the economics of money, banking, and financial markets

676 #

© 2014 Pearson Canada Inc.#

21. 
    

    Factors that influenced planned investment spending include ____.
    A) real interest rates
    B) financial frictions
    C) emotional waves of optimism and pessimism
    D) all of the above
    Answer: D
    Diff: 2 Type: MC Page Ref: 544
    Skill: Recall
    Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

    
    


22. 
    

    Planned investment spending is higher ____.
    A) when real interest rate is higher
    B) during financial frictions
    C) when businesses are optimistic
    D) A and C
    Answer: C
    Diff: 2 Type: MC Page Ref: 544
    Skill: Recall
    Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

    
    


23. 
    

    Aggregate demand in an economy with no government or foreign trade is ____.
    A) consumer expenditure plus actual investment
    B) consumer expenditure plus planned investment
    C) consumer expenditure plus inventory investment
    D) consumer expenditure plus fixed investment
    Answer: B
    Diff: 2 Type: MC Page Ref: 545
    Skill: Recall
    Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output

    
    


24. 
    

    What is the marginal propensity to consume according to Keynes's consumption theory?
    provide an example.
    Answer: Marginal propensity to consume or mpc is the slope of the consumption function line
    or ΔC/ΔYD and reflects the change in consumer expenditure that results from an additional

    
    

dollar of disposable income. Keynes assumed that mpc is constant between the values of 0 and 1.
If for example mpc = 0.5, this means that when disposable income increases by $1, the consumer
will increase her consumption by $0.50.
Diff: 2 Type: SA Page Ref: 543
Skill: Recall
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output