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- Consumption, investment, government spending, exports, and imports are: Group of answer choices all complementary elements of a market-orientated economy. some of the opposing elements found in a market-orientated economy. all components of aggregate demand. some of the building blocks of Keynesian analysis.According to traditional Keynesian analysis, a tax cut has a larger effect on aggregate demand than an increase in government expenditures of the same size. a.true b.falseThe impact of Keynesian Policy can be diminished by secondary effects such as: a)Inflation – to the extent increasing Aggregate Demand causes inflation the impact on expanding the economy is dissipated by higher product prices b)Crowding-out effect of expansionary fiscal policy - To the extent expansionary Keynesian policy requires a government budget deficit and if this is financed by government borrowing, it may lead to rising interest rates, which will decrease private borrowing to finance investment spending as well as some consumption spending. c)Crowding out effect of monetary policy – As Expansionary policy leads to greater spending, the demand for money for transactions purposes (to buy products) increases, which may increase the interest rate which will crowd out private spending. d)All the above e)(a) and (b) only
- In the basic Keynesian model, a decline in autonomous spending: Group of answer choices a. reduces potential output. b. increases potential output. c. reduces short run equilibrium output. d. has no effect on short run equilibrium output.Keynesian Cross and Equilibrium in the Goods Market. Z=Y. Show graphically and functionally.Which of the following statements is most accurate? The Keynesian model focuses on aggregate demand while the classical model focuses on aggregate supply. The Keynesian model focuses on aggregate supply while the classical model focuses on aggregate demand. The Keynesian model focuses on long run while the classical model focuses on short run. The Keynesian model calls for no government intervention while the classical model insist the government should act to a macroeconomy.
- Compare and contrast the ideas of Keynes and the policies based on his ideas with the ideas and policies of the supply-side economists who came to prominence with the election of Ronald Reagan in 1980.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.Consider a simple Keynesian model. Which of the following will decrease planned aggregate expenditure? Government closes schools as a part of major restructureHouseholds prefer homemade meals to restaurant mealsAll the other optionsBusiness profitability is expected to go down
- Which of the following best differentiates the Keynesian View from the Classical View? The Classical View contains a SRAS curve while the Keynesian View does not include a SRAS curve. The Classical View only pertains to the short run while the Keynesian View only pertains to the long run. The Classical View only pertains to the long run while the Keynesian View pertains to both the short run and the long run. The Classical View contains an aggregate demand curve while the Keynesian View does not.The Keynesian model suggests that .... should be preferred over .... since the ..... is larger than the ..... a. fiscal policy / monetary policy / unplanned changes in inventories / marginal propensity to consume. b. fiscal policy / monetary policy / impact of money supply / marginal propensity to consume. c. government sprending / tax cuts / tax multiplier / government-spending multiplier. d. government sprending / tax cuts / government-spending multiplier / tax multiplier. e. monetary policy / fiscal policy / impact of money supply / marginal propensity to consume.The simple Keynesian model a. understated the effect of an increase in government spending by neglecting the necessary decrease in the interest rate and consequent decrease in investment that accompany an increase in government spending. b. overstated the effect of an increase in government spending by neglecting the necessary decrease in the interest rate and consequent increase in investment that accompanies a decrease in government spending. c. overstated the effect of an increase in government spending by neglecting the necessary increase in the interest rate and consequent decline in investment that accompany an increase in government spending. d. understated the effect of an increase in government spending by neglecting the necessary increase in the interest rate and consequent decline in investment that accompany an increase in government spending.
