ECON162 Macroeconomics Essay, In the fixed price Keynesian model

ECON 162 Binghamton University Macroeconomics Essay

QUESTION 1 1. In the fixed price Keynesian model, an increase in investment spending leads to

a. a decrease in saving

b. an increase in saving

c. a decrease in real GDP

d. a multiplied increase in real GDP

e. an increase in net exports

QUESTION 2 1. In the fixed-price Keynesian model, an increase in the MPC leads to an increase in the spending multiplier

True

False

QUESTION 3 1. The paradox of thrift is the idea that

a. increases in saving lead to declines in real GDP.

b. increases in saving benefit the economy.

c. increases in saving lead to increases in real GDP.

d. households are better off if they do not save.

e. increases in investment lead to increases in real GDP.

QUESTION 4 1. In the neo-classical model, the aggregate supply curve has three ranges depending on how far the economy is from full employment.

True

False

QUESTION 5 1. Suppose you are given the following fixed-price Keynesian model: C = 480 + 0.9Yd I = 200 G = 100 X = 200 M = 100 + 0.1Yd T = 100. What is the equilibrium level of GDP?

 a. 1180 b. 5500 c. 4400 d. 4000 e. 3200

QUESTION 6 1. In the question above, at equilibrium the level of consumption spending is $3990

True

 False

 QUESTION 7 1. Which of the following will cause an increase in aggregate demand?

a. an increase in household wealth b. a decrease in interest rates c. an increase in income equality d. an increase in government deficits e. all of the above

QUESTION 8 1. The aggregate demand curve can be derived by looking at different levels of output along the production function. True False

QUESTION 9 1. Which of the following is an example of an automatic stabilizer?

a. an increase in government military spending b. government stimulus checks due to the Corona virus c. an increase in consumption spending d. sales taxes e. progressive income taxes

QUESTION 10 1. Suppose that in Donaldland the level of potential real GDP is $1000 million but actual real GDP is $800 million. The MPC is 0.75 and the MPIM is 0.15. What increase in government spending will bring the economy to full employment?

a. $80 million b. $200 million c. $400 million d. $500 million e. The economy cannot reach full employment given these parameters.

QUESTION 11 1. Go to the following link to read Franklin Roosevelt’s fireside chat of April 14, 1938: http://www.presidency.ucsb.edu/ws/index.php?pid=15628 Using the terminology of the fixed-price Keynesian model to summarize the arguments made in paragraphs 9-14 (“I then said this to the Congress:….), which statement best expresses Roosevelt's ideas?

a. In 1938 the economy was below equilibrium so output increased.

 b. By 1938 output had exceeded aggregate expenditures so inventories were rising and output declined.

c. inventories were falling in 1938 so that real GDP increased.

d. In 1938 the economy was in equilibrium where output = spending.

e. By 1938 it was clear that the Great Depression was ending.

QUESTION 12 1. In the Fireside Chat above, what macroeconomic concept is expressed in paragraph 46? (It is going to cost something to get out of this recession this way…)

a. hyperinflation

b. the Keynesian spending multiplier

c. full employment GDP

d. The GDP Gap

e. the fixed-price Keynesian model aggregate supply curve.

QUESTION 13 1. Assume a model with a downward-sloping aggregate demand curve and an upward-sloping aggregate supply curve. What are the effects of an increase in aggregate demand?

a. an increase in the price level and an increase in real GDP.

b. a decrease in the price level and an increase in real GDP.

c. an increase in the price level and a decrease in real GDP.

d. a decrease in the price level and a decrease in real GDP.

e. an increase in the price level and no change in real GDP.

QUESTION 14 1. Due to the Corona virus, both aggregate demand and aggregate supply have been declining recently for the US economy.

True

 False

QUESTION 15 1. In the classical model, an increase in government spending leads to the complete crowding out effect.

True

 False

QUESTION 16 1. In the neo-classical model, assume the economy starts in a recession. What are the possible policy responses?

a. the do-nothing approach or the supply-side approach.

b. the Supply-side (classical) response or the Demand-side (Keynesian) response

c. the investment response or the saving response

d. the Inflation Approach or the Deflation Approach

e. none of the above

QUESTION 17 1. Which of the following is not a function of money?

a. Money provides intrinsic value to the user.

b. Money acts as a medium of exchange.

 c. Money acts as a store of value.

d. Money provides a unit of account.

e. Money provides a standard of deferred payment.

QUESTION 18 1. Suppose that your grandmother sends you a check for $100 for your birthday, and you deposit the check into your savings account at your local bank. What is the effect on the money supply?

a. M1 declines by $100 and M2 increases by $100.

b. Both M1 and M2 increase by $100.

c. Both M1 and M2 decline by $100.

d. M1 declines by $100 with no change in M2.

e. M2 increases by $100 with no change in M1.

QUESTION 19 1. The tools of monetary policy include tax cuts, increases in government spending, and balanced budget changes in government spending.

True

False

QUESTION 20 1. In the Keynesian Monetary Policy Transmission Mechanism, what is the effect of an increase in the money supply?

a. The money supply curve shifts to the right.

b. Interest rates decline.

c. Investment spending increases.

d. Aggregate demand shifts to the right.

e. All of the above.