Deck 15: Keynesian Economics and the Great Depression

Question 1

Whats defention of terms:
-macroeconomics

Answer 1

the study of the economy as a whole with primary interest in growth, unemployment, inflation, and business cycles

Question 2

Whats defention of terms:
-medium of exchange

Answer 2

payment for goods and services

Question 3

Whats defention of terms:
-microeconomics

Answer 3

the study of individual firms, individual employees, and individual consumers

Question 4

Whats defention of terms:
-Say's law

Question 5

Describe Keynes's basic explanation of the boom and bust cycle of a capitalist market economy.
-State Say's Law and then explain what it means in your own words.

Question 6

Describe Keynes's basic explanation of the boom and bust cycle of a capitalist market economy.
-How does the use of money in the economy create the possibility that Say's Law may not hold?

Question 7

Describe Keynes's basic explanation of the boom and bust cycle of a capitalist market economy.
-What are the two main things people can do with their income (money)?

Question 8

Describe Keynes's basic explanation of the boom and bust cycle of a capitalist market economy.
-How does income (money) "leak" out of circulation? In what way do savings enter back into circulation?

Question 9

Describe Keynes's basic explanation of the boom and bust cycle of a capitalist market economy.
-What happens when there is not enough demand for the amount of goods produced?

Question 10

Explain how the government can act to stabilize the economy.
-How can the government offset a lack of private demand? How does this help prevent a recession?

Question 11

Explain how the government can act to stabilize the economy.
-How could lower taxes, especially for middle and low-income households, help the economy?

Question 12

The name of John Maynard Keynes' most famous book is

A) The General Theory of Employment, Interest and Money.
B) The Causes of Unemployment and Depression.
C) Principles of Macroeconomics.
D) The Theory of Capitalism.

Question 13

Say's law was developed

A) by John Maynard Keynes in 1926.
B) by Adam Smith in 1789.
C) by Jean Baptiste Say in 1800.
D) by Thomas Say in 1825.

Question 14

According to Say's law, a lack of demand

A) may occur briefly in one industry until capital moves to another industry.
B) will never occur in the aggregate economy for any reason.
C) occurs whenever there is insufficient income to purchase goods produced.
D) will occur frequently, because people tend to hoard money.

Question 15

What is the difference between microeconomics and macroeconomics?

A) microeconomics deals with the economy with a country; macroeconomics deals with the global economy.
B) microeconomics deals with small firms; macroeconomics deals with large firms.
C) microeconomics deals with individual firms, consumers, etc; macroeconomics deals with the economy as a whole.
D) microeconomics deals with small countries; macroeconomics deals with large countries.

Question 16

Which of the following is a statement of Say's law?

A) good money always drives out bad.
B) capitalism must be reformed in order to preserve it.
C) any output supplied to the market generates an equal amount of demand.
D) an economy left alone will always return to equilibrium.

Question 17

Keynes divided spending into four great flows which are

A) consumer spending on durable goods, consumer spending on nondurable goods, consumer spending on personal services, and consumer spending on financial services.
B) business spending on buildings, business spending on equipment, business spending on raw materials, and business spending on advertising.
C) consumer spending, business spending, government spending, and spending by foreign on exports.
D) government spending on welfare, government spending on the military, government spending on education, and government spending on Social Security.

Question 18

Income received by households will be used for

A) consumption, saving, and investment.
B) consumption, saving, and taxes.
C) consumption, investment, and exports.
D) consumption, investment, and transfers.

Question 19

The 3 leakages from spending are

A) savings, investment, and taxes.
B) exports, imports, and government spending.
C) savings, taxes, and imports.
D) consumption, savings, and taxes.

Question 20

The Great Depression occurred

A) during the 1890s and lasted for 20 years.
B) during the 1930s and last for 10 years.
C) during the 1970s and lasted for 5 years
D) during the 1990s and lasted for 1 year.

Question 21

Keynes disagreed with the neoclassical view of money and argued that

A) money is used only as a medium of exchange.
B) money is neutral in its impact on the economy.
C) money is used as a medium of exchange only in barter systems.
D) money is used as a medium of exchange and also is used to keep in reserve for emergencies.