Question 1

John Maynard Keynes was the son of
A) one of the first female students to attend Cambridge University.
B) Russian ballerina Lydia Lopokova.
C) the mayor of London.
D) an eminent economist.
E) a and d

Accepted Answer

John Maynard Keynes's mother was one of the first female students to attend Cambridge University, and his father, John Neville Keynes, was an eminent economist.

Question 2

Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.85,then we know that A) as Y_d rises by $1,Co rises by $0.85. B) as Y_d rises by $1,C rises by $0.85. C) Y_d rises by $0.85. D) as C₀ rises by $0.85,Y_d rises by $1.

Accepted Answer

The MPC (marginal propensity to consume) is the change in consumption (C) for every $1 change in income (Y_d). Therefore, as Y_d rises by $1, the consumption (C) will rise by MPC*$1, which is 0.85*$1 = $0.85.

Question 3

-Refer to Exhibit 10-8.The consumption function is
A) C = 0.80(Yd).
B) C = $4,000 + 0.90(Yd).
C) C = $400 + 0.2(Yd).
D) C = $400 + 0.8(Yd).

Accepted Answer

The consumption function is represented by a formula that includes both a constant term and a variable term that is a proportion of disposable income (Yd). The correct option, D, C = $400 + 0.8(Yd), correctly identifies both the autonomous consumption ($400) and the marginal propensity to consume (0.8 or 80% of disposable income).

Question 4

-Refer to Exhibit 10-8.The marginal propensity to consume (MPC)is
A) 0.90.
B) 0.10.
C) 0.80.
D) 0.95.
E) 0.75.

Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. Without specific numbers from Exhibit 10-8, the general formula is MPC = ΔC/ΔY. An MPC of 0.80 means that for every additional dollar of income, consumption increases by 80 cents.

Question 5

Here is a consumption function: C = C₀ + MPC(Y_d).If MPC is 0.91,then we know that A) as Y_d rises by $1,Co rises by $0.91. B) as Y_d rises by $1,C rises by $0.91. C) Y_d rises by $0.91. D) as C₀ rises by $0.09,Y_d rises by $1.

Accepted Answer

The MPC represents the change in consumption (C) corresponding to a change in income (Y_d). Specifically, for every $1 increase in income, consumption will increase by $0.91 according to the given consumption function. Therefore, as Y_d rises by $1, C will rise by $0.91.

Question 6

-Refer to Exhibit 10-7.If government purchases decrease,which of the following is possible? A) The AD curve shifts leftward from AD₂ to AD₁,the price level remains constant,and Real GDP falls. B) The AD curve shifts leftward from AD₄ to AD₃,the price level falls,and Real GDP remains constant. C) The AD curve shifts rightward from AD₁ to AD₂,the price level remains constant,and Real GDP rises. D) The AD curve shifts rightward from AD₃ to AD₄,the price level rises,and Real GDP remains constant. E) a and b

Accepted Answer

A decrease in government purchases would lead to a leftward shift in the Aggregate Demand (AD) curve, which could result in either a decrease in the price level with Real GDP remaining constant (option B) or a decrease in Real GDP with the price level remaining constant (option A).

Question 7

John Maynard Keynes wrote which of the following?
A) Das Kapital
B) The Scope and Method of Political Economy
C) Wealth of Nations
D) The General Theory of Employment,Interest and Money
E) all of the above

Accepted Answer

John Maynard Keynes wrote The General Theory of Employment, Interest and Money. The other options were written by Karl Marx (A), John Stuart Mill (B), and Adam Smith (C). Therefore, the best choice is only D.

Question 8

-Refer to Exhibit 10-8.Autonomous consumption (C_o)is equal to A) $4. B) $40. C) $400. D) $4,000. E) $2,000.

Accepted Answer

The answer of -Refer to Exhibit 10-8.Autonomous consumption (C_o)is equal...

