question
According to kenes, low income and high unemployment in economic downturns are because of
answer
low aggregate demand
question
In classical theory, national income depends on ________, but keynes proposed that _________ determined national income
answer
aggregate supply, aggregate demand
question
The IS-LM model takes ________ as exogenous.
answer
The price level
question
A variable that links the market for goods and services and the market for real money balances in the IS-LM model is the:
answer
interest rate
question
In the IS-LM model, which two variables are influenced by the interest rate
answer
demand for real money balances and investment spending
question
The IS curve plots the relationship between the interest rate and _____ that arises in the market for _______.
answer
national income, goods and services
question
For the purposes of the Keynesian cross, planned expenditure consists of:
answer
planned investment, government spending and consumption expenditures.
question
In the keynesian-cross model, actual expenditures equal:
answer
GDP
question
In the Keynesian-cross model, actual expenditures differ from planned expenditures by the amount of:
answer
unplanned inventory investment
question
Planned expenditure is a function of:
answer
national income and planned investment, government spending, and taxes
question
When planned expenditure is drawn on a graph as a function of income the slop of the line is
answer
between zero and one
question
When drawn on a graph with Y along the horizontal axis and PE along the vertical axis the line showing planned expenditure rises to the:
answer
right with a slope of less than one
question
The equilibrium condition in the keynesian-cross analysis in a closed economy is:
answer
actual expenditure equals planned expenditure
question
With planned expenditure and the equilibrium condition Y=PE drawn on a grph with income along the horizontal axis, if income exceeds expenditure, then income is to the ______ of equilibrium income and there is unplanned inventory _________.
answer
right, accumulation
question
According to the analysis underlying the Keynesian cross, when planned expenditure exceeds income:
answer
unplanned inventory investment is negative
question
When firms experience unplanned inventory accumulation, they typically:
answer
lay off workers and reduce production
question
The Keynesian cross shows:
answer
equality of planned expenditure and income in the short-run.
question
The government-purchases multiplier indicates how much ______ changes in response to a $1 change in government purchases.
answer
income
question
In the Keynesian-cross model, if the MPC equals .75, then a $1 billion increase in the government spending increases planned expenditures by _______ and increases the equilibrium level of income by _________.
answer
$1 billion; more than $1 billion
question
According to the Keynesian-cross analysis, when there is a shift upward in the government-purchases schedule by an amount of ΔG and the planned expenditure schedule by an equal amount, then equilibrium income rises by:
answer
ΔG divided by the quantity one minus the marginal propensity to consume
question
In the Keyneisan-cross model, if government purchases increase by 100, then planned expenditures _______ for any given level of income.
answer
increase by 100
question
In the Keynesian-cross model, if government purchases increase by 250, then the equilibrium level of income
answer
increases by more than 250
question
In the Keynesian-cross model, fiscal policy has a multiplier effect on income because fiscal policy:
answer
changes income, which changes consumption, which further changes income.
question
According to the Keynesian-cross analysis, if MPC stands for marginal propensity to consume, then a rise in taxes of ΔT will:
answer
...
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