question

According to Keynesian economics, the aggregate supply curve is:

answer

L-shaped

question

During the 1930s, the U.S. unemployment rate reached a peak of about:

answer

25%

question

The most important implication of Keynesian economics is:

answer

persistent unemployment.

question

The business-cycle phase that is most likely to be associated with high rates of unemployment is:

answer

contraction.

question

According to classical economics, the aggregate supply curve is:

answer

a vertical line.

question

The economic theory that emerged out of the economic turmoil of the 1930s was:

answer

Keynesian economics.

question

Classical economics was largely replaced as the dominant theory of macroeconomics by:

answer

Keynesian economics.

question

New classical economics philosophically tends to be most consistent with:

answer

conservative politics.

question

The transition between classical economics and Keynesian economics was triggered by:

answer

the Great Depression.

question

The persistently high rates of unemployment during the Great Depression led to the development of:

answer

Keynesian economics.

question

Fiscal policy makes use of __________ to control __________.

answer

government spending and taxes, business cycles

question

A macroeconomic theory based on the idea that unrestricted markets generate the aggregate production needed to maintain full employment is:

answer

classical economics.

question

An important implication of classical economics is:

answer

government intervention is a source of instability not the solution to it.

question

Theories that seek to explain macroeconomic phenomena:

answer

tend to be conflicting and controversial.

question

Keynesian economics contends that classical economics failed to explain the Great Depression because:

answer

supply does not necessarily create its own demand.

question

One of the key assumptions of classical economics is:

answer

Say's Law.

question

One of the key assumptions of classical economics is:

answer

flexible prices.

question

After it was introduced in the 1930s, Keynesian economics:

answer

dominated government policies for the next four decades.

question

An important implication of classical economics is:

answer

government intervention is not needed to ensure full employment.

question

If aggregate demand increases in the aggregate market with a classical aggregate supply curve, then:

answer

a temporary shortage of real aggregate production emerges.

question

The Keynesian economics principle stating that people have the propensity to spend a large fraction, but not all, of additional income is:

answer

the psychological law.

question

An upward shift of the consumption line can be caused by a(n):

answer

increase in consumer confidence.

question

Fiscal policy makes use of __________ to control the business cycle.

answer

government spending and taxes

question

The generic term for the use of goods and services to satisfy wants and needs is:

answer

consumption.

question

The saving line is derived as the vertical distance between the __________ and the __________.

answer

consumption line, 45-degree line

question

A table showing the relation between consumption expenditures and income is termed the:

answer

consumption schedule.

question

According to Keynesian economics the household sector is the source of:

answer

consumption.

question

A downward shift of the consumption line can be caused by a(n):

answer

increase in taxes.

question

During a business-cycle __________, income causes __________ in __________ consumption.

answer

contraction, decreases, induced

question

An upward shift of the consumption line can be caused by a(n):

answer

increase in financial wealth.

question

In Keynesian economics, the consumption line depicts the relation between consumption and:

answer

income.

question

An upward shift of the consumption line can be caused by a(n):

answer

decrease in interest rates.

question

If a consumption schedule has income values of $0, $100, $200, $300, and $400, with corresponding consumption values of $150, $175, $200, $225, and $250, then saving is -$75 if income is:

answer

$100.

question

The cumulatively reinforcing interaction between consumption and income that amplifies changes in autonomous expenditures is termed the:

answer

multiplier.

question

In Keynesian economics, the saving line depicts the relation between saving and:

answer

income.

question

Consumption determinants cause shifts in the:

answer

consumption line.

