Keynesian Economics and the Multiplier Effect

The video introduces John Maynard Keynes and his influential economic theories, focusing on government spending and the multiplier effect. It explains how these ideas challenge classical economics, particularly during recessions. The video also discusses the complexities of implementing Keynesian policies, including debates on fiscal policy and the broken window fallacy. The conclusion invites viewers to reflect on the trade-offs of Keynesian economics.

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