According to a model by John Maynard Keynes the economy is \"__________ ________

Question

According to a model by John Maynard Keynes the economy is "__________ _________ " and may require "________ ________" to control aggregate expenditures (demand) in order to reach full employment

Given the comsumption function c=500 billion +.80Y, an increase in disposable income from $6000billion to $7000 billion will cause consumption to increase by:

a. 800 billion

b. 1000billion

c. 1300 billion

d.1500 billion

e. 1800 billion

Keynes' central proposition that a dollar increase in dispoasable income will increase consumption, but by less than the increase in disposable income implies a marginal propensity to consume that is

a. greater than or equal to one

b. equal to one.

c. less than one but greater than zero

d. negative

If there are strong negative expectations about future economic growth, then the:

a. econmy will move to the right along the exisiting consumption function

b. economy will move to the left along the existing consumption function

c. investment demand curve will shift leftward

Explanation / Answer

A. "in recession.depression " and " fiscal / monetary policy" B. 800 billion C.. less than one but greater than zero D.If there are strong negative expectations about future economic growth, then the, b. economy will move to the left along the existing consumption function

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