#1
Which of the following best describes macroeconomic equilibrium?
When aggregate demand equals aggregate supply.
ExplanationBalanced state where overall demand matches overall supply.
#2
In Keynesian economics, what is the role of government intervention during economic downturns?
To increase government spending.
ExplanationBoosting spending to stimulate economic activity.
#3
What is the primary focus of Keynesian economics?
Ensuring full employment through fiscal policy.
ExplanationAim to maintain high job levels via government actions.
#4
What does the Keynesian consumption function suggest?
Consumption increases but at a decreasing rate with income.
ExplanationConsumption rises, but less with each income increase.
#5
In the IS-LM model, what does the LM curve represent?
The relationship between income and money demand.
ExplanationIllustrates money demand at different income levels.
#6
What is the multiplier effect in Keynesian economics?
The process where an initial change in spending leads to a larger change in aggregate demand.
ExplanationInitial spending changes causing ripple effect on demand.
#7
Which of the following is a characteristic of the Keynesian aggregate supply curve?
It is horizontal at less than full employment level of output.
ExplanationOutput remains constant despite price changes.
#8
In the Keynesian cross diagram, what does the 45-degree line represent?
The equilibrium level of income.
ExplanationIncome level where spending equals income.
#9
Which of the following represents the equation for aggregate demand in Keynesian economics?
AD = C + I + G + (X - M)
ExplanationSum of consumption, investment, government, and net exports.
#10
According to the Keynesian theory of income determination, what causes unemployment during a recession?
Insufficient aggregate demand.
ExplanationLack of overall demand leading to job loss.
#11
What is the paradox of thrift in Keynesian economics?
When an increase in saving leads to a decrease in aggregate demand.
ExplanationSavings up, but demand down, affecting economy.
#12
Which of the following is a key assumption of Keynesian economics?
Wage and price rigidities in the short run.
ExplanationPrices and wages don't adjust instantly.
#13
According to Keynesian theory, what is the role of expectations in influencing aggregate demand?
Expectations primarily influence investment decisions.
ExplanationExpectations guide investment choices, impacting demand.
#14
What is the main criticism of Keynesian economics?
It relies too heavily on government intervention.
ExplanationCritique of excessive government involvement.
#15
What is the main implication of the 'liquidity preference theory' in Keynesian economics?
Interest rates are determined by both money supply and demand for money.
ExplanationRates determined by money supply and demand dynamics.