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.   1.50.
B.   20
C.   5
D.   50
Question #2
The basic reason for the multiplier effect is that, when you spend money,
A.   another person receives income.
B.   your net worth decreases.
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.   automatically.
C.   only with the help of government stabilization.
D.   if spending was generally greater than output.
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.   consumers and producers.
B.   central bankers.
C.   economic planners.
D.   government officials.
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 upward and decrease equilibrium real GDP.
B.   decrease both.
C.   increase 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.   budget deficits.
B.   trade deficits.
C.   unemployment.
D.   hyperinflation.
Question #9
Each C + I + G + (X - IM) expenditure schedule is drawn assuming a specific
A.   production level.
B.   spending level.
C.   income level.
D.   price level.
Question #10
If inventory levels are decreasing, then we should expect business firms to
A.   lay off workers.
B.   decrease prices.
C.   increase output.
D.   decrease output.

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