If consumption is $3,000,MPC =0.80,and disposable income is $2,900,what does autonomous consumption equal?

In the Keynesian analysis of changes from one Real GDP level to another,which of the following plays a critical role?

-Refer to Exhibit 10-9.What is the value of the marginal propensity to consume (MPC)that would correctly fill in blank (G)and the value of the multiplier that would correctly fill in blank (H)?

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

Which of the following is good evidence against the classical view of Say's law?

Classical economists used efficiency wage models to support their belief in a self-regulating economy.

John Maynard Keynes was a very famous economist from

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

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

Here is a consumption function: C = C₀ + MPC(Y_d).If C₀ = $200,then we know that

-Refer to Exhibit 10-4.If the present level of disposable income is Yd₁,autonomous consumption is equal to

Here is a consumption function: C = C₀ + MPC(Y_d).If consumption is $3,000,MPC =0.80,and disposable income is $2,900,what does autonomous consumption equal?