Question

A.) The work of John Maynard Keynes led to a major revolution in economic thought.

True

False

B.) Here is a consumption function: C = C₀ + MPC(Y_d). If C₀ = $300, then we know that

if Yd rises by $1, then Co rises by $1.

if Yd rises by $1, then C rises by $300.

as C0 rises by $15, C rises by $15.

as C0 rises by $15, Yd rises by $15.

C) The economy is in equilibrium, TP = TE, and Real GDP is $4,555 billion. The MPC is 0.80, the multiplier is operative, and idle resources exist at each expenditure round. Government purchases rise by $10 billion. As a result, the __________ curve shifts __________, inventory levels unexpectedly __________, business firms ___________ the quantity of goods and services they produce, and Real GDP __________ by __________.

TE; downward; fall; increase; rises; $10 billion.

TP; rightward; fall; decrease; falls; $50 billion

TE; upward; fall; increase; rises; $50 billion

TE; downward; rise; increase; rises, $50 billion

Answer 1

A.) The work of John Maynard Keynes led to a major revolution in economic thought.

Ans:True (particularly his general theory of employment, interest and money revolutionised the economic thought)

B.) Here is a consumption function: C = C₀ + MPC(Y_d). If C₀ = $300, then we know that
Ans:as C₀ rises by $15, C rises by $15.

C) The economy is in equilibrium, TP = TE, and Real GDP is $4,555 billion. The MPC is 0.80, the multiplier is operative, and idle resources exist at each expenditure round. Government purchases rise by $10 billion. As a result, the __________ curve shifts __________, inventory levels unexpectedly __________, business firms ___________ the quantity of goods and services they produce, and Real GDP __________ by __________.

Ans:TE; upward; fall; increase; rises; $50 billion