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1 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) We would expect a Keynesian economist to believe that governments should ___________ and _______________ |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | not intervene, allow the economy to regulate itself |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | intervene, keep output close to potential output |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | balance their budget, practice strict monetarism |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | promote supply-side policies, impose trade barriers |
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2 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) In a macroeconomic model without foreign trade or a government, aggregate demand is the sum of |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | personal saving and private investment |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | personal saving and personal consumption |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | personal consumption and private investment |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | none of the above |
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3 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) A linear consumption function with a positive slope less than one means that if income increases, consumption will ___________ |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | fall |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | not change |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | fluctuate |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | increase |
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4 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Short-run equilibrium output means that aggregate demand _________ actual output |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | is less than |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | equals |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | is greater than |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | fluctuates around |
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5 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) If desired spending in the economy exceeds income we would expect _________ |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | households to save more |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | firms to produce less |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | firms to produce more |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | the MPC to change |
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6 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) When investment is assumed to autonomous the slope of the AD schedule is determined by the _______________ |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | marginal propensity to invest |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | disposable incomes |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | marginal propensity to consume |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | average propensity to consume |
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7 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The multiplier tells us how much ____________ changes after a shift in ________________ |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | consumption, income |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | investment, output |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | savings, investment |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | output, aggregate demand |
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8 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The multiplier is calculated as |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | 1/(1 - MPC) |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | 1/MPS |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | 1/MPC |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | a or b |
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9 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) If the MPC is 0.5, the multiplier is ________ |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | 2 |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | 1/2 |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | 0.2 |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | 20 |
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10 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) If as a result of households' wish to save more, there is a change in equilibrium income and no change in equilibrium saving, this is an example of ___________ |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | market imperfection |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | the law of diminishing returns |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | the paradox of thrift |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | market failure |
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11 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The sum of the MPS and MPC is 1 |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |
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12 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) In equilibrium savings exceed investment |
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![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | TRUE |
![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | FALSE |