1. If an economy comes to equilibrium at less than full employment, we refer to

Question

1. If an economy comes to equilibrium at less than full employment, we refer to that as a _________________; if it comes to equilibrium at more that full employment, we refer to that as a(n) _______________.

a) inflationary gap; recessionary gap

b) recessionary gap; inflationary gap

c) depression equilibrium; full employment plus equilibrium

d) any of the above can be correct under the right circumstances

e) none of the above is correct

2. According to Keynes, ________________.

a) real GDP will always adjust to aggregate demand

b) real GDP will always adjust to aggregate supply

c) supply creates its own demand

d) savings will always equal investment

e) spending will always occur at the full employment level

3. The consumption function tells us that, as income rises, consumption

a) declines

b) remains the same

c) rises more slowly than income

d) rises more quickly that income

e) none of the above is correct

4. as a nation's income falls, induced consumption

a) rises

b) falls

c) remains the same

d) either rises or falls

5. the slope of the Keynesian Consumption Curve is

a) the MPS

b) the APS

c) the MPC

d) the APS

Explanation / Answer

1. a ..................... 2. c.......................................3 a............................................4d..........................5b

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