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.   20
B.   1.50.
C.   5
D.   50
Question #2
The basic reason for the multiplier effect is that, when you spend money,
A.   your net worth decreases.
B.   your money balances are reduced.
C.   another person must pay for it.
D.   another person receives income.
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.   precautionary gap.
C.   expansionary gap.
D.   recessionary 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.   government officials.
B.   economic planners.
C.   consumers and producers.
D.   central bankers.
Question #6
An inflationary gap will exist when the full employment level of GDP is
A.   less than equilibrium GDP.
B.   greater than disposable income.
C.   equal to equilibrium GDP.
D.   greater 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.   shift the expenditure schedule downward and increase equilibrium real GDP.
D.   decrease both.
Question #8
Writing during the Great Depression, Keynes naturally focused on problems of
A.   unemployment.
B.   hyperinflation.
C.   trade deficits.
D.   budget deficits.
Question #9
Each C + I + G + (X - IM) expenditure schedule is drawn assuming a specific
A.   price level.
B.   spending level.
C.   production level.
D.   income level.
Question #10
If inventory levels are decreasing, then we should expect business firms to
A.   increase output.
B.   lay off workers.
C.   decrease output.
D.   decrease prices.

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