Question 1

Inventory levels unexpectedly rise and as a result firms reduce the level of production. 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)  TP is equal to TE.
D)  TP is equal to TE minus the rise in inventories above the optimum inventory level.
E)  none of the above

Question 2

Exhibit 10-1
 3, there is a tendency for Real GDP to A) rise. B) fall. C) remain unchanged. D) There is not enough information to answer this question." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 10-1. At Q3, 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.

Question 3

If income rises from $10,000 to $10,600 and consumption rises from $9,100 to $9,622, the marginal propensity to save (MPS)  is

Accepted Answer

A)  0.13.
B)  0.87.
C)  0.25.
D)  0.10.

Question 4

A change in autonomous spending leads to an even greater change in total spending through the multiplier process.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

Exhibit 10-9
 
-Refer to Exhibit 10-9. What is the value of the marginal propensity to save (MPS)  that would correctly fill in blank (A)  and the multiplier that would correctly fill in blank (B) ?

Accepted Answer

A)  0.20; 5
B)  0.08; 8
C)  0.08; 12.5
D)  0.05; 0.95

Question 7

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

Question 8

Exhibit 10-4
 1, autonomous consumption is equal to A) C0. B) C1. C) C2. D) C1 - C0. E) C2 - C1." class="answers-bank-image d-inline" rel="preload" >
-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.

Question 9

Exhibit 10-8
 
-Refer to Exhibit 10-8. The marginal propensity to save (MPS)  is

Accepted Answer

A)  0.90.
B)  0.10.
C)  0.80.
D)  0.20.
E)  5.00.

Question 10

Exhibit 10-6
 1." class="answers-bank-image d-inline" rel="preload" >
-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.

Question 11

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.

Question 12

Exhibit 10-4
 0A. B) C0A divided by AF. C) AF divided by C0F. D) C0F divided by AF. E) none of the above" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 10-4. Marginal propensity to consume is equal to

Accepted Answer

A)  AF divided by C0A.
B)  C0A divided by AF.
C)  AF divided by C0F.
D)  C0F divided by AF.
E)  none of the above

Question 13

Exhibit 10-5
 
-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.

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

Question 15

Exhibit 10-5
 
-Refer to Exhibit 10-5. When TE is $300 billion, what will firms most likely firms 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.

Question 16

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 17

Exhibit 10-2
 
-Refer to Exhibit 10-2. If autonomous consumption increases, the TE curve will shift ____________ and the new level of equilibrium Real GDP will be ___________ than $4,500.

Accepted Answer

A)  downward; greater
B)  downward; less
C)  upward; less
D)  upward; greater

Question 18

When the MPC = 0.75, the multiplier is

Accepted Answer

A)  0.25.
B)  1.33.
C)  2.50.
D)  4.00.
E)  5.00.

Question 19

Which of the following statements is true?

Accepted Answer

A)  When TP = TE (total production = total expenditures) , the economy is necessarily producing Natural Real GDP.
B)  When TP is greater than TE, inventory levels unexpectedly fall.
C)  When TE is greater than TP, inventory levels unexpectedly rise.
D)  b and c
E)  none of the above

Question 20

The answer is: 1/(1 - MPC) . What is the question?

Accepted Answer

A)  What is the marginal propensity to save?
B)  What is the efficiency wage model?
C)  What does consumption equal if the economy is in equilibrium?
D)  What is the multiplier?
E)  What does disposable income equal if the economy is in equilibrium?

Exam 10: Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

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

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Inventory levels unexpectedly rise and as a result firms reduce the level of production. Which of the following is consistent with these two occurrences?

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Exhibit 10-4 -Refer to Exhibit 10-4. Marginal propensity to consume is equal to

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The answer is: 1/(1 - MPC) . What is the question?

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

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Exhibit 10-9 -Refer to Exhibit 10-9. What is the value of the marginal propensity to save (MPS) that would correctly fill in blank (A) and the multiplier that would correctly fill in blank (B) ?

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Exhibit 10-2 -Refer to Exhibit 10-2. If autonomous consumption increases, the TE curve will shift ____________ and the new level of equilibrium Real GDP will be ___________ than $4,500.

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Which of the following statements is true?

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

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

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

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

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

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Exhibit 10-8 -Refer to Exhibit 10-8. The marginal propensity to save (MPS) is

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Exhibit 10-1 -Refer to Exhibit 10-1. At Q3, there is a tendency for Real GDP to

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A change in autonomous spending leads to an even greater change in total spending through the multiplier process.

Correct AnswerverifiedShow Answer

If income rises from $10,000 to $10,600 and consumption rises from $9,100 to $9,622, the marginal propensity to save (MPS) is

Correct AnswerverifiedShow Answer

When the MPC = 0.75, the multiplier is

Correct AnswerverifiedShow Answer

Exhibit 10-5 -Refer to Exhibit 10-5. When TE is $300 billion, what will firms most likely firms do next?

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

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

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Exhibit 10-2 -Refer to Exhibit 10-2. If autonomous consumption increases, the TE curve will shift __ and the new level of equilibrium Real GDP will be _ than $4,500.

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Exhibit 10-1 -Refer to Exhibit 10-1. At Q₃, there is a tendency for Real GDP to

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