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

The economy's marginal propensity to consume (MPC) is 0.68, meaning it consumes 68% of any increase in disposable income. The multiplier effect is calculated as 1/(1-MPC), which is 1/(1-0.68) = 3.125. Therefore, an increase in autonomous investment of $1 billion would result in an increase in total spending of $1 billion * 3.125 = $3.125 billion.

Question 2

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

Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. If the exhibit showed, for example, that when income increases by $100, consumption increases by $80, the MPC would be 0.80 ($80/$100). This calculation reflects the proportion of additional income that is spent on consumption.

Question 3

If we graph the consumption function such that it cuts the vertical axis at a point above the origin,this is because we are assuming that

Accepted Answer

Autonomous consumption represents the level of consumption that exists even if income is zero. The fact that the function cuts the vertical axis at a point above the origin implies that there is positive autonomous consumption, which means that even when income is zero, individuals have a minimum level of consumption. This choice is different from the other options because it directly relates to the position of the consumption function on the vertical axis, as opposed to the slope or the direction of the function.

Question 4

Which of the following is not an aspect of Keynesian economics?

Accepted Answer

Keynesian economics does not assume that unemployment above natural unemployment is brief and temporary. In fact, Keynesian economics emphasizes the role of government intervention to address long-term unemployment and promote full employment.

Question 5

-Refer to Exhibit 10-3.The marginal propensity to save (MPS)is

Accepted Answer

The marginal propensity to save (MPS) is calculated as the change in saving divided by the change in income. If the change in income leads to a change in saving, the ratio of these changes gives the MPS. Without specific numbers from "Exhibit 10-3," we typically calculate MPS as 1 minus the marginal propensity to consume (MPC). If MPC is 0.8 (implied by the common economic principle that if one is not consuming, they are saving), then MPS = 1 - 0.8 = 0.20.

Question 6

-Refer to Exhibit 10-3.When disposable income equals $2,300,saving equals

Accepted Answer

The answer of 
-Refer to Exhibit 10-3.When disposable income equals...

Question 7

Suppose the MPC = 0.60 and government purchases increase by $40 billion.In Keynesian theory,which of the following is true?

Accepted Answer

In Keynesian theory, an increase in government purchases shifts the Total Expenditure (TE) curve upward by the amount of the increase. With a marginal propensity to consume (MPC) of 0.60, the multiplier is 1/(1-MPC) = 2.5. Therefore, a $40 billion increase in government purchases leads to a total increase in spending of $40 billion * 2.5 = $100 billion.

Question 8

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

Accepted Answer

An increase in MPC (marginal propensity to consume) implies that people tend to spend more of their income on goods and services, which leads to a rise in the total expenditures (TE) curve. As a result, the slope of the TE curve becomes steeper, and the value of the multiplier increases. Hence, choice A is the correct answer.

Question 9

-Refer to Exhibit 10-4.If the present level of disposable income is Yd₁,autonomous consumption is equal to

Accepted Answer

Autonomous consumption is the level of consumption expenditure when disposable income is zero, which is represented by C₀ in the given options.

Question 10

If the multiplier is 5,then the MPC must be

Accepted Answer

The multiplier formula is 1/MPC, where MPC is the marginal propensity to consume. Therefore, if the multiplier is 5, then 1/MPC = 5. Solving for MPC, we get MPC = 4/5. Hence, the best choice is D.

Question 11

When the MPC = 0.75,the multiplier is

Accepted Answer

The multiplier is calculated as 1/(1-MPC). With MPC = 0.75, the multiplier is 1/(1-0.75) = 1/0.25 = 4.00.

Question 12

-Refer to Exhibit 10-3.When disposable income equals $2,000,saving equals

Accepted Answer

The answer of 
-Refer to Exhibit 10-3.When disposable income equals...

Question 13

-Refer to Exhibit 10-3.The multiplier is

Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. If the multiplier is 5, it implies an MPC of 0.8.

Question 14

Keynes argued that

Accepted Answer

Keynes argued that monopolistic elements in the economy and sticky wages and prices would prevent an immediate sharp fall in prices as a result of decreasing demand. This is because, in the short run, businesses may maintain prices to protect their profit margins, and employees may resist wage cuts. As a result, the economy may experience a period of low demand and high unemployment, known as a recession. Keynes suggested that during such times, governments could intervene to stimulate demand and boost employment, such as through increased government spending or tax cuts.

