AP ECONOMICS: CHAPTER 9
1. John Maynard Keynes created the aggregate expenditures model based primarily on what
historical event?
A. Bank panic of 1907
B. Great Depression
C. Spectacular economic growth during World War II
D. Economic expansion of the 1920s
2. A private closed economy includes:
A. households, businesses, and government, but not international trade.
B. households, businesses, and international trade, but not government.
C. households and businesses, but not government or international trade.
D. households only.
3. The relationship between investment and GDP is shown by the:
A. consumption of fixed capital schedule.
B. saving schedule.
C. investment schedule.
D. consumption schedule.
4. Refer to the above data. The MPS is:
A. 7/10.
B. 3/10.
C. 2/5.
D. 3/5.
5. Refer to the above data. At the $370 billion level of DI the APS is approximately:
A. 4 percent.
B. 7 percent.
C. 1 percent.
D. 16 percent.
6. Refer to the above data for a private closed economy. If gross investment is $12 billion, the
equilibrium level of GDP will be:
A. $380.
B. $370.
C. $360.
D. $350.
7. The equilibrium level of GDP in a private closed economy is where:
A. MPC = APC.
B. unemployment is about 3 percent of the labor force.
C. consumption equals saving.
D. aggregate expenditures equal GDP.
8. Classical economics suggests that in capitalist economies
a. unemployment may persist for extended periods
b. the market system will ensure full employment
c. a slump in output will increase prices, wages, and interest rates
d. demand creates its own supply
e. not all income is spent
9. Which would be considered part of Keynes’ criticism of classical economics?
a. investment spending will increase when the interest rate increases
b. prices and wages are flexible downward in modern capitalist economies
c. the act of producing goods generates an amount of income equal to the value of
the goods produced
d. saving and investment decisions are not always completely synchronized
e. deviations in the economy from full employment are self-correcting
10. As the disposable income of the economy increases
a. both the APC and the APS rise
b. the APC rises and the APS falls
c. the APC falls and the APS rises
d. both the APC and the APS fall
e. none of the above
KEY:
1. b
2. c
3. c
4. b
5. a
6. c
7. d
8. b
9. c
10. c