Question 9

If Keynes's theory is correct,wage rates may be _______________ in a _____________ direction which means that the __________ curve will not shift to the __________ to remove the economy from a recessionary gap as it would in a self-regulating economy.
A) inflexible; downward; AD; right
B) flexible; upward; SRAS; right
C) flexible; downward; AD; right
D) inflexible; upward; SRAS; left
E) inflexible; downward; SRAS; right

Accepted Answer

Keynes's theory suggests that wage rates may be inflexible downward, meaning workers and unions resist wage cuts. This inflexibility in the downward direction implies that the Short-Run Aggregate Supply (SRAS) curve will not shift to the right to help the economy recover from a recessionary gap, contrasting with the self-regulating economy assumption where wages adjust to clear the labor market.

Question 10

Here is a consumption function: C = C₀ + MPC(Y_d).If consumption is $3,000,MPC =0.80,and disposable income is $2,900,what does autonomous consumption equal? A) $100 B) $5,900 C) $680 D) $500 E) none of the above

Accepted Answer

Using the consumption function: C = C₀ + MPC(Y_d) Substituting the given values: 3000 = C₀ + 0.80(2900) 3000 = C₀ + 2320 C₀ = 680 Therefore, autonomous consumption (C₀) equals $680. The answer is (C).

Question 11

Here is a consumption function: C = C₀ + MPC(Y_d).If C₀ = $4,000,then we know that A) if Y_d rises by $1,then Co rises by $1. B) if Y_d rises by $1,then C rises by $4,000. C) as C₀ rises by $150,C rises by $150. D) as C₀ rises by $150,Y_d rises by $150.

Accepted Answer

C₀ is the autonomous consumption, which means it is the part of consumption that does not depend on disposable income (Y_d). Therefore, if C₀ rises by $150, C will also rise by $150, independent of Y_d.

Question 12

In the TE-TP framework,total production
A) always equals total expenditures.
B) equals Real GDP.
C) is always greater than total expenditures.
D) is always less than total expenditures.

Accepted Answer

In the TE-TP framework, total production refers to the total value of all goods and services produced within an economy in a given time period. This value is measured by Real GDP (Gross Domestic Product), which includes both goods and services produced within the country's borders. Therefore, option B is correct. Option A is incorrect because total expenditures also include the value of intermediate goods, which are not counted in total production. Option C and D are incorrect because it is possible for total production to be equal, greater or less than total expenditures, depending on various factors such as the level of inventory investment, net exports, etc.

Question 13

-Refer to Exhibit 10-6.If total production (TP)is greater than total expenditures (TE),the economy is currently producing a level of Real GDP that is A) equal to or lower than Q₃. B) equal to or greater than Q₃. C) less than Q₂. D) between Q₂ and Q₁. E) greater than Q₃.

Accepted Answer

If total production (TP) is greater than total expenditures (TE), it indicates that the economy is producing more goods and services than are being purchased, which suggests that the level of Real GDP is greater than the equilibrium level, hence option E is correct.

Question 14

-Refer to Exhibit 10-8.When disposable income equals $1,500,saving equals
A) $1,800.
B) $1,600.
C) $100.
D) -$100.

Accepted Answer

When disposable income equals $1,500, saving equals -$100 because at this income level, consumption exceeds income, indicating a negative saving.

Question 15

Which of the following is a characteristic of consumption according to Keynes?
A) consumption depends on disposable income
B) consumption and disposable income have a direct relationship
C) when disposable income changes,consumption changes by less
D) a and c
E) a,b,and c

Accepted Answer

Keynesian economics suggests that consumption is primarily determined by disposable income (A), indicating a direct relationship between consumption and disposable income (B). Additionally, it posits that when disposable income changes, consumption tends to change but by a smaller proportion, reflecting the concept of marginal propensity to consume (C). Therefore, all three statements (A, B, and C) are characteristics of consumption according to Keynes, making E the correct choice.

Question 16

Most economists think that the Keynesian position is that
A) the wage rate will never fall and the price level will never adjust downward if the economy is in a recessionary gap.
B) the time required before wages and prices adjust downward is short enough for the economy to be called self-regulating.
C) the time required before wages and prices adjust downward is long enough for the economy to exist in a recessionary gap for a long time.
D) the time required before wages and prices adjust downward if the economy is in a recessionary gap is rather long,but short enough for the economy to be considered self-regulating.

