Keynes Quiz

Who is considered the founder of Keynesian economics?

• John Maynard Keynes

• Karl Marx

• Adam Smith

• Milton Friedman

What is the main idea behind Keynesian economics?

• The main idea is to reduce government involvement in the economy

• Government intervention is necessary to ensure economic stability and growth.

• Keynesian economics promotes complete government control of all industries

• The free market will naturally correct any economic imbalances

What is fiscal policy and how does it relate to Keynesian economics?

• Fiscal policy is the government's use of monetary policy to influence the economy, and it relates to Keynesian economics by promoting free market principles.

• Fiscal policy is the government's use of tariffs and subsidies to influence the economy, and it relates to Keynesian economics by promoting austerity measures.

• Fiscal policy is the government's use of regulations to influence the economy, and it relates to Keynesian economics by promoting supply-side economics.

• Fiscal policy is the government's use of taxation and spending to influence the economy, and it relates to Keynesian economics by aligning with the idea of government intervention to stabilize the economy.

Explain the concept of 'demand-side' economics in the context of Keynesian economics.

• Private sector intervention to stimulate aggregate demand through monetary policy

• Government intervention to reduce aggregate demand through fiscal policy

• Government intervention to stimulate aggregate supply through fiscal policy

• Government intervention to stimulate aggregate demand through fiscal policy

What is the role of government in implementing Keynesian fiscal policy?

• The government has no role in implementing Keynesian fiscal policy

• The government only adjusts tax rates without considering government spending

• The government adjusts tax rates, government spending, and public investment to stimulate or stabilize the economy.

• The government only focuses on reducing public investment

How does Keynesian economics differ from classical economics in terms of government intervention?

• Keynesian economics advocates for complete laissez-faire without any government intervention.

• Keynesian economics supports government intervention only in social issues, not in the economy.

• Keynesian economics believes that government intervention should only occur during times of war, not during peacetime.

• Keynesian economics advocates for government intervention to stabilize the economy.

What is monetary policy and how does it influence the economy according to Keynesian economics?

• Keynesian economics does not support the idea that monetary policy can influence the economy

• Monetary policy influences the economy by affecting the level of aggregate demand through changes in interest rates and the money supply, as proposed by Keynesian economics.

• Monetary policy has no impact on the economy according to Keynesian economics

• Monetary policy only affects the stock market and not the overall economy

Explain the concept of 'liquidity trap' in the context of Keynesian monetary policy.

• The liquidity trap occurs when interest rates are very low and savings become insensitive to changes in interest rates, rendering monetary policy ineffective.

• The liquidity trap occurs when interest rates are very low and savings become insensitive to changes in interest rates, making monetary policy highly effective.

• The liquidity trap occurs when interest rates are very low and savings become sensitive to changes in interest rates, making monetary policy highly effective.

• The liquidity trap occurs when interest rates are very high and savings become sensitive to changes in interest rates, rendering monetary policy ineffective.

What are the tools available to the central bank for implementing Keynesian monetary policy?

• Tax cuts, government spending, and price controls

• Foreign exchange intervention, quantitative easing, and fiscal policy

• Inflation targeting, currency pegs, and capital controls

• Open market operations, reserve requirements, and discount rates

How does Keynesian economics address the issue of unemployment through monetary policy?

• Raising interest rates to decrease borrowing and spending

• Decreasing government spending to balance the budget

• Government intervention to stimulate demand and increase spending

• Reducing taxes to encourage saving and investment