Question

According to Keynesian theory, the most important determinant of saving and consumption is

Select one:

a. the level of real income.

b. the stock of liquid assets.

c. the stock of durable goods in the consumer's possession.

d. the level of consumer indebtedness.

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In the Keynesian model, planned investment is inversely related to

Select one:

a. the interest rate.

b. the level of income.

c. the wage rate.

d. the tax rate.

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Which of the following would cause a leftward shift in the investment function?

Select one:

a. technological progress

b. a reduction in the rate of interest

c. optimistic expectations about business conditions

d. an increase in business taxes

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In Keynesian analysis, if investment remains constant when income increases or decreases, it is described as being

Select one:

a. planned.

b. autonomous.

c. unplanned.

d. discretionary.

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If the MPC decreases, then

Select one:

a. the MPS decreases.

b. the multiplier decreases.

c. the multiplier increases.

d. MPC + MPS is less than 1.

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The expression 1/MPS is defined as

Select one:

a. one minus the multiplier.

b. the inverse of the multiplier.

c. the multiplier.

d. autonomous consumption.

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The aggregate demand curve usually

Select one:

a. is vertical.

b. slopes upward.

c. slopes downward.

d. is horizontal.

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All of the following explain the downward slope of the aggregate demand curve EXCEPT

Select one:

a. changes in the stock of real wealth held by individuals.

b. the effect of changing interest rates on the quantity demanded of interest-rate-sensitive goods.

c. the availability of foreign substitute goods.

d. the presence of unused production capacity and unemployment.

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The horizontal axis for an aggregate demand curve measures

Select one:

a. quantity demanded of the representative good.

b. real GDP.

c. output of all goods and services measured as a quantity index.

d. disposable personal income.

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If the price level increases, then

Select one:

a. the exchange rate will increase, causing Canadian goods to become cheaper and increasing the quantity demanded for domestic goods.

b. imports increase but exports do not change. Therefore, there is no effect on the quantity demanded for goods and services.

c. foreigners buy fewer Canadian goods, leaving more goods for Canadians and an increase in the quantity demanded for goods and services produced domestically.

d. domestic goods are more expensive relative to foreign goods, which reduces quantity demanded for domestic goods.

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At each price level, the aggregate demand curve indicates

Select one:

a. the nominal domestic income that will be produced.

b. the total amount of real domestic income that will be purchased.

c. the nominal domestic output that will be produced.

d. the total amount of real domestic output that will be produced.

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When the relative prices of Canadian-made goods go up, the result is

Select one:

a. an increase in exports.

b. a decrease in exports.

c. a decrease in imports.

d. no net change in imports or exports.

As the price level increases, the ________ becomes increasingly steep.

Select one:

a. short-run aggregate supply curve

b. aggregate demand curve

c. long-run aggregate supply curve

d. planned aggregate expenditure curve

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With respect to slope, ________ function is normally positively sloped.

Select one:

a. aggregate demand

b. the short-run aggregate supply

c. planned aggregate expenditure

d. planned investment

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What is measured on the vertical axis of the short-run aggregate supply curve?

Select one:

a. real national income

b. nominal income

c. the price level

d. the interest rate

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Economic growth takes place

Select one:

a. only when both aggregate demand and aggregate supply increase.

b. when aggregate supply increases.

c. when aggregate demand increases.

d. only if the price level is constant or rising.

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An unexpected event that causes the aggregate demand curve to shift inward or outward is an

Select one:

a. aggregate demand shock.

b. aggregate supply shock.

c. aggregate supply increase.

d. aggregate supply decrease.

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OPEC's oil embargo of Canada in the 1970s was an example of

Select one:

a. a demand shock that increased price levels.

b. a demand shock that decreased price levels.

c. a supply shock that increased price levels.

d. a supply shock that decreased price levels.

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If there are continual decreases in aggregate supply, the economy will experience

Select one:

a. a slow decrease in price levels.

b. demand-pull inflation.

c. an expansionary gap.

d. cost-push inflation.

Answer 1

4 .the level of real income

5. rate of interest

6.Reduction in rate of interest

7.Autonomous

8 MPS Decreases

9.Inverse of multiplier

10 Slopes Downward

11 the presence of unused production capacity and unemployment.

12  real GDP.

13 domestic goods are more expensive relative to foreign goods, which reduces quantity demanded for domestic goods.

14 the total amount of real domestic output that will be produced.

15 a decrease in exports.

16  short-run aggregate supply curve

17 the short-run aggregate supply

18 the price level

19 only when both aggregate demand and aggregate supply increase.

20 aggregate demand shock.

21 a supply shock that increased price levels.

22 cost-push inflation.