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

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