ECO 102
Fall 2014
Quiz 5
1.
Both economic forecasters and economic theorists interested in causes of business
cycles are most interested in _____ variables. These include _____.
a.
b.
c.
d.
e.
pro-cyclical
countercyclical
leading
coincident
lagging
investment and unemployment
government spending and inflation
residential investment and stock prices
real wages and inventory investment
stock prices and real wages
2.
The most important difference between the Keynesian model of the economy and the
classical model of the economy is that the Keynesian model does NOT assume that:
a.
consumers save more when their incomes are high.
b.
prices adjust quickly so that quantity supplied equals quantity demanded in all markets.
c.
firm owners are trying to maximize profits.
d.
firms make investment decisions based on comparing expected return to the cost of
borrowing.
e.
the labor supply curve is upward-sloping.
3.
In the Keynesian model, the equilibrium level of output (and income) in the short term is
where:
(i)
(ii)
(iii)
(iv)
a.
b.
c.
d.
e.
Unplanned investment is equal to zero.
The planned aggregate expenditure line crosses the 45 degree line.
Savings is equal to planned investment.
Output is equal to potential GDP.
only (i) is true.
only (ii) is true.
only (iii) is true.
only (iv) is true.
none of the options above (a, b, c, or d) is correct.
4.
If the amount of output that a country’s producers produce is greater than the amount
that consumers desire to buy, businesses wish to invest, government wishes to buy, and net
exports that foreigners wish to purchase, then the difference is:
a.
b.
c.
d.
e.
the marginal propensity to consume.
unplanned investment.
overused labor.
excess reserves.
a budget deficit.
5.
The amount of extra spending a consumer would do if given one dollar of extra income
is called:
a.
b.
c.
d.
e.
the marginal propensity to consume.
the money multiplier.
the required reserve ratio.
the real wage.
the real interest rate.
6.
According to the Keynesian model, if firms do not adjust their price when quantity
demanded is less than the quantity they have to sell, the firm instead:
a.
b.
c.
d.
e.
raises output.
offers volume discounts.
reduces output.
goes out of business.
lowers wages to its workers.
EXTRA CREDIT:
7.
The correct way to pronounce the name “Keynes” is:
a.
b.
c.
d.
e.
KEE-nes
ke-NESS
KEENZ
KAYNZ
KAY-ness