Question 1

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.

Question 2

A rise in MPC makes the total expenditures (TE)  curve __________ and __________ the multiplier.

Accepted Answer

A)  steeper; raises
B)  steeper; lowers
C)  flatter; raises
D)  flatter; lowers

Question 3

The economy is in equilibrium, TP = TE, and Real GDP is $2,000 billion. The MPC is 0.75, the multiplier is operative, and idle resources exist at each expenditure round. Autonomous investment spending falls by $10 billion. As a result, the TE curve shifts __________, inventory levels unexpectedly __________, business firms __________ the quantity of goods and services they produce, and Real GDP __________ by __________.

Accepted Answer

A)  downward; rise; decrease; falls; $7.5 billion
B)  downward; fall; increase; rises; $40 billion
C)  downward; rise; decrease; falls; $40 billion
D)  upward; rise; decrease; falls; $40 billion
E)  downward; fall; decrease; falls; $7.5 billion

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The economy is in equilibrium, TP = TE, and Real GDP is $4,000 billion. The MPC is 0.60, the multiplier is operative, and idle resources exist at each expenditure round. Autonomous investment spending rises by $13 billion. As a result, the __________ curve shifts __________, inventory levels unexpectedly __________, business firms __________ the quantity of goods and services they produce, and Real GDP __________ by __________.

Accepted Answer

A)  TE, downward, rise, increase, rises, $32.5 billion
B)  TE, upward, fall, increase, rises, $101.5 billion
C)  TE, upward, fall, decrease, rises, $32.5 billion
D)  TE, upward, fall, increase, rises, $32.5 billion
E)  TP, upward, fall, increase, rises, $101.5 billion

Question 6

Exhibit 10-2
  TE. C) TE > TP. D) the relationship between TP and TE cannot be determined." class="answers-bank-image d-inline" rel="preload" >
-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.

Question 7

Exhibit 10-8
 o)  is equal to A) $4. B) $40. C) $400. D) $4,000. E) $2,000." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 10-8. Autonomous consumption (Co)  is equal to

Accepted Answer

A)  $4.
B)  $40.
C)  $400.
D)  $4,000.
E)  $2,000.

Question 8

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 9

Here is a consumption function: C = C0 + MPC(Yd) . If MPC is 0.80, then we know that

Accepted Answer

A)  as Yd rises by $1, Co rises by $0.80.
B)  as Yd rises by $1, C rises by $0.80.
C)  Yd rises by $0.80.
D)  as C0 rises by $0.80, Yd rises by $1.

Question 10

Exhibit 10-8
 
-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.

Question 11

Exhibit 10-3
 
-Refer to Exhibit 10-3. The marginal propensity to consume (MPC)  is

Accepted Answer

A)  0.80.
B)  0.75.
C)  0.20.
D)  0.25.
E)  0.90.

Question 12

Exhibit 10-5
  TP, individuals are buying more output than firms produce. C) TE = TP, the economy is in equilibrium. D) TE  TP, individuals are buying less output than firms produce." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 10-5 When TE is $700 billion, what state is the economy in?

Accepted Answer

A)  TE 
B)  TE > TP, individuals are buying more output than firms produce.
C)  TE = TP, the economy is in equilibrium.
D)  TE 
E)  TE > TP, individuals are buying less output than firms produce.

Question 13

What type of relationship exists between the marginal propensity to consume (MPC) and the multiplier? Explain why this relationship exists, giving a hypothetical numerical example to help support your answer.

Accepted Answer

The MPC and the multiplier have a direct...

Question 14

Exhibit 10-9
 
-Refer to Exhibit 10-9. What is the value of the marginal propensity to consume (MPC)  that would correctly fill in blank (C)  and the marginal propensity to save (MPS)  that would correctly fill in blank (D) ?

Accepted Answer

A)  0.90; 0.10
B)  0.10; 10
C)  0.90; 9
D)  0.01; 100

Question 15

When the MPC = 0.6, the multiplier is

Accepted Answer

A)  0.40.
B)  2.50.
C)  1.67.
D)  6.00.

Question 16

Keynes believed that

Accepted Answer

A)  Say's law would hold in a laissez-faire economy.
B)  the economy would always be near or on its production possibilities frontier.
C)  wages and prices are often inflexible in the downward direction.
D)  the equilibrium level of output will always be at the full-employment level of output.

Question 17

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.

