Question 1

Keynes believed that:

Accepted Answer

A) ​discretionary fiscal policy was needed to stabilize the economy. 
B) ​wages are not flexible particularly in a downward direction. 
C) ​the economy could remain in a period of unemployment for a long time period. 
D) ​all of the above. 
A) ​discretionary fiscal policy was needed to stabilize the economy. 
B) ​wages are not flexible particularly in a downward direction. 
C) ​the economy could remain in a period of unemployment for a long time period. 
D) ​all of the above.

Question 2

Consumption expenditure tends to increase when consumers have higher levels of debt.

Accepted Answer

A) True 
 B)False

Question 3

Identify factors that would cause consumption spending to increase. What effect would that have on aggregate demand?
​

Accepted Answer

The factors that cause consumption to in

Question 4

If government spending increased by $100 billion and the MPS within the economy was 0.25, what would be the total impact on real GDP?

Accepted Answer

A) ​$25 billion increase 
B) ​$75 billion increase 
C) ​$133 billion increase 
D) ​$400 billion increase 
A) ​$25 billion increase 
B) ​$75 billion increase 
C) ​$133 billion increase 
D) ​$400 billion increase

Question 5

Which of the following is not true with regard to the aggregate expenditure model?

Accepted Answer

A) ​It explains short-run business cycles. 
B) ​It explains inflation. 
C) ​It assumes that consumption spending is the primary determinant of aggregate demand. 
D) ​It includes investment, government spending, and net exports. 
A) ​It explains short-run business cycles. 
B) ​It explains inflation. 
C) ​It assumes that consumption spending is the primary determinant of aggregate demand. 
D) ​It includes investment, government spending, and net exports.

Question 6

In the simplest Keynesian expenditure model, which of the following is fixed to allow for easy evaluation of changes in demand due to real income?

Accepted Answer

A) ​the price level 
B) ​interest rates 
C) ​tastes and preferences 
D) ​future expectations 
A) ​the price level 
B) ​interest rates 
C) ​tastes and preferences 
D) ​future expectations

Question 7

The marginal propensity to consume (MPC) is defined as:

Accepted Answer

A) ​the additional consumption that results from one dollar increase in disposable income. 
B) ​the fraction of total disposable income that households spend on consumption. 
C) ​the fraction of total disposable income that households save. 
D) ​the additional disposable income households earn in a given period. 
A) ​the additional consumption that results from one dollar increase in disposable income. 
B) ​the fraction of total disposable income that households spend on consumption. 
C) ​the fraction of total disposable income that households save. 
D) ​the additional disposable income households earn in a given period.

Question 8

A change in aggregate expenditures for reasons other than the price level will shift the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 9

If government spending increased by $50 billion and the MPC within the economy was 0.8, what would be the total impact on real GDP?

Accepted Answer

A) $62.5 billion decrease 
B) ​$62.5 billion increase 
C) ​$250 billion decrease 
D) ​$250 billion increase 
A) $62.5 billion decrease 
B) ​$62.5 billion increase 
C) ​$250 billion decrease 
D) ​$250 billion increase

Question 10

Which of the following changes in disposable income would lead to the greatest increase in consumption?

Accepted Answer

A) ​a $20,000 increase in disposable income, if MPC equals 0.5 
B) ​a $12,000 increase in disposable income, if MPC equals 0.75 
C) ​a $15,000 increase in disposable income, if MPC equals 0.6 
D) ​a $30,000 increase in disposable income, if MPC equals 0.25 
A) ​a $20,000 increase in disposable income, if MPC equals 0.5 
B) ​a $12,000 increase in disposable income, if MPC equals 0.75 
C) ​a $15,000 increase in disposable income, if MPC equals 0.6 
D) ​a $30,000 increase in disposable income, if MPC equals 0.25

Question 11

Bill's disposable income goes from $100,000 in 2010 to $200,000 in 2011, and his consumption spending goes from $80,000 in 2010 to $140,000 in 2011. Which of the following statements about Bill is true?

Accepted Answer

A) ​Bill's MPC rose between 2010 and 2011. 
B) ​Bill's MPC is equal to 0.7. 
C) ​Bill's MPC is equal to 0.6. 
D) ​Both (a) and (b) are true. 
A) ​Bill's MPC rose between 2010 and 2011. 
B) ​Bill's MPC is equal to 0.7. 
C) ​Bill's MPC is equal to 0.6. 
D) ​Both (a) and (b) are true.

Question 12

Keynes emphasized the idea that wages and prices adjusted very rapidly bringing an economy back to the full employment level of output.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not an autonomous determinant of consumption expenditures?

Accepted Answer

A) ​real wealth 
B) ​the interest rate 
C) ​tastes and preferences 
D) ​current disposable income 
A) ​real wealth 
B) ​the interest rate 
C) ​tastes and preferences 
D) ​current disposable income

Question 14

For an economy in equilibrium, the Keynesian model suggests that the plot of aggregate expenditure against RGDP:

Accepted Answer

A) ​is a vertical line. 
B) ​has slope lesser than 1. 
C) ​has slope equal to 1. 
D) ​is a horizontal line. 
A) ​is a vertical line. 
B) ​has slope lesser than 1. 
C) ​has slope equal to 1. 
D) ​is a horizontal line.

Question 15

The Keynesian-cross model is based on the idea that the ____ must equal total output.

Accepted Answer

A) ​components of consumption 
B) ​components of aggregate supply 
C) ​components of aggregate demand 
D) ​net exports 
A) ​components of consumption 
B) ​components of aggregate supply 
C) ​components of aggregate demand 
D) ​net exports

Question 16

If government spending increased by $200 billion and the MPC within the economy was 0.9, what would be the total impact on real GDP?

Accepted Answer

A) ​$180 billion increase 
B) ​$222 billion increase 
C) ​$380 billion increase 
D) ​$2.0 trillion increase 
A) ​$180 billion increase 
B) ​$222 billion increase 
C) ​$380 billion increase 
D) ​$2.0 trillion increase

Question 17

The marginal propensity to consume is a measure of the additional consumption that results from a one-dollar increase in disposable income.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following changes in taxes would lead to the greatest increase in consumption?

Accepted Answer

A) ​a $20,000 decrease in taxes, if MPC equals 0.5 
B) ​a $12,000 decrease in taxes, if MPC equals 0.75 
C) ​a $15,000 decrease in taxes, if MPC equals 0.6 
D) ​a $30,000 decrease in taxes, if MPC equals 0.25 
A) ​a $20,000 decrease in taxes, if MPC equals 0.5 
B) ​a $12,000 decrease in taxes, if MPC equals 0.75 
C) ​a $15,000 decrease in taxes, if MPC equals 0.6 
D) ​a $30,000 decrease in taxes, if MPC equals 0.25

Question 19

Keynes believed that the economy could stay in period of unemployment for a long time period without self-correcting.

Accepted Answer

A) True 
 B)False

Question 20

Marginal propensity to save is equal to the change in ____ divided by the change in ____.

Accepted Answer

A) ​consumption spending; total income 
B) ​saving; total income 
C) ​saving; disposable income 
D) ​consumption spending; disposable income 
A) ​consumption spending; total income 
B) ​saving; total income 
C) ​saving; disposable income 
D) ​consumption spending; disposable income

Exam 15: Oligopoly and Strategic Behavior

Keynes believed that:

Consumption expenditure tends to increase when consumers have higher levels of debt.

Identify factors that would cause consumption spending to increase. What effect would that have on aggregate demand? ​

If government spending increased by $100 billion and the MPS within the economy was 0.25, what would be the total impact on real GDP?

Which of the following is not true with regard to the aggregate expenditure model?

In the simplest Keynesian expenditure model, which of the following is fixed to allow for easy evaluation of changes in demand due to real income?

The marginal propensity to consume (MPC) is defined as:

A change in aggregate expenditures for reasons other than the price level will shift the aggregate demand curve.

If government spending increased by $50 billion and the MPC within the economy was 0.8, what would be the total impact on real GDP?

Which of the following changes in disposable income would lead to the greatest increase in consumption?

Bill's disposable income goes from $100,000 in 2010 to $200,000 in 2011, and his consumption spending goes from $80,000 in 2010 to $140,000 in 2011. Which of the following statements about Bill is true?

Keynes emphasized the idea that wages and prices adjusted very rapidly bringing an economy back to the full employment level of output.

Which of the following is not an autonomous determinant of consumption expenditures?

For an economy in equilibrium, the Keynesian model suggests that the plot of aggregate expenditure against RGDP:

The Keynesian-cross model is based on the idea that the ____ must equal total output.

If government spending increased by $200 billion and the MPC within the economy was 0.9, what would be the total impact on real GDP?

The marginal propensity to consume is a measure of the additional consumption that results from a one-dollar increase in disposable income.

Which of the following changes in taxes would lead to the greatest increase in consumption?

Keynes believed that the economy could stay in period of unemployment for a long time period without self-correcting.

Marginal propensity to save is equal to the change in ____ divided by the change in ____.

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Identify factors that would cause consumption spending to increase. What effect would that have on aggregate demand?

Marginal propensity to save is equal to the change in divided by the change in .