Macroeconomics Q 1: Effective demand will increase if: a. Taxes and savings incr
ID: 1166824 • Letter: M
Question
Macroeconomics
Q 1: Effective demand will increase if:
a. Taxes and savings increase
b. Consumption decreases and saving increase
c. Government expenditures decrease
d. Consumption, investment and government expenditure increase
Q 2: Of all the parameters that influence effective demand, the most unstable overtime is:
a. Savings
b. Government Expenditure
c. Investment
d. Consumption
Q 3: Which of the following argument did Keynes used in challenging that wage and price flexibility is sufficient brings about full employment and no surpluses
a. None of the below
b. Workers are more concerned with real income then money income
c. Monopoly power is rare in U.S. market economy
d. Wages always fall more rapidly than prices
Q4: Which of the following is false about aggregate supply curve consistent with the Keynesian assumptions
a. Unemployment exists
b. The aggregate supply curve is horizontal
c. Both prices and real income increases with increase in demand
d. Prices do not increase with increase in output
Q 5: Classical economists consider unemployment a temporary phenomenon because of considerable monopoly in both the product and labor markets. TRUE OR FALSE
Q6: Cyclical fluctuations are recurrent and non-periodic variations in the level of economic activity. TRUE OR FALSE
Explanation / Answer
Q 1:
Right answer is :
d. Consumption, investment and government expenditure increase
Y = C+I+G
Hence, when all these components rise, aggregate effective demand also increases.
Q 2:
Right answer is:
c. Investment
Investment is subject to change due to changed economic conditions. It keeps on changing according to prospective profit expectations.
Q 3:
Right answer is :
a. None of the below
labor laws do not allow fall in wage and price, further even if fall is warranted, it would lead to the fall in aggregate demand.
Q4
c. Both prices and real income increases with increase in demand
according Keynesian theory, prices do not rise until there are unemployment in economy.
Q 5
This is false statement : Classical does not regard that market is characterized by the presence of monopoly. They assume that perfect competition prevails in market.
Q6:
This is true statement: cyclical fluctuation are recurrent and non-periodic variations in the level of economic activities.
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