Question 1

As portrayed in terms of total expenditures (TE)and total production (TP),discuss at least three assumptions that sum up the workings of the simple Keynesian model.

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Question 2

Using the concept of the multiplier,explain in detail how college students flocking to beach towns for spring break can positively impact the beach towns' economies.

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Question 3

A decline in housing prices can help to push the economy into a recessionary gap.

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A decline in housing prices can have a negative impact on the overall economy as it reduces the value of homeowner's assets, reduces construction activity and related jobs, and can lead to a decrease in consumer spending as people feel less wealthy. This can push the economy into a recessionary gap, where the actual output is lower than the potential output.

Question 4

The economy can be in equilibrium and in a recessionary gap simultaneously.

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In a recessionary gap, the economy is producing below its potential level. However, it is possible for this level of output to also be the equilibrium level of output, where aggregate supply and aggregate demand intersect. This situation is known as a stagnant equilibrium, where the economy is stuck in a state of low output and high unemployment without any natural forces to push it towards full employment.

Question 5

Describe the three basic points that Keynes made regarding consumption.Briefly explain why consumption was such a main concern in the Keynesian model.

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Question 6

What type of relationship exists between the marginal propensity to consume (MPC)and the multiplier? Explain why this relationship exists.

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Question 7

Explain the sequence of events that occurs in the economy once total production (TP)is less than total expenditure (TE).

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Question 8

Explain how the Keynesian view differs from the classical view with respect to saving.Explain further how the two views differ with respect to investment.

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Question 9

In the simple Keynesian model,the aggregate supply curve has a horizontal segment and a vertical segment at full-employment.

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In the simple Keynesian model, the aggregate supply curve is horizontal until full employment is reached, at which point it becomes vertical.

Question 10

What is the general format of the consumption function? Explain what each term means and use the consumption function to explain the three different ways that consumption can increase.

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Question 11

Describe Keynes' criticism of Say's law in a money economy.

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Question 12

Discuss how the Great Depression contributed to the development of Keynesian economics.

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Question 13

Explain the process by which a change in autonomous spending can lead to an even greater change in Real GDP.

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Quiz 10: Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy