Econ 102 - Principles of Macroeconomics » Spring 2023 » The Keynesian Model The Demand-Side Quiz.

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Question #1
If an increase in investment of $100 billion generates an increase of $500 billion in real GDP, the multiplier is
A.   50
B.   5
C.   20
D.   1.50.
Question #2
The basic reason for the multiplier effect is that, when you spend money,
A.   another person must pay for it.
B.   your money balances are reduced.
C.   another person receives income.
D.   your net worth decreases.
Question #3
Economists before Keynes assumed that equilibrium GDP occurred
A.   if spending was generally greater than output.
B.   only with the help of government stabilization.
C.   automatically.
D.   only in socialist economies with central planning.
Question #4
If the expenditure schedule must be shifted upward to reach potential GDP, then the economy is experiencing a (n)
A.   precautionary gap.
B.   recessionary gap.
C.   inflationary gap.
D.   expansionary gap.
Question #5
In a market economy, the decisions about what to produce and how much of each good or service to produce are made by
A.   economic planners.
B.   government officials.
C.   consumers and producers.
D.   central bankers.
Question #6
An inflationary gap will exist when the full employment level of GDP is
A.   greater than disposable income.
B.   equal to equilibrium GDP.
C.   greater than equilibrium GDP.
D.   less than equilibrium GDP.
Question #7
If the price level rises, the effect on the expenditure schedule and equilibrium real GDP is to
A.   increase both.
B.   shift the expenditure schedule upward and decrease equilibrium real GDP.
C.   decrease both.
D.   shift the expenditure schedule downward and increase equilibrium real GDP.
Question #8
Writing during the Great Depression, Keynes naturally focused on problems of
A.   hyperinflation.
B.   budget deficits.
C.   unemployment.
D.   trade deficits.
Question #9
Each C + I + G + (X - IM) expenditure schedule is drawn assuming a specific
A.   production level.
B.   income level.
C.   price level.
D.   spending level.
Question #10
If inventory levels are decreasing, then we should expect business firms to
A.   decrease output.
B.   increase output.
C.   lay off workers.
D.   decrease prices.

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