Question

The classical economists argued that the production of goods and services generates an equal amount of income and, in turn, total spending. This theory is called

Question 1 options:

A) Keynes' General Theory.
B) Say's Law.
C) the "aminal spirits" theory.
D) the law of autonomous consumption.

Question 2 (1 point)

[Question 2 Unsaved]
According to Keynes, what is the most important determinant of households' spending on goods and services?

Question 2 options:

A) Disposable income.
B) Autonomous consumption.
C) The price level.
D) The interest rate.

Question 3 (1 point)

[Question 3 Unsaved]
If households spend less on goods and services than they earn during the year, then

Question 3 options:

A) more dissaving will occur.
B) the marginal propensity to consumer (MPC) is negative.
C) autonomous consumption increases.
D) households must be saving.

Question 4 (1 point)

[Question 4 Unsaved]
The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) always equals

Question 4 options:

A) 0.
B) 1.
C) the interest rate.
D) the marginal propensity to invest (MPI).

Question 5 (1 point)

[Question 5 Unsaved]
Which of the following would cause an upward shift in the consumption function?

Question 5 options:

A) More disposable income.
B) Greater wealth
C) A fall in consumer confidence.
D) A higher interest rate.

Question 6 (1 point)

[Question 6 Unsaved]
Since 1960, real investment spending in the U.S. has

Question 6 options:

A) increased by at least 1 percent annually.
B) remained stable.
C) steadily declined.
D) fluctuated more than real personal consumption expenditures.

Question 7 (1 point)

[Question 7 Unsaved]
If the interest rate rises, then firms' investment spending

Question 7 options:

A) also rises.
B) falls.
C) remains unchanged
D) reacts unpredictably.

Question 8 (1 point)

[Question 8 Unsaved]

What is the households' marginal propensity to consume (MPC)?

Question 8 options:

A)

0.5

B)

0.67

C)

0.75

D)

0.8

Question 9 (1 point)

[Question 9 Unsaved]

What is the value of autonomous invenstment?

Question 9 options:

A)

$0.67 trillion.

B)

$2 trillion.

C)

$2.67 trillion.

D)

$4.67 trillion.

Question 10 (1 point)

[Question 10 Unsaved]

Aggregate income will equal consumption plus investment and the economy will be in equilibrium when real disposable income is

Question 10 options:

A)

$4 trillion.

B)

$6 trillion.

C)

$8 trillion.

D)

$10 trillion.

Answer 1

The classical economists argued that the production of goods and services generates an equal amount of income and, in turn, total spending. This theory is called

B) Say's Law.

Explanation: Say's Law was crucial to proving the classical theory that the economy will always be in full equilibrium.

Question 2 (1 point)

According to Keynes, what is the most important determinant of households' spending on goods and services?

A) Disposable income.

Explanation: Disposable income is the gross income - taxes + transfer payments

Question 3 (1 point)

If households spend less on goods and services than they earn during the year, then

D) households must be saving.

Explanation: Household can either spend or save income.

Question 4 (1 point)

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) always equals
B) 1.

Explanation: MPC + MPS = 1