Question

1 of25

Keynes notes that when looking at aggregate demand (AD), there are two factors that can cause shifts in import and export demand. Which of the following would be such a factor?

	Changes in populations
	Changes in relative growth rates between countries
	Changes in the discount rate
	Changes in savings behavior

Question

2 of25

The Keynesian economic system is based on two notions. One of those assumptions is that

	an increase in government spending will cause the aggregate demand curve to shift to the left.
	prices and wages are sticky and do not adjust rapidly.
	an increase in business investment spending will cause the aggregate demand curve to shift to the left.
	people can afford a high level of government services.

Question

3 of25

During the pandemic of 2020, stimulus checks were sent to qualifying individuals. Some people chose to save their money, rather than spend it. This led to

	a smaller rightward shift in the aggregate demand (AD) than expected.
	a larger rightward shift in the aggregate demand (AD) than expected.
	a desire to increase consumption.
	a smaller leftward shift in the aggregate demand (AD) than expected.

Question

4 of25

The multiplier effect tends to

	generate instability.
	promote stability of the general price level.
	magnify small changes in spending into much larger changes in real GDP.
	increase the MPC.

Question

5 of25

If U.S. goods are relatively less expensive than goods made in other countries, then

	U.S. exports are likely to rise.
	U.S. exports are likely to decline.
	U.S. imports are likely to rise.
	U.S. trade deficit will rise.

Question

6 of25

When referring to the Keynesian system, ____________________________ will not help reduce inflation, but may help a country get out of a recession.

	increased taxes on business investments
	increased spending by the government on health care
	decreased military spending
	increased consumer tax rate

Question

7 of25

According to the Keynesian approach, all of the following are determinants of consumptions, except for

	disposable income.
	expected future income.
	price.
	wealth.

Question

8 of25

According to Keynes, disposable income is a factor that affects consumption. Disposable income is

	income after taxes and investments.
	income before taxes.
	income after taxes.
	income known as take-home pay.

Question

9 of25

Keynes stipulated that there are two determinants of investment. They are

	disposable income and wealth.
	expected future profits and interest rates.
	price and quantity.
	interest rates and labor cost.

Question

10 of25

One reason for an increase in aggregate demand (AD) on the consumption side is

	an increase in taxes.
	a decrease in income.
	an increase in interest rates.
	a desire to save less.

Question

11 of25

One reason for a decrease in aggregate demand (AD) on the consumption side is

	an increase in taxes.
	an increase in income.
	a decrease in taxes.
	a desire to save less.

Question

12 of25

An example of a nondurable good is

	groceries.
	an oven.
	a purchase of Apple stock.
	a truck.

Question

13 of25

Business investment is the most variable of all the components of aggregate demand (AD). If interest rates decline, business investment would be expected to

	not change.
	decrease.
	increase.
	all of the above.

Question

14 of25

One reason for a decrease in aggregate demand (AD) on the investment side is

	an increase in rate of return.
	a rise in interest rates.
	an increase in business confidence.
	an increase in wealth.

Question

15 of25

One reason for an increase in aggregate demand (AD) on the net exports side is

	a rise in the expected rate of return.
	a rise in interest rates.
	an increase in foreign demand.
	an increase in the relative price of U.S. goods.

Question

16 of25

One reason that wages are downwardly sticky is due to

	competition of low-skilled labor.
	minimum wage laws.
	fear of reduced profits.
	the CPI.

Question

17 of25

The Keynesian view of the AD/AS model uses a short-run aggregate supply (SRAS) curve. This curve is

	insignificant in the short run.
	upward sloping at levels of output below potential input.
	downward sloping at levels of output below potential output.
	horizontal at levels of output below potential output.

Question

18 of25

When the stock market in the United States fell nearly 40% from March 2008 to March 2009, consumption declined due to

	the wealth effect.
	the income effect.
	uncertainty regarding future profits.
	a fall in interest rates.

Question

19 of25

According to the Keynesian framework of economics, aggregate demand (AD) is stable.

	True
	False

Question

20 of25

One argument to support the reason why businesses avoid wage cuts is

	fear of reduced profits.
	that the industry won't support the cuts.
	it may lead to increased unemployment.
	it may depress morale and hurt the productivity of existing workers.

Question

21 of25

One reason for a decrease in aggregate demand (AD) on the net exports side is

	a rise in the expected rate of return.
	a rise in interest rates.
	a decrease in foreign demand.
	a decrease in the relative price of U.S. goods.

Question

22 of25

An example of a service is

	gas to fill your tank.
	a visit to your doctor.
	a purchase of Apple stock.
	a motorcycle.

Question

23 of25

Which macroeconomic model shows evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation?

	Neoclassical expenditure-output model.
	Keynesian cross diagram.
	Phillips curve.
	Keynesian inflation trade-off model

Question

24 of25

One reason for an increase in aggregate demand (AD) on the investment side is

	a rise in the expected rate of return.
	a rise in interest rates.
	a decrease in business confidence.
	an increase in wealth.

Question

25 of25

Keynesian theory suggests that in the short run _________

	prices fluctuate significantly.
	wages and prices are free flowing.
	wages are based on supply and demand.
	wages and prices are sticky.