Question 1

Keynes believed that saving is

Accepted Answer

A)  more responsive to changes in income than to changes in interest rates. 
B)  less responsive to changes in income than to changes in interest rates. 
C)  equally responsive to changes in income and to changes in interest rates. 
D)  dependent only on changes in interest rates. 
A)  more responsive to changes in income than to changes in interest rates. 
B)  less responsive to changes in income than to changes in interest rates. 
C)  equally responsive to changes in income and to changes in interest rates. 
D)  dependent only on changes in interest rates.

Question 2

In Keynes' view,labor unions would resist wage cuts,but individual employees would go along with wage cuts initiated by his/her employer.

Accepted Answer

A) True 
 B)False

Question 3

-Refer to Exhibit 10-8.The marginal propensity to consume (MPC)is

Accepted Answer

A)  0.90. 
B)  0.10. 
C)  0.80. 
D)  0.95. 
E)  0.75. 
A)  0.90. 
B)  0.10. 
C)  0.80. 
D)  0.95. 
E)  0.75.

Question 4

-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 
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

Question 5

When total production is greater than total expenditures,

Accepted Answer

A)  the economy is in disequilibrium. 
B)  there are increases in inventory. 
C)  total output will decrease. 
D)  all of the above 
A)  the economy is in disequilibrium. 
B)  there are increases in inventory. 
C)  total output will decrease. 
D)  all of the above

Question 6

If total production is greater than total expenditures,

Accepted Answer

A)  there will be an increase in saving. 
B)  there will be an increase in inventories. 
C)  firms will then increase production. 
D)  firms will then increase prices. 
A)  there will be an increase in saving. 
B)  there will be an increase in inventories. 
C)  firms will then increase production. 
D)  firms will then increase prices.

Question 7

How is the multiplier expressed in terms of the MPS?

Accepted Answer

A)  1 - MPS 
B)  1/MPS 
C)  1/(1 - MPS) 
D)  1/(1 + MPS) 
A)  1 - MPS 
B)  1/MPS 
C)  1/(1 - MPS) 
D)  1/(1 + MPS)

Question 8

The ratio of the change in consumption to the change in disposable income is called the

Accepted Answer

A)  marginal utility of consumption. 
B)  average utility of consumption. 
C)  marginal propensity to consume. 
D)  average propensity to consume. 
A)  marginal utility of consumption. 
B)  average utility of consumption. 
C)  marginal propensity to consume. 
D)  average propensity to consume.

Question 9

If households,businesses,and government buy more than businesses have produced,

Accepted Answer

A)  the economy is in equilibrium. 
B)  total expenditures are greater than total production. 
C)  there will be an increase in inventory. 
D)  there will be a decrease in total output. 
A)  the economy is in equilibrium. 
B)  total expenditures are greater than total production. 
C)  there will be an increase in inventory. 
D)  there will be a decrease in total output.

Question 10

-Refer to Exhibit 10-6.If investment increases,it follows that

Accepted Answer

A)  the TE curve will shift upward,possibly passing through point 2. 
B)  the TE curve will shift downward,possibly passing through point 3. 
C)  the TE curve will not change but the economy will move from point 1 to point 3. 
D)  the TE curve will not change but the economy will move from point 1 to point 2. 
E)  At the new equilibrium position,Real GDP will necessarily be Q1. 
A)  the TE curve will shift upward,possibly passing through point 2. 
B)  the TE curve will shift downward,possibly passing through point 3. 
C)  the TE curve will not change but the economy will move from point 1 to point 3. 
D)  the TE curve will not change but the economy will move from point 1 to point 2. 
E)  At the new equilibrium position,Real GDP will necessarily be Q1.

Question 11

The economy is in equilibrium,TP = TE.Then,net exports fall.As a result,the __________ curve shifts __________,inventory levels unexpectedly __________,and business firms __________ the quantity of good and services they produce.

