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- 19. Which of the following statements concerning Keynesian analysis are true? Select one: a. Keynes's analysis started with the recognition that the total quantity demanded of an economy's output was the sum of three types of spending: consumer expenditure, planned investment spending, and government spending. Ob. Keynes recognized that equilibrium would occur in the economy when planned expenditure equals Actual expenditure O c All of the above are true. d. Keynes's analysis involves explaining why aggregate output is at a certain level by understanding what factors affect each component of aggregate demand and how the sum of these components could add up to an output smaller or greater than the economy is capable of producingWhich of the following policies will NOT shift the Aggregate Expenditure curve upward? Select one: O a. increasing autonomous taxes O b. decreasing autonomous taxes O c. increasing autonomous transfer payments O d. increasing government expenditures on goods and servicesSuppose that due ot a fiscal stimulus, there is an increase in disposable incomes of $100 billion in the first round. Then, $33 billion was spent in consumption from this initial change of the disposable incomes. Following the same marginal propensity to consume, how much is the change in consumption spending in the next round from the $33 billion?
- Following the Keynesian cross, if there is a sudden tidal wave of investment, then it must be true that: a. Total output will not change at all in the short run because of the crowding out effect. O b. The planned expenditure line becomes steeper than the 45-degree line. Planned spending will be larger than income at the existing output level; inventories will be depleted fast, and producers must step up production. O d. The planned expenditure line becomes steeper than the 45-degree line.n the Keynesian cross, assume that the consumption function is given byC = 200 + 0.75 (Y - T).Planned investment is 100; government purchasesand taxes are both 100.a. Graph planned expenditure as a function ofincome.b. What is the equilibrium level of income?c. If government purchases increase to 125, whatis the new equilibrium income?d. What level of government purchases is neededto achieve an income of 1,600?In a model with a constant price level and demand- determined output, the multiplier is larger, the... a. Lower the APC. O b. Lower the level of autonomous expenditures. O c. Higher the level of autonomous expenditures. O d. Flatter is the AE function. O e. Steeper is the AE function.
- Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is government consumption expenditure, I is investment expenditure, c is the marginal propensity to consume. In this model, if lthere is an increse in both labor productivity and the marginal propensity to consume while autonomus expenditures remain unchanged, what will happen to the level of employment? a. can't say for sure b. decreses c. stays the same d. increasesLast year, Jim and Matthew both spent about two third of their income on consumption. This year, each receive a large bonus at work. Jim immediately spends two third of his bonus on a new TV. Matthew increases consumption slightly, spending a small percentage of the bonus each month. Which of the following is true? O a. Both Jim and Matthew's behaviors are more consistent with a Keynesian consumption function than Friedman's permanent income hypothesis O b. Both Jim and Matthew's behaviors are more consistent with Friedman's permanent income hypothesis than a Keynesian consumption function O c. Jim's behavior is most consistent with Friedman's permanent income hypothesis, while Matthew's is more consistent with a Keynesian consumption function d. Jim's behavior is most consistent with a Keynesian consumption function, while Matthew's is more consistent with Friedman's permanent income hypothesis A firm produces 1000 units of its product, which it expects to be able to sell to the…Given an economy's marginal propensity to consume = .60 and marginal propensity to import = .10, an increase of government spending = $100 will raise GDP by Ⓒ$100 O none of the other answers are correct. $300. O $150 O $10.
- The Life-Cycle/Permanent Income Model of Consumption makes a different prediction from the Keynesian Model, about how Consumption reacts to an increase in current income. Which of the following is the best description of the difference? O In the Keynesian Model, consumers will increasktheir spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will not increase their spending by much unless they believe that the increase in their income is permanent. O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc times the increase in income. In the Keynesian Model, consumers will only increase their spending if they believe that the increase in their income is temporary. O In the Keynesian Model, consumers will increase their spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will only increase their spending if they believe that the increase in their income…Consider a closed economy where investment is constant and the marginal propensity to consume is 0.8. In that economy, the government decides to increase its expenditures. Why is the associated Keynesian multiplier greater than 1? Select one: а. Because the production increase leads to a revenue increase which leads to a demand increase which leads to a consumption increase which leads to further increases in production, demand and consumption O b. Because the demand increase leads to a consumption increase which leads to a GDP increase which leads to a supply increase which leads to further increases in consumption, revenue and supply O c. Because the demand increase leads to a supply increase which leads to a revenue increase which leads to a consumption increase which leads to further increases in demand, supply and GDP O d. Because the production increase leads to a demand increase which leads to a supply increase which leads to a revenue increase which leads to further increases…Price Level 200 180 160 140 120 100 80 60 40 20 0 LRAS AD, Real GDP (billions of dollars) 20 40 60 80 100 120 140 160 180 200 billion AS Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative si front of those numbers. billion AD a. By what amount has aggregate demand changed? $ b. If the marginal propensity to consume is 0.80, what is the expenditures multiplier? c. By how much will Investment demand need to change in order to restore the economy to long-run equilibrium? Investment Demand Curve