Accepted Answer

The Keynesian position is that the time required before wages and prices adjust downward is long enough for the economy to exist in a recessionary gap for a long time. This is because they believe in the presence of sticky wages and prices, and therefore, the economy is not self-regulating in the short run.

Question 17

-Refer to Exhibit 10-8.The marginal propensity to save (MPS)is
A) 0.90.
B) 0.10.
C) 0.80.
D) 0.20.
E) 5.00.

Accepted Answer

The answer of 
-Refer to Exhibit 10-8.The marginal propensity to...

Question 18

-Refer to Exhibit 10-7.If investment decreases,which of the following is possible? A) The AD curve shifts leftward from AD₂ to AD₁,the price level falls,and Real GDP remains constant. B) The AD curve shifts leftward from AD₄ to AD₃,the price level falls,and Real GDP remains constant. C) The AD curve shifts rightward from AD₁ to AD₂,the price level remains constant,and Real GDP rises. D) The AD curve shifts rightward from AD₃ to AD₄,the price level rises,and Real GDP remains constant. E) c and d

Accepted Answer

The answer of 
-Refer to Exhibit 10-7.If investment decreases,which of...

Question 19

-Refer to Exhibit 10-7.If autonomous consumption increases,which of the following is possible? A) The AD curve will shift rightward from AD₁ to AD₂,the price level will remain constant,and Real GDP will rise. B) The AD curve will shift leftward from AD₄ to AD₃,the price level will fall,and Real GDP will remain constant. C) The AD curve will shift rightward from AD₃ to AD₄,the price level will remain constant,and Real GDP will rise. D) The AD curve will shift rightward from AD₁ to AD_2, the price level will rise,and Real GDP will remain constant.

Accepted Answer

An increase in autonomous consumption will shift the AD curve to the right, leading to an increase in Real GDP. The price level will remain constant if the economy is operating at full employment.

Question 20

-Refer to Exhibit 10-8.The multiplier is
A) 0.20.
B) 4.
C) 20.
D) 5.
E) 0.80.

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 that the MPC is 0.8, since 1/(1-0.8) = 5.

Quiz 10: Monopoly

John Maynard Keynes was the son of

Here is a consumption function: C = C₀ + MPC(Y_d) .If MPC is 0.85,then we know that

-Refer to Exhibit 10-8.The consumption function is

-Refer to Exhibit 10-8.The marginal propensity to consume (MPC) is

Here is a consumption function: C = C₀ + MPC(Y_d) .If MPC is 0.91,then we know that

-Refer to Exhibit 10-7.If government purchases decrease,which of the following is possible?

John Maynard Keynes wrote which of the following?

-Refer to Exhibit 10-8.Autonomous consumption (C_o) is equal to

If Keynes's theory is correct,wage rates may be _________ in a _ direction which means that the curve will not shift to the ______ to remove the economy from a recessionary gap as it would in a self-regulating economy.

Here is a consumption function: C = C₀ + MPC(Y_d) .If consumption is $3,000,MPC =0.80,and disposable income is $2,900,what does autonomous consumption equal?

Here is a consumption function: C = C₀ + MPC(Y_d) .If C₀ = $4,000,then we know that

In the TE-TP framework,total production

-Refer to Exhibit 10-6.If total production (TP) is greater than total expenditures (TE) ,the economy is currently producing a level of Real GDP that is

-Refer to Exhibit 10-8.When disposable income equals $1,500,saving equals

Which of the following is a characteristic of consumption according to Keynes?

Most economists think that the Keynesian position is that

-Refer to Exhibit 10-8.The marginal propensity to save (MPS) is

-Refer to Exhibit 10-7.If investment decreases,which of the following is possible?

-Refer to Exhibit 10-7.If autonomous consumption increases,which of the following is possible?

-Refer to Exhibit 10-8.The multiplier is