Keynesian Economics Quiz

Who was one of the most influential thinkers in modern economics?

• John Maynard Keynes

• Milton Friedman

• Adam Smith

• David Ricardo

What did Keynes suggest the government should do when consumer spending falls?

• Decrease taxes

• Increase spending and money supply

• Nothing, as the market self-corrects

• Cut public services

What does Keynesian economics primarily focus on to stimulate the economy?

• Increasing consumer savings

• Privatizing public services

• Increasing government spending

• Reducing government spending

What effect does government spending have on the economy according to Keynes?

• The liquidity trap

• The crowding out effect

• The multiplier effect

• The trickle-down effect

What does the marginal propensity to consume indicate?

• The portion of additional income that is spent

• The tendency to save rather than spend

• The amount of income spent on saving

• The ratio of saving to income

What is the 'broken window fallacy'?

• A theory that supports government spending

• A parable that criticizes unnecessary spending

• A concept that promotes tax cuts

• A critique of Keynesian economics

What is a major concern with expansionary fiscal policy?

• It reduces the national debt

• It can be difficult to implement effectively

• It is universally accepted by economists

• It always leads to inflation

What is one potential problem with government borrowing according to Keynesian critics?

• It can lead to lower interest rates

• It encourages reckless spending

• It can result in crowding out

• It decreases the national debt

How did Keynesian policies reportedly affect the Great Recession?

• They had no significant impact

• They prevented the recession entirely

• They worsened the recession

• They significantly reduced its depth and length

What is the main critique of Keynesian economic policy?

• It relies too much on consumer spending

• It does not account for inflation

• It overemphasizes the role of the government

• It completely ignores market forces