Which of the following is a key feature of Keynesian economics?

Consumption is typically several times larger than sav Show more The multiplier effect means that A. consumption is typically several times larger than saving. B. a small increase in consumption will cause a large decrease in investment. C. a small decrease in investment spending will cause a large increase in the equilibrium level of income/output (GDP). D. a small change in investment spending will cause the equilibrium level of income/output (GDP) to change by a larger amount. One of the economic costs of unemployment can be measured by A. the excess of real GDP over nominal GDP. B. the excess of nominal GDP over real GDP. C. the amount by which actual GDP exceeds potential GDP. D. the amount by which potential GDP exceeds actual GDP. You are given the following information about aggregate demand for an economy: (1) consumption = $700 billion; (2) investment = $60 billion; (3) government purchases = $100 billion; and (4) net export = $20 billion. If the MPC is 3/4 and the no inflation full-employment (ideal) level of GDP for this economy is $800 billion then what change in aggregate demand (spending) is needed to reach full employment without inflation? A. increase aggregate spending by $80 billion B. decrease aggregate spending by $80 billion C. decrease aggregate spending by $20 billion D. increase aggregate spending by $20 billion Suppose the economy is currently producing $650 billion GDP and the no inflation full employment level of production is $610 billion and the MPC = 3/4. If businesses decrease investment spending by $5 billion this will A. eliminate the recessionary gap that exists and bring the economy to the no inflation full employment level of output. B. lessen the size of the recessionary gap that exists but there will still be a recessionary gap. C. lessen the size of the inflationary gap that exists but there will still be an inflationary gap. D. eliminate the inflationary gap that exists and bring the economy to the no inflation full employment level of output. If an increase in aggregate demand results in no increase in real output (production) or employment we can surmise that A. the economy is in a deep recession. B. the MPC equals 1. C. the price level has fallen. D. the economy is already operating at full employment. Which of the following is a key feature of Keynesian economics? A. Supply creates its own demand. B. The level of saving depends primarily on interest rates. C. The level of investment depends solely on interest rates. D. Macroeconomic equilibrium can occur at less than full employment. If wages increase by 10% while worker productivity increases by 7% A. business profits can not increase. B. cost-push inflation will most likely to occur. C. demand-pull inflation will most likely to occur. D. the aggregate level of saving must have increased If the inventories of business firms rise above the desired levels the business sector can be expected to do which of the following in the near future? A. increase production. B. decrease production. C. continue producing the same amount of output. D. hire additional workers. At the equilibrium level of GDP A. actual investment is zero. B. unplanned changes in inventories are zero. C. saving is greater than planned investment. D. saving is less than planned investment. The household sector would tend to decrease their consumption (i.e. decrease the amount of current income used for consumption) if there was A. an increase in stock prices B. a reduction in interest rates C. the expectation that employment will decrease in the future. D. the expectation that consumer prices will increase more rapidly in the future Show less