blank (G) and the value of the multiplier that would correctly fill in blank (H)?
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.
164. Which of the following is a basic point that Keynes made about consumption?
a.
Consumption and disposal income are inversely related.
b.
When disposable income changes, consumption changes by a greater amount.
c.
Consumption is dependent upon disposable income.
d.
b and c
e.
all of the above
United States – BUSPROG: Analytic
Bloom’s: Application
165. In the simple Keynesian model, a rightward shift in the aggregate demand curve __________ result in a change in
the price level when the economy is in the horizontal segment of the AS curve and ___________ result in a change in the
price level if the economy is in the vertical segment of the AS curve.
a.
will not; will
b.
will not; will not
c.
will; will not
d.
will; will
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Application
166. Economist Brown believes that changes in aggregate demand affect only the price level, and economist Black
believes that changes in aggregate demand affect only Real GDP. What does the aggregate supply (AS) curve look like
for each economist?
United States – BUSPROG: Analytic
Bloom’s: Application
a.
For economist Brown the AS curve is vertical and for economist Black the AS curve is horizontal.
b.
For economist Brown the AS curve is horizontal and for economist Black the AS curve is vertical.
c.
For economist Brown the AS curve is upward sloping and for economist Black the AS curve is downward
sloping.
d.
For economist Brown the AS curve is downward sloping and for economist Black the AS curve is upward
sloping.
167. Keynes believed that saving is more responsive to changes in income than to changes in interest rates.
a.
b.
True
1
Moderate
United States – BUSPROG: Analytic
United States – OH – Default City – DISC: Understanding and applying – DISC:
Bloom’s: Knowledge
168. The work of John Maynard Keynes led to a major revolution in economic thought.
a.
b.
True
1
Easy
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Knowledge
169. According to Keynes, the economy is inherently unstable and may get stuck in a recessionary gap.
a.
b.
True
1
Easy
United States – BUSPROG: Analytic
Bloom’s: Knowledge
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
New
170. One similarity between the beliefs of the classical economists and Keynes is that increased saving would necessarily
stimulate an equal amount of increased investment spending.
a.
b.
171. Keynes asserted that investment is more responsive to business expectations, technological changes and innovation,
than to changes in interest rates.
a.
b.
True
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Knowledge
172. In Keynes’ view, labor unions would resist wage cuts, but individual employees would go along with wage cuts
initiated by his/her employer.
a.
b.
False
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Knowledge
173. Classical economists used efficiency wage models to support their belief in a self-regulating economy.
a.
b.
False
1
Moderate
Bloom’s: Knowledge
False
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Comprehension
174. Efficiency wage models imply that workers are more productive when they are paid a higher wage, as compared to
when they are paid a lower wage.
a.
b.
175. A simple Keynesian model is representative of a closed economy, with no foreign sector.
a.
b.
True
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Knowledge
176. The marginal propensity to consume (MPC) refers to the proportion of disposable income that is spent on
consumption.
a.
b.
False
1
Challenging
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Knowledge
177. A consumption function is a statement that shows the relationship between interest rates and consumption.
a.
b.
False
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
True
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Knowledge
178. An increase in autonomous consumption, an increase in disposable income, or a decrease in the marginal propensity
to consume can all increase consumption.
a.
b.
179. 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.
a.
b.
True
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
180. The part of consumption that is dependent on disposable income is called autonomous consumption.
a.
b.
False
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Knowledge
181. The marginal propensity to save (MPS) can be found using the equation: (1 – MPC).
a.
b.
True
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Disposable Income
182. A change in autonomous spending leads to an even greater change in total spending through the multiplier process.
False
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Disposable Income
a.
b.
183. In reality, idle resources must exist in the economy in order for the multiplier process to lead to an increase in Real
GDP.
a.
b.
True
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Disposable Income
184. In a simple Keynesian model, the aggregate supply curve is upward sloping.
a.
b.
False
1
Easy
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Knowledge
185. Many economists argue that the labor market may take a long time for wages to adjust to new equilibrium level.
a.
b.
True
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Knowledge
186. In the simple Keynesian model, the aggregate supply curve has a horizontal segment at levels of output below the
level of natural Real GDP and a vertical segment at the level of natural Real GDP.
a.
True
1
Moderate
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Disposable Income
b.
187. The economy can be in equilibrium and in a recessionary gap simultaneously.
a.
b.
True
1
Easy
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Disposable Income
188. A decline in housing prices can help to push the economy into a recessionary gap.
a.
b.
True
1
Easy
United States – BUSPROG: Analytic
Bloom’s: Application
Economics 24/7
189. Explain the sequence of events that occurs in the economy once total production (TP) is less than total expenditure
(TE).
1
Moderate
United States – BUSPROG: Analytic
190. Discuss how the Great Depression contributed to the development of Keynesian economics.
True
1
Easy
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Knowledge
191. Explain the process by which an initial change in autonomous spending can lead to an even greater change in total
spending.
192. What is the general format of the consumption function? Explain what each term means and use the consumption
function to explain the three different ways that consumption can increase.
193. Describe Keynes’ criticism of Say’s law in a money economy.
194. 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.
195. 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.
196. Using the concept of the multiplier, explain in detail how college students flocking to beach towns for spring break
can positively impact the beach towns’ economies.
197. As portrayed in terms of total expenditures (TE) and total production (TP), discuss at least three assumptions that
sum up the workings of the simple Keynesian model.
1
United States – BUSPROG: Analytic
198. Describe the three basic points that Keynes made regarding consumption. Briefly explain why consumption was
such a main concern in the Keynesian model.
1
United States – BUSPROG: Analytic
Understanding and applying economic models
Bloom’s: Application
199. Given the following data, what is the distance from the origin to the point where the total expenditures (TE) curve
cuts the vertical axis?
C = $800 + 0.85Yd
I = $350
G = $420
a.
$1,570
b.
$1,150
c.
$1,220
d.
$770
1
Moderate
Bloom’s: Application
Economics 24/7
e.
$1,220.85
200. Given the following data, what is the distance from the origin to the point where the total expenditures (TE) curve
cuts the vertical axis?
C = $400 + 0.75Yd
I = $120
G = $270
a.
$670
b.
$790.75
c.
$790
d.
$400
e.
$390
1
Moderate
United States – BUSPROG: Analytic
Bloom’s: Application
New
1
Moderate
Understanding and applying economic models
New