According to Keynes’ Law... A) The total demand for products determine the level of gross domestic product and may not equal the supply capacity of the economy in the short run. B) The total demand always equals the total supply capacity in the short run. C) The total demand tends to rise above the total supply capacity in the short run which leads to recessions D) The total supply of products determines the level of gross domestic product and the level of demand in the economy in the long run.

According to Keynes’ Law... A) The total demand for products determine the level of gross domestic product and may not equal the supply capacity of the economy in the short run. B) The total demand always equals the total supply capacity in the short run. C) The total demand tends to rise above the total supply capacity in the short run which leads to recessions D) The total supply of products determines the level of gross domestic product and the level of demand in the economy in the long run.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 2SQ

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According to Keynes’ Law... Group of answer choices The total demand tends to rise above the total supply capacity in the short run which leads to recessions The total demand always equals the total supply capacity in the short run. The total demand for products determine the level of gross domestic product and may not equal the supply capacity of the economy in the short run. The total supply of products determines the level of gross domestic product and the level of demand in the economy in the long run.
In the Keynesian model, is aggregate expenditure (AE) exceeds total production an unintended _________ will occur and business will __________. a) inventory reduction; increase production b) inventory reduction; decrease production c) inventory reduction; not change production d) inventory accumulation; decrease production e) inventory accumulation; increase production
Keynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP) to be "too low," then an appropriate policy action would be to do nothing, because the economy is self-adjusting. raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP) with little or no inflationary consequences. increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP) with little or no inflationary consequences. reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures.
In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (1) The marginal propensity to consume is 1/4;(2) The marginal propensity to save is -420; (3) At an income level of R1 000, the value of savings is 250;(4) At an income level of R1 000, the level of savings is -170.
Due to an increase in consumer wealth, there is a $40 billion autonomous increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in both countries, and there are no taxes and no foreign trade, complete the accompanying tables to show the various rounds of increased spending that will occur in both economies if the marginal propensity to consume is 0.5 in Westlandia and 0.75 in Eastlandia. What do your results indicate about the relationship between the size of the marginal propensity to consume and the multiplier?
In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75 (Y − T ). Planned investment is 100; government purchases and taxes are both 100. A. What is the equilibrium level of income? B. If government purchases increase to 125, what is the new equilibrium income? C. What level of government purchases is needed to achieve an income of 1,600?
Keynes stipulated that there are two determinants of investment. They are A,B,C, OR D ONE ANSWER A disposable income and wealth. B expected future profits and interest rates. C price and quantity. D interest rates and labor cost.
Which of the following features of a Keynesian consumption function is not true? a. In the short run, current disposable income has the most impact on consumption. b. As income rises, so does the average tendency to consume. c. the average tendency to consume decreases as income increases decrease d .The marginal consumption propensity is smaller than one.
the two parts of the keynesian consumption function are consumption that depends on and consumption that depends on a. money; wealth b. planned spending, unplanned spending c. disposable income; factors other than disposable income d. real income; nominal income
In the Keynesian cross, the economy is in equilibrium when planned expenditure equals actual expenditure. However, when planned expenditure exceeds actual expenditure, unplanned inventory investment is ________, causing output to ________. a. negative; fall b. positive; fall c. positive; rise d. negative; rise
Consider the following income/expenditure diagram in the simple Keynesian model. If taxes, T, were increased, then Group of answer choices A) The Y = C+S+T line would shift to the right, and equilibrium Y would increase. B) the C+I+G line would shift downward, and equilibrium Y would decrease. C) The Y = C+S+T line would shift to the left, and equilibrium Y would decrease. D) neither of the lines would shift, and equilibrium Y would stay the same. E) the C+I+G line would shift upward, and equilibrium Y would increase.
In the Keynesian model the multiplier is equal to (4 marks)A The equilibrium level of output for a given level of aggregate expenditure.B The increase in aggregate expenditure brought about by a change in investment.C The increase in the equilibrium level of income divided by the change in autonomous expenditure.D The increase in autonomous expenditure when equilibrium income increases.