Question 1

Whats defention of terms:
-effective demand

Accepted Answer

demand when someone has both desire and money

Question 2

Whats defention of terms:
-Keynesian cross

Accepted Answer

a model that illustrates the relationship between aggregate production and aggregate expenditures; it can be used to explain why unemployment can be a persistent condition

Question 3

Whats defention of terms:
-leakage

Accepted Answer

money income that is not spent on consumption or investment; caused by funds used for savings, imports, and taxes

Question 4

Explain and give examples of how a progressive view of aggregate supply and demand is completely different from the traditional view.
-What is "effective demand" according to Keynes? How can there be a lack of effective demand?

Accepted Answer

The answer of Explain and give examples of how a...

Question 5

Explain and give examples of how a progressive view of aggregate supply and demand is completely different from the traditional view.
-Can aggregate demand suffer from "leakages" according to the traditional view? Explain.

Accepted Answer

The answer of Explain and give examples of how a...

Question 6

Discuss how Keynes refuted Say's law.
-How did Keynes explain that aggregate production and aggregate spending might not be equal? What happens if aggregate production is greater than aggregate spending?

Accepted Answer

The answer of Discuss how Keynes refuted Say's law.
-How did...

Question 7

Discuss how Keynes refuted Say's law.
-Why does aggregate spending rise more slowly than income?

Accepted Answer

The answer of Discuss how Keynes refuted Say's law.
-Why does...

Question 8

Describe how Keynes built an entirely new view of aggregate supply and demand in which an economy may not automatically recover from a recession.
-How do Keynesians counter the neoclassical argument that, in a recession, falling prices will restore demand for goods to the full employment equilibrium point?

Accepted Answer

The answer of Describe how Keynes built an entirely new...

Question 9

Describe how Keynes built an entirely new view of aggregate supply and demand in which an economy may not automatically recover from a recession.
-How do Keynesians counter the neoclassical argument that in a recession, falling wages and salaries will restore demand for labor to the full employment equilibrium point?

Accepted Answer

The answer of Describe how Keynes built an entirely new...

Question 10

Describe how Keynes built an entirely new view of aggregate supply and demand in which an economy may not automatically recover from a recession.
-How do Keynesians counter the neoclassical argument that in a recession, falling interest rates will restore demand for loans for new investment to the full employment equilibrium point?

Accepted Answer

The answer of Describe how Keynes built an entirely new...

Question 11

Describe how Keynes built an entirely new view of aggregate supply and demand in which an economy may not automatically recover from a recession.
-How does Keynes explain inflation?

Accepted Answer

The answer of Describe how Keynes built an entirely new...

Question 12

Compare and contrast the arguments of critiques of classical economics and Say's law.
-How do Marx and Mitchell refute Say's law?

Accepted Answer

The answer of Compare and contrast the arguments of critiques...

Question 13

Compare and contrast the arguments of critiques of classical economics and Say's law.
-Compare and contrast Marx and Mitchell's arguments to that of Keynes.

Accepted Answer

The answer of Compare and contrast the arguments of critiques...

Question 14

Keynes defined aggregate supply as
A) the total dollar amount of money spent on goods and services by consumers, investors, government and net spending by foreigners at a given price level.
B) the total dollar amount of money spent on goods and services by consumers at a given price level.
C) the total output produced and offered for sale at a given price level by all economic units.
D) the total output produced and offered for sale at a given price level by the private sector.

Accepted Answer

Keynes defined aggregate supply as the total output produced and offered for sale at a given price level by all economic units. This includes both the private and public sectors, and is not limited to just consumer spending like in option B or total spending by all economic units like in option A. Option D is also too limited since it only refers to the private sector.

Question 15

Keynes defined aggregate demand as
A) the total dollar amount of money spent on goods and services by consumers, investors, government and net spending by foreigners at a given price level.
B) the total dollar amount of money spent on goods and services by consumers at a given price level.
C) the total output produced and offered for sale at a given price level by all economic units.
D) the total output produced and offered for sale at a given price level by the private sector.

Accepted Answer

Keynes defined aggregate demand as the total dollar amount of money spent on goods and services by consumers, investors, government and net spending by foreigners at a given price level. This encompasses all components of demand in an economy, including consumption, investment, government spending and net exports.

