Question 1

Keynes was especially concerned with explaining the ________.
A) recession of 1920-21
B) low levels of output and employment during the Great Depression
C) strong economic growth of the 1920s
D) high unemployment in Great Britain during the 1920s

Accepted Answer

Keynes is most famously known for his work in explaining and advocating for policies to address the low levels of output and employment during the Great Depression.

Question 2

Everything else held constant, if consumption expenditure increases by 65 for a 100 increase in disposable income, the mpc is ________.
A) 0
B) 0.5
C) 0.65
D) 1

Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption expenditure divided by the change in disposable income, which in this case is 65/100 = 0.65.

Question 3

In the simple Keynesian model, equilibrium aggregate output is determined by ________.
A) aggregate demand
B) aggregate supply
C) the national demand for labor
D) the price level

Accepted Answer

In the simple Keynesian model, equilibrium aggregate output is determined by aggregate demand. This is because aggregate demand represents the total demand for goods and services in the economy, and in the short run, changes in aggregate demand have a greater impact on output than changes in aggregate supply or the national demand for labor. The price level is also a factor that influences aggregate demand, but it is not the sole determinant of equilibrium aggregate output in the simple Keynesian model.

Question 4

Assume that autonomous consumption equals $200 and disposable income equals $1000. If total consumption equal $800, then the mpc equals ________.
A) 0.2
B) 0.6
C) 0.8
D) 1.0

Accepted Answer

Autonomous consumption is the amount of consumption that occurs regardless of income levels, so it is not used in calculating the MPC. Disposable income is the income that is available to be spent or saved after taxes have been taken out.

MPC (marginal propensity to consume) is the portion of each additional dollar of disposable income that is spent on additional consumption.

To calculate the MPC, we use the formula:

MPC = change in consumption / change in disposable income

In this case, total consumption is $800, and disposable income is $1000. Autonomous consumption is ignored since it is not affected by changes in disposable income.

So, change in consumption = $800 - $200 (autonomous consumption) = $600. 
And change in disposable income = $1000 - $0 (initial disposable income) = $1000.

Therefore,

MPC = $600 / $1000 = 0.6

The correct answer is B.

Question 5

Assume that disposable income equals $1000 and the mpc equals 0.6. If total consumption equal $800, then autonomous consumption is equal to ________.
A) $0
B) $200
C) $800
D) $1000

Accepted Answer

MPC = change in consumption / change in disposable income 
0.6 = (C - $800) / $1000 
0.6 * $1000 = C - $800 
$600 + $800 = C 
$1400 = C

Autonomous consumption is equal to total consumption minus consumption due to changes in disposable income. 
Autonomous consumption = $800 - (0.4 * $1000) = $400

Therefore, autonomous consumption is equal to $400 which is option B.

Question 6

If the consumption function is expressed as C = a + mpc × Y_D, then "mpc" represents ________. A) autonomous consumer expenditure B) the marginal propensity to consume C) the expenditure multiplier D) disposable income

Accepted Answer

"mpc" stands for "marginal propensity to consume," which represents the change in consumption resulting from a change in disposable income. Therefore, the correct answer is B, the marginal propensity to consume.

Question 7

Keynes was especially interested in explaining movements of ________ because he wanted to explain why the Great Depression had occurred and how government policy could be used to increase ________ in a similar economic situation.
A) aggregate output; wages
B) aggregate output; employment
C) wage rates; wages
D) wage rates; employment

Accepted Answer

Keynes believed that movements in aggregate output (also known as GDP) were critical to understanding economic performance and fluctuations. He believed that government policy could be used to increase employment and stimulate economic activity during recessions or depressions. While wage rates were a factor in Keynesian economics, employment was more directly related to changes in aggregate output. Therefore, choice B is the best answer.

Question 8

Keynes reasoned that consumer expenditure is most closely related to ________.
A) the level of interest rates
B) the price level
C) disposable income
D) the marginal tax rate

Accepted Answer

Keynes believes that disposable income has the strongest impact on consumer expenditure. As disposable income increases, people have more money to spend, which in turn leads to an increase in consumer expenditure. The other options (A, B, and D) may also have some impact on consumer expenditure, but it is not as direct or strong as disposable income.

Question 9

Keynes was especially concerned with explaining the ________ level of output and employment during the ________.
A) low; 1920s
B) low; 1930s
C) high; 1920s
D) high; 1930s

Accepted Answer

Keynes was primarily concerned with explaining the low level of output and employment during the Great Depression of the 1930s.

Question 10

If the consumption function is C = 20 + 0.8Y_D, then an increase in disposable income by $100 will result in an increase in consumer expenditure by ________. A) $58 B) $64 C) $80 D) $100

Accepted Answer

In the given consumption function, the marginal propensity to consume(MPC) is 0.8. 
Therefore, an increase in disposable income by $100 will result in an increase in consumer expenditure by MPC*increase in disposable income = 0.8*$100 = $80. So, the correct answer is C) $80.

Question 11

Under Keynesian analysis, aggregate demand can be written as ________.
A)  = C + I + G + NX
B)  = C + I + G - NX
C)  = C - I - G - NX
D)  = C + I - G - NX

Accepted Answer

According to Keynesian analysis, aggregate demand can be written as AD = C + I + G + NX, where C represents consumption, I represents investment, G represents government spending, and NX represents net exports.

Question 12

Everything else held constant, if disposable income increases by 200 and consumption expenditure increases by 150, the mpc is ________.
A) 0
B) 0.15
C) 0.5
D) 0.75

Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption expenditure divided by the change in disposable income, which is 150/200 = 0.75.