Accepted Answer

A)  TE; upward; rise; increase 
B)  TP; rightward; rise; decrease 
C)  TE; downward; rise; decrease 
D)  TE; downward; rise; increase 
E)  none of the above 
A)  TE; upward; rise; increase 
B)  TP; rightward; rise; decrease 
C)  TE; downward; rise; decrease 
D)  TE; downward; rise; increase 
E)  none of the above

Question 12

In the TE-TP framework,total production

Accepted Answer

A)  always equals total expenditures. 
B)  equals Real GDP. 
C)  is always greater than total expenditures. 
D)  is always less than total expenditures. 
A)  always equals total expenditures. 
B)  equals Real GDP. 
C)  is always greater than total expenditures. 
D)  is always less than total expenditures.

Question 13

Keynes believed that investment is

Accepted Answer

A)  dependent on a number of factors,including business expectations. 
B)  mainly determined by changes in interest rates. 
C)  unrelated to business expectations. 
D)  related to business expectations only during recessionary periods. 
A)  dependent on a number of factors,including business expectations. 
B)  mainly determined by changes in interest rates. 
C)  unrelated to business expectations. 
D)  related to business expectations only during recessionary periods.

Question 14

When the economy is in short-run equilibrium,

Accepted Answer

A)  there are increases in inventory. 
B)  there are decreases in inventory. 
C)  total expenditures equal total production. 
D)  people want to buy more than will be produced. 
A)  there are increases in inventory. 
B)  there are decreases in inventory. 
C)  total expenditures equal total production. 
D)  people want to buy more than will be produced.

Question 15

Explain the process by which an initial change in autonomous spending can lead to an even greater change in total spending.

Accepted Answer

When autonomous spending increases,the m

Question 16

-Refer to Exhibit 10-2.At M,

Accepted Answer

A)  TP = TE. 
B)  TP > TE. 
C)  TE > TP. 
D)  the relationship between TP and TE cannot be determined. 
A)  TP = TE. 
B)  TP > TE. 
C)  TE > TP. 
D)  the relationship between TP and TE cannot be determined.

Question 17

Explain how the Keynesian view differs from the classical view with respect to saving.Explain further how the two views differ with respect to investment.

Accepted Answer

Classical economists believed that the a

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The marginal propensity to save (MPS)can be found using the equation: (1 - MPC).

Accepted Answer

A) True 
 B)False

Question 20

-Refer to Exhibit 10-1.At Q1,there is a tendency for Real GDP to

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  There is not enough information to answer this question. 
A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  There is not enough information to answer this question.

Exam 10: Monopoly

Keynes believed that saving is

In Keynes' view,labor unions would resist wage cuts,but individual employees would go along with wage cuts initiated by his/her employer.

-Refer to Exhibit 10-8.The marginal propensity to consume (MPC)is

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

When total production is greater than total expenditures,

If total production is greater than total expenditures,

How is the multiplier expressed in terms of the MPS?

The ratio of the change in consumption to the change in disposable income is called the

If households,businesses,and government buy more than businesses have produced,

-Refer to Exhibit 10-6.If investment increases,it follows that

The economy is in equilibrium,TP = TE.Then,net exports fall.As a result,the __________ curve shifts __________,inventory levels unexpectedly __________,and business firms __________ the quantity of good and services they produce.

In the TE-TP framework,total production

Keynes believed that investment is

When the economy is in short-run equilibrium,

Explain the process by which an initial change in autonomous spending can lead to an even greater change in total spending.

-Refer to Exhibit 10-2.At M,

Explain how the Keynesian view differs from the classical view with respect to saving.Explain further how the two views differ with respect to investment.

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

The marginal propensity to save (MPS)can be found using the equation: (1 - MPC).

-Refer to Exhibit 10-1.At Q1,there is a tendency for Real GDP to

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The economy is in equilibrium,TP = TE.Then,net exports fall.As a result,the curve shifts ,inventory levels unexpectedly ,and business firms the quantity of good and services they produce.

-Refer to Exhibit 10-1.At Q₁,there is a tendency for Real GDP to