Chapter 13

Keynesian policy focuses on which of the following: Increasing aggregate demand in the short run A. Increasing aggregate demand in the long run B. Opportunities; interest rates. C. Increasing aggregate supply in the long run D. Increasing long run aggregate supply and demand by increasing government spending

A. Increasing aggregate demand in the long run

In the Expenditure-Output model, the ____________ is drawn as an upward-sloping line because ____________ is assumed to increase as current national income increases. A. consumption function; consumption B. investment function; investment C. export function; export D. income function; income

A. consumption function; consumption

In a Keynesian cross diagram, what name is given to the distance between an output level that is above potential GDP and the level of potential GDP? A. inflationary gap B. expenditure-output C. recessionary gap D. national income (Y)

A. inflationary gap

The sum of all the income received for contributing resources to GDP is called ____________. A. national income B. national revenue C. marginal income D. marginal revenue

A. national income

In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP? A. recessionary gap B. expenditure-output C. national income (Y) D. inflationary gap

A. recessionary gap

If a Keynesian Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy: A. is producing at its potential GDP. B. is producing at a point where output is less than potential GDP. C. is producing at its equilibrium point. D. is producing at a point where output is more than potential GDP.

B. is producing at a point where output is less than potential GDP.

According to Keynesian theory, Aggregate Demand is more likely to ____________ than Aggregate Supply in the short run. A. remain unchanged B. shift substantially C. decrease substantially D. increase slightly

B. shift substantially

Which of the following concepts relate to the Phillips Curve? A. The gap between real GDP and potential GDP, when the level of output is above the level of potential GDP. B. The relationship between income and expenditures on consumption. C. The trade-off between unemployment and inflation. D. The share of an additional dollar that goes to saving.

C. The trade-off between unemployment and inflation.

In the Expenditure-Output model, the ____________ is drawn as a horizontal line because ____________ will be determined by the buying power of other countries and thus do not change with the size of the domestic economy. A. consumption function; consumption B. investment function; investments C. export function; exports D. income function; income

C. export function; exports

In the Expenditure-Output model, the ____________ is drawn as a flat line because ____________ is based on expectations about the future, and so it doesn't change with the level of current national income. A. consumption function; consumption B. export function; export C. investment function; investment D. income function; income

C. investment function; investment

In macroeconomics, what name is given to the costs of changing prices that businesses must consider? A. opportunity costs B. internal costs C. menu costs D. customer costs

C. menu costs

Which of the following is a distinguishing characteristic of a Keynesian cross diagram? A. several different Phillips curves B. a flat line C. real GDP on the vertical axis D. 45-degree line

D. 45-degree line

It must always hold true that Marginal Propensity to Consume + Marginal Propensity to Save = 0 True False

False

"Expenditure-output model" is a macroeconomic model in which equilibrium output occurs where the total or aggregate expenditures in the economy are equal to the amount produced. True False

True

The term "stagflation" refers to when an economy experiences stagnant growth and high inflation at the same time. True False

True