Question 13

His analysis started with the recognition that the total quantity demanded of an economy's output was the sum of four types of spending: consumer expenditure, planned investment spending, government spending, and net exports.
A) John Maynard Keynes
B) Sir John Hicks
C) Milton Friedman
D) Paul A. Samuelson

Accepted Answer

This statement is describing the Keynesian Model of economics. John Maynard Keynes was the economist who developed this model.

Question 14

Assume that autonomous consumption equals $200 and that the mpc equals 0.8. If disposable income equals $1000, then total consumption equals ________.
A) $80
B) $200
C) $800
D) $1000

Accepted Answer

Total consumption is calculated by adding autonomous consumption to the product of the marginal propensity to consume (mpc) and disposable income. Here, it's $200 + 0.8 * $1,000 = $200 + $800 = $1,000.

Question 15

Everything else held constant, if total consumption increases from $600 to $800 because of an increase of disposable income of $400, then the mpc is equal to ________.
A) 0.2
B) 0.4
C) 0.5
D) 0.6

Accepted Answer

MPC (marginal propensity to consume) is the fraction of an increase in income that is spent on consumption. Here, the increase in disposable income is $400 and the increase in consumption is $200, so the MPC is calculated as: MPC = change in consumption/change in income = $200/$400 = 0.5. Therefore, the correct answer is C.

Question 16

In the Keynesian model of income determination, consumer expenditure includes spending by ________.
A) consumers on personal computers
B) businesses on personal computers
C) governments on personal computers
D) foreigners on domestic personal computers

Accepted Answer

In the Keynesian model of income determination, consumer expenditure refers to spending by households on goods and services. Personal computers are typically purchased by households, making it part of consumer expenditure. Business spending on personal computers would be considered investment expenditure, which is a separate component in the Keynesian model. Government spending on personal computers would be classified as government expenditure, and foreign spending on domestic personal computers would be considered exports, both of which are also separate components in the Keynesian model.

Question 17

If the consumption function is C = 20 + 0.5Y_D, then an increase in disposable income by $100 will result in an increase in consumer expenditure by ________. A) $25 B) $70 C) $50 D) $100

Accepted Answer

According to the consumption function, the marginal propensity to consume (MPC) is 0.5. This implies that for every additional dollar of disposable income, consumers will spend 50 cents. 
Therefore, an increase in disposable income by $100 will result in an increase in consumer expenditure by:
MPC x change in disposable income = 0.5 x $100 = $50 
Therefore, the correct answer is C, $50.

Question 18

If the consumption function is expressed as C = a + mpc × Y_D, then "a" represents ________. A) autonomous consumer expenditure B) the marginal propensity to consume C) the expenditure multiplier D) disposable income

Accepted Answer

"a" represents autonomous consumer expenditure, which is the amount of consumption that occurs regardless of changes in disposable income.

Question 19

The marginal propensity to consume (mpc) can be defined as the fraction of ________.
A) a change in income that is spent
B) a change in income that is saved
C) income that is spent
D) income that is saved

Accepted Answer

The marginal propensity to consume (MPC) is the fraction or proportion of a change in income that is spent. It represents the additional spending that occurs in response to an increase in income.

Question 20

Keynes's motivation in developing the aggregate output determination model stemmed from his concern with explaining ________.
A) the hyperinflations of the 1920s
B) why the Great Depression occurred
C) the high unemployment in Great Britain before World War I
D) the high unemployment in Great Britain after World War II

Accepted Answer

Keynes developed the aggregate output determination model in order to explain the causes of and potential solutions to the Great Depression.

Quiz 21: The Is Curve

Keynes was especially concerned with explaining the ________.

Everything else held constant, if consumption expenditure increases by 65 for a 100 increase in disposable income, the mpc is ________.

In the simple Keynesian model, equilibrium aggregate output is determined by ________.

Assume that autonomous consumption equals $200 and disposable income equals $1000. If total consumption equal $800, then the mpc equals ________.

Assume that disposable income equals $1000 and the mpc equals 0.6. If total consumption equal $800, then autonomous consumption is equal to ________.

If the consumption function is expressed as C = a + mpc × Y_D, then "mpc" represents ________.

Keynes was especially interested in explaining movements of because he wanted to explain why the Great Depression had occurred and how government policy could be used to increase in a similar economic situation.

Keynes reasoned that consumer expenditure is most closely related to ________.

Keynes was especially concerned with explaining the level of output and employment during the .

If the consumption function is C = 20 + 0.8Y_D, then an increase in disposable income by $100 will result in an increase in consumer expenditure by ________.

Under Keynesian analysis, aggregate demand can be written as ________.

Everything else held constant, if disposable income increases by 200 and consumption expenditure increases by 150, the mpc is ________.

His analysis started with the recognition that the total quantity demanded of an economy's output was the sum of four types of spending: consumer expenditure, planned investment spending, government spending, and net exports.

Assume that autonomous consumption equals $200 and that the mpc equals 0.8. If disposable income equals $1000, then total consumption equals ________.

Everything else held constant, if total consumption increases from $600 to $800 because of an increase of disposable income of $400, then the mpc is equal to ________.

In the Keynesian model of income determination, consumer expenditure includes spending by ________.

If the consumption function is C = 20 + 0.5Y_D, then an increase in disposable income by $100 will result in an increase in consumer expenditure by ________.

If the consumption function is expressed as C = a + mpc × Y_D, then "a" represents ________.

The marginal propensity to consume (mpc) can be defined as the fraction of ________.

Keynes's motivation in developing the aggregate output determination model stemmed from his concern with explaining ________.