Question 18

When total expenditure (TE) exceeds total production (TP), inventory levels rise unexpectedly, which sends a signal to firms that they have overproduced, so they cut back on production.

Accepted Answer

A) True 
 B)False

Question 19

Describe Keynes' criticism of Say's law in a money economy.

Accepted Answer

In order for Say's law to hold in a mone...

Question 20

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 ...

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

What type of relationship exists between the marginal propensity to consume (MPC) and the multiplier? Explain why this relationship exists, giving a hypothetical numerical example to help support your answer.

Correct Answer
verified
The MPC and the multiplier have a direct...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified
When autonomous spending increases, the ...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Describe Keynes' criticism of Say's law in a money economy.

Correct Answer
verified
In order for Say's law to hold in a mone...
View Answer

When the MPC = 0.6, the multiplier is

Correct Answer
verified

Exhibit 10-5 -Refer to Exhibit 10-5 When TE is $700 billion, what state is the economy in?

Correct Answer
verified

Exhibit 10-3 -Refer to Exhibit 10-3. The marginal propensity to consume (MPC) is

Correct Answer
verified

Correct Answer
verified

Exhibit 10-9 -Refer to Exhibit 10-9. What is the value of the marginal propensity to consume (MPC) that would correctly fill in blank (C) and the marginal propensity to save (MPS) that would correctly fill in blank (D) ?

Correct Answer
verified

A rise in MPC makes the total expenditures (TE) curve and the multiplier.

Correct Answer
verified

When total expenditure (TE) exceeds total production (TP), inventory levels rise unexpectedly, which sends a signal to firms that they have overproduced, so they cut back on production.

Correct Answer
verified

Exhibit 10-8 -Refer to Exhibit 10-8. Autonomous consumption (C_o) is equal to

Correct Answer
verified

Exhibit 10-2 -Refer to Exhibit 10-2. At M,

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Keynes believed that

Correct Answer
verified

Here is a consumption function: C = C₀ + MPC(Y_d) . If MPC is 0.80, then we know that

Correct Answer
verified

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

What type of relationship exists between the marginal propensity to consume (MPC) and the multiplier? Explain why this relationship exists, giving a hypothetical numerical example to help support your answer.

Correct AnswerverifiedThe MPC and the multiplier have a direct...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedWhen autonomous spending increases, the ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Describe Keynes' criticism of Say's law in a money economy.

Correct AnswerverifiedIn order for Say's law to hold in a mone...View AnswerShow Answer

When the MPC = 0.6, the multiplier is

Correct AnswerverifiedShow Answer

Exhibit 10-5 -Refer to Exhibit 10-5 When TE is $700 billion, what state is the economy in?

Correct AnswerverifiedShow Answer

Exhibit 10-3 -Refer to Exhibit 10-3. The marginal propensity to consume (MPC) is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 10-9 -Refer to Exhibit 10-9. What is the value of the marginal propensity to consume (MPC) that would correctly fill in blank (C) and the marginal propensity to save (MPS) that would correctly fill in blank (D) ?

Correct AnswerverifiedShow Answer

A rise in MPC makes the total expenditures (TE) curve __________ and __________ the multiplier.

Correct AnswerverifiedShow Answer

When total expenditure (TE) exceeds total production (TP), inventory levels rise unexpectedly, which sends a signal to firms that they have overproduced, so they cut back on production.

Correct AnswerverifiedShow Answer

Exhibit 10-8 -Refer to Exhibit 10-8. Autonomous consumption (Co) is equal to

Correct AnswerverifiedShow Answer

Exhibit 10-2 -Refer to Exhibit 10-2. At M,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Keynes believed that

Correct AnswerverifiedShow Answer

Here is a consumption function: C = C0 + MPC(Yd) . If MPC is 0.80, then we know that

Correct AnswerverifiedShow Answer

Correct Answer
verified
The MPC and the multiplier have a direct...
View Answer

Correct Answer
verified

Correct Answer
verified
When autonomous spending increases, the ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In order for Say's law to hold in a mone...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A rise in MPC makes the total expenditures (TE) curve and the multiplier.

Correct Answer
verified

Correct Answer
verified

Exhibit 10-8 -Refer to Exhibit 10-8. Autonomous consumption (C_o) is equal to

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Here is a consumption function: C = C₀ + MPC(Y_d) . If MPC is 0.80, then we know that

Correct Answer
verified