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WorksheetsKeynesian Economics
Total questions: 30
Worksheet time: 15mins
Which of the following options is FALSE? At the equilibrium level of national income, ___.
aggregate spending equals aggregate production.
aggregate spending equals aggregate income.
aggregate income equals aggregate production.
aggregate income equals aggregate production, but the level of aggregate spending is irrelevant.
Which of the following statements is/are TRUE?
"If aggregate expenditure is equal to total income, this means ___."
nothing, because they are always equal by definition
inventories will remain at their planned levels.
investment will decrease to run down inventories.
investment will increase to build up inventories.
In the simplest (or introductory) form of the Keynesian model, which of the following decisions can we analyse?
Interest rate fluctuations
Foreign investment by firms
Savings of households
Wage levels in firms
In the simplest version of the Keynesian model, income is determined by ___.
consumption spending
investment spending
consumption and investment spending
consumption, investment, and government spending
Which one of the following is NOT an assumption of the Simple Keynesian model?
The economy consists of households and firms.
Prices are given.
There is no government or foreign sector.
Income is never equal to production
Which of the following statements about the consumption function is true?
The level of autonomous consumption is determined by the level of income.
The level of induced consumption is determined by the level of wealth.
The level of induced consumption is determined by the level of income.
The level of consumption is determined only by the level of induced consumption.
The marginal propensity of consumption (MPC) measures the relationship between ___.
a change in consumption and a change in income
a change in consumption and savings
changes in consumption and changes in savings
None of the above.
Which one of the following factors will not increase the level of autonomous consumption?
An increase in the interest rate
An increase in prices
A decrease in the interest rate
An increase in the value of shares
Which one of the following statements about the consumption function is FALSE?
The consumption function has a positive slope.
The slope of the consumption function is determined by the level of autonomous consumption.
The slope of the consumption function is equal to the marginal propensity to consume.
The slope of the consumption function relates to induced consumption.
If a household’s income falls from R20 000 to R17 000 and its consumption falls from R18 000 to R15 000, then its marginal propensity to consume is ___.
-0.67
0.88
0.2
1
Which of the following is NOT a characteristic of the consumption function?
The consumption function shows the level of consumption spending at each level of income.
Consumption increases as income increases.
Consumption is positive even if income is zero.
Consumption increases when income increases, but the increase in consumption is greater than the increase in income.
Which one of the following statements is FALSE regarding the marginal propensity to consume?
It lies between zero and one.
It is the ratio between change in consumption and change in income.
It is equal to the slope of the consumption function.
It is equal to the vertical-axis intercept of the consumption function.
Assume that South African consumers’ marginal propensity to consume (c) is 0.9. This means that the marginal propensity to save is:
0.1
0.9
1.11
10
Which of the following would increase the size of the multiplier for the simple Keynesian model?
An increase in autonomous consumption
An increase in investment
An increase in marginal propensity to consume
An increase in marginal propensity to save
If a household’s income rises from R20 000 to R23 000 and its consumption rises from R18 000 to R20 000, then its marginal propensity to consume is ___.
-0.67
0.67
0.23
0
Which of these will cause Aggregate Spending (A) to not be equal to Income (Y)?
Saving.
Purchasing on credit.
Using savings from previous periods.
All of the above.
Which one of the following is NOT a determinant of the investment decision?
The level of total income (Y).
The interest rate.
The expected revenue from an investment project.
None of the above
If investment spending is autonomous or independent of income, the slope of the investment curve (as a function of income) is ___.
vertical
horizontal
positive
negative
Which of the following is not a component of aggregate expenditure?
Autonomous consumption
Investment
Saving
Induced consumption
The gap labelled W represents ___.
autonomous consumption
investment spending
induced consumption
None of the above.
Autonomous consumption equals ___.
R 0
R 4 Million
R 16 Million
R 40 Million
Total investment equals ___.
R 4 Million
R 12 Million
R 16 Million
R 40 Million
Equilibrium income equals ___.
R 4 Million
R 12 Million
R 16 Million
R 40 Million
Which one of the following statements is FALSE?
"In a simple Keynesian model without a government and a foreign sector, ___."
C depends largely on total income.
I represents spending on capital goods.
I depends largely on total production and income Y.
there is equilibrium when A = Y.
The 45-degree line (used in conjunction with the aggregate spending line) illustrates ___.
the level of autonomous consumption.
the level of induced consumption.
the level of investment spending.
illustrates all the possible equilibrium points
Which one of these is required to calculate the multiplier?
Total Income (Y)
Investment (I)
Total Consumption (C)
marginal propensity to consume (c)
Which one of the following is NOT required to calculate the equilibrium level of income in a simple Keynesian model?
The marginal propensity to consume
The level of autonomous consumption
The size of the money stock
The level of investment spending
Look at the following information:
Marginal propensity to consume = 0,9
Investment = R200 million
Autonomous consumption = R70 million
The equilibrium level of income is ___.
R 270 million
R 700 million
R2 700 million
impossible to determine from the information provided.
If the marginal propensity to consume is equal to 0.8, then the multiplier in the economy is equal to:
0.2
0.8
3.75
5
Consider the following information:
Marginal propensity to consume = 0.8
Investment = R150 million
Autonomous consumption = R110 million
The equilibrium level of income is ___.
R1 300 million.
R260 million.
R325 million.
R2 600 million.