Question 15

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts __________,the AD curve shifts __________,and Real GDP __________.

Accepted Answer

Both the Keynesian and aggregate demand-supply frameworks predict that an increase in household wealth will lead to an increase in consumption spending, which will increase aggregate demand (AD). As a result, the AD curve will shift to the right, leading to an increase in Real GDP. In the Keynesian framework, this shift will also lead to an upward shift in the total expenditure (TE) curve, while in the aggregate demand-supply framework, the TE curve remains unchanged as the shift in AD is reflected in a movement along the aggregate supply curve. The only option that includes an upward shift in the AD curve and an increase in Real GDP is C.

Question 16

-Refer to Exhibit 10-4.Marginal propensity to consume is equal to

Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption (AF) divided by the change in income (C₀F).

Question 17

How is the multiplier expressed in terms of the MPS?

Accepted Answer

The answer of How is the multiplier expressed in terms...

Question 18

Keynes assumed consumption is

Accepted Answer

The answer of Keynes assumed consumption is
...

Question 19

When the MPC = 0.80,the multiplier is

Accepted Answer

The multiplier is 1/(1-MPC), so when MPC = 0.80, the multiplier is 1/(1-0.80) = 5.00.

Question 20

When the MPC = 0.6,the multiplier is

Accepted Answer

The multiplier is calculated as 1/(1-MPC), so with an MPC of 0.6, the multiplier is 1/(1-0.6) = 2.50.

Quiz 10: Monopoly

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

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

If we graph the consumption function such that it cuts the vertical axis at a point above the origin,this is because we are assuming that

Which of the following is not an aspect of Keynesian economics?

-Refer to Exhibit 10-3.The marginal propensity to save (MPS) is

-Refer to Exhibit 10-3.When disposable income equals $2,300,saving equals

Suppose the MPC = 0.60 and government purchases increase by $40 billion.In Keynesian theory,which of the following is true?

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

-Refer to Exhibit 10-4.If the present level of disposable income is Yd₁,autonomous consumption is equal to

If the multiplier is 5,then the MPC must be

When the MPC = 0.75,the multiplier is

-Refer to Exhibit 10-3.When disposable income equals $2,000,saving equals

-Refer to Exhibit 10-3.The multiplier is

Keynes argued that

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts ,the AD curve shifts ,and Real GDP __.

-Refer to Exhibit 10-4.Marginal propensity to consume is equal to

How is the multiplier expressed in terms of the MPS?

Keynes assumed consumption is

When the MPC = 0.80,the multiplier is

When the MPC = 0.6,the multiplier is

Quiz 10: Monopoly

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

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

If we graph the consumption function such that it cuts the vertical axis at a point above the origin,this is because we are assuming that

Which of the following is not an aspect of Keynesian economics?

-Refer to Exhibit 10-3.The marginal propensity to save (MPS) is

-Refer to Exhibit 10-3.When disposable income equals $2,300,saving equals

Suppose the MPC = 0.60 and government purchases increase by $40 billion.In Keynesian theory,which of the following is true?

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

-Refer to Exhibit 10-4.If the present level of disposable income is Yd1,autonomous consumption is equal to

If the multiplier is 5,then the MPC must be

When the MPC = 0.75,the multiplier is

-Refer to Exhibit 10-3.When disposable income equals $2,000,saving equals

-Refer to Exhibit 10-3.The multiplier is

Keynes argued that

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts __________,the AD curve shifts __________,and Real GDP __________.

-Refer to Exhibit 10-4.Marginal propensity to consume is equal to

How is the multiplier expressed in terms of the MPS?

Keynes assumed consumption is

When the MPC = 0.80,the multiplier is

When the MPC = 0.6,the multiplier is

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

-Refer to Exhibit 10-4.If the present level of disposable income is Yd₁,autonomous consumption is equal to

Considering both the Keynesian and the aggregate demand-supply frameworks,if households as a group experience an increase in wealth at a given price level,then the TE curve shifts ,the AD curve shifts ,and Real GDP __.