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In terms of the circular flow, the __________ sector includes the __________.

answer

household, consumers

question

Household saving is important to the macroeconomy because:

answer

income diverted to saving does not disappear from the economy.

question

The slope of the consumption line is the:

answer

MPC.

question

The portion of household income used for saving is the:

answer

average propensity to save.

question

The C + I + G line is derived by:

answer

adding government purchases to the C + I line.

question

Tangible goods purchased by the household sector that tend to last for less than a year are:

answer

nondurable goods.

question

The change in government purchases divided by the change in income is the:

answer

marginal propensity for government purchases.

question

The slope of the C + I line with autonomous investment is equal to the:

answer

MPC.

question

Keynesian economics failed to explain the problems of:

answer

stagflation of the 1970s.

question

The C + I + G + (X - M) line with induced imports:

answer

is less steeply sloped than the C + I + G line.

question

The term for all spending by the government sector is:

answer

government expenditures.

question

Equilibrium in Keynesian economics is based on equality between:

answer

aggregate expenditures and aggregate production.

question

In terms of the multiplier process, Keynesian equilibrium is disrupted by __________ and restored by __________.

answer

autonomous expenditures, induced expenditures

question

A decrease in financial wealth causes a(n):

answer

downward shift of the aggregate expenditures line.

question

Movements along the net exports line are due to:

answer

induced changes in imports.

question

An expenditure that changes as the level of national income changes is termed a(n):

answer

induced expenditure.

question

Keynesian equilibrium requires equilibrium in the __________ markets, but not necessarily equilibrium in the __________ markets.

answer

product, resource

question

The C + I line is derived by:

answer

adding investment to the consumption line.

question

Tangible goods purchased by the household sector that tend to last for more than a year are:

answer

durable goods.

question

The graphical depiction of the relation between household consumption expenditures and household disposable income is the:

answer

consumption line.

question

The change in imports divided by the change in total income is the formula for:

answer

marginal propensity to import.

question

The C + I + G + (X - M) line is derived by:

answer

adding net exports to the C + I + G line.

question

An important implication of Keynesian economics is:

answer

the use of fiscal policy.

question

Induced investment expenditures are best specified as those expenditures that:

answer

depend on the level of national income.

question

Compared to Keynesian economics, which was originally concerned primarily with the problem of unemployment, the aggregate market is:

answer

concerned with both the problems of unemployment and inflation.

question

Keynesian economics is a school of thought based on the proposition that:

answer

aggregate demand is a primary source of business-cycle instability

question

In Keynesian economics, the two sectors combined as the private sector are the:

answer

household and business sectors.

question

The three-sector Keynesian model is obtained by adding the __________ sector to the two-sector Keynesian model.

answer

government

question

The four-sector Keynesian model is obtained by adding the __________ sector to the three-sector Keynesian model.

answer

foreign

question

The macroeconomic model based on the combination of all product markets is termed:

answer

the aggregate market.

question

The inclusion of taxes into the three-sector Keynesian model causes:

answer

a downward shift of the consumption line.

question

In terms of the multiplier process, Keynesian equilibrium is disrupted by __________ and restored by __________.

answer

autonomous expenditures, induced expenditures

question

Aggregate expenditures and aggregate production are the opposing forces for equilibrium in the theory of:

answer

Keynesian economics.

question

In the three-sector injections-leakages model, the injection(s) is(are):

answer

investment and government purchases.

question

Equilibrium in Keynesian economics is measured as the balance between the sum of consumption expenditures, investment expenditures, government purchases, and net exports and:

answer

gross domestic product.

question

The injection added to the three-sector injections-leakages model to derive the four-sector model is(are):

answer

exports.

question

The macroeconomic problem of unemployment is most likely to result if:

answer

aggregate expenditures are less than aggregate production.

question

According to Keynesian economics, the __________ sector is largely the cause of business cycles, while the __________ sector is primarily responsible for stabilizing business cycles.

answer

private, public

question

In Keynesian economics, the foundation of the two-sector aggregate expenditures line is the:

answer

consumption line.

question

In the three-sector injections-leakages model, the leakage(s) is(are):

answer

saving and taxes.

question

The situation that exists if some resources willing to produce goods are not engaged in production is the macroeconomic problem of:

answer

unemployment.

question

According to Keynesian economics, an inflationary gap is best closed through:

answer

contractionary fiscal policy.

question

A downward shift of the aggregate expenditures line can be triggered by:

answer

an increase in taxes.

question

A non-consumption use of income is commonly termed a(n):

answer

leakage.

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