Question 16

Keynes stressed the importance of effective demand which is
A) when business firms are effective in convincing consumers that they have a demand for certain goods.
B) when consumers have the desire for goods and services as well as the income to purchase these goods.
C) when the demand for goods and services is effective in satisfying individuals desires.
D) when aggregate demand is less than aggregate supply.

Accepted Answer

Keynes emphasized that effective demand arises from the desire of consumers to purchase goods and services combined with their ability to pay for them. This means that in addition to having the willingness to buy goods and services, consumers must have the necessary income or purchasing power to actually make those purchases. Effective demand is important because it drives economic growth and is necessary for firms to produce and sell their goods and services, leading to increased employment and income generation.

Question 17

National or aggregate income includes
A) profits, rent and interest income.
B) wages, salaries and profits.
C) wages, salaries, rent and interest income.
D) wages, salaries, rent, profits and interest income.

Accepted Answer

National or aggregate income includes wages, salaries, rent, profits, and interest income.

Question 18

The Keynesian cross diagram shows
A) the relationship between equilibrium income and full employment.
B) the relationship between aggregate demand and aggregate supply.
C) the relationship between equilibrium demand and the price level.
D) the relationship between full employment and the price level.

Accepted Answer

The Keynesian cross diagram shows the relationship between equilibrium income (or output) and the level of total spending in the economy. It is based on the assumption that prices are fixed and that there is a direct relationship between spending and output. Therefore, it is used to analyze the impact of changes in spending, such as government spending or investment, on the level of output and employment in the economy. It does not directly relate to aggregate demand and supply, price level, or full employment and price level.

Question 19

The basic definition of GDP used in the Keynesian framework is
A) GDP = C + I + S + X
B) GDP = C + I + G + X
C) GDP = C + I + G + NX
D) GDP = C + S + B + NX

Accepted Answer

The basic definition of GDP used in the Keynesian framework is GDP = C + I + G + NX. This formula indicates that GDP is composed of four components: consumption (C), investment (I), government spending (G), and net exports (NX). This definition is consistent with the Keynesian view that government intervention can help stabilize and stimulate the economy, and that exports can contribute positively to economic growth. Option A is incorrect because it includes savings (S) instead of government spending (G). Option B is incorrect because it includes government spending (G) instead of net exports (NX). Option D is incorrect because it includes a term (B) that is not relevant to GDP.

Question 20

Leakages from the circular flow include
A) savings, investment, and taxes.
B) savings, imports, and taxes.
C) exports, savings, and investment.
D) exports, investment, and imports.
E) investment, taxes, and imports.

Accepted Answer

Savings, imports, and taxes are all leakages from the circular flow because they represent money that is leaving the economy and not being circulated through it. Savings are not being spent on goods and services, imports are being purchased from other countries instead of domestically, and taxes are being collected by the government and not being spent by consumers or businesses.

Quiz 40: Keynesian View of Aggregate Supply and Demand

Whats defention of terms: -effective demand

Whats defention of terms: -Keynesian cross

Whats defention of terms: -leakage

Explain and give examples of how a progressive view of aggregate supply and demand is completely different from the traditional view. -What is "effective demand" according to Keynes? How can there be a lack of effective demand?

Explain and give examples of how a progressive view of aggregate supply and demand is completely different from the traditional view. -Can aggregate demand suffer from "leakages" according to the traditional view? Explain.

Discuss how Keynes refuted Say's law. -How did Keynes explain that aggregate production and aggregate spending might not be equal? What happens if aggregate production is greater than aggregate spending?

Discuss how Keynes refuted Say's law. -Why does aggregate spending rise more slowly than income?

Describe how Keynes built an entirely new view of aggregate supply and demand in which an economy may not automatically recover from a recession. -How does Keynes explain inflation?

Compare and contrast the arguments of critiques of classical economics and Say's law. -How do Marx and Mitchell refute Say's law?

Compare and contrast the arguments of critiques of classical economics and Say's law. -Compare and contrast Marx and Mitchell's arguments to that of Keynes.

Keynes defined aggregate supply as

Keynes defined aggregate demand as

Keynes stressed the importance of effective demand which is

National or aggregate income includes

The Keynesian cross diagram shows

The basic definition of GDP used in the Keynesian framework is

Leakages from the circular flow include