Podcast
Questions and Answers
The Keynesian economic framework is based on an assumption that:
The Keynesian economic framework is based on an assumption that:
According to the Keynesian framework, ________________________ may cause a recession, but not inflation.
According to the Keynesian framework, ________________________ may cause a recession, but not inflation.
a major trading partner's economic slowdown
If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:
If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:
According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession.
According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession.
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If a Phillips curve shows that unemployment is low and inflation is high in the economy, then that economy:
If a Phillips curve shows that unemployment is low and inflation is high in the economy, then that economy:
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The sum of all the income received for contributing resources to GDP is called ___________________.
The sum of all the income received for contributing resources to GDP is called ___________________.
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Refer to the graph. At point A:
Refer to the graph. At point A:
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Refer to the graph. At point B:
Refer to the graph. At point B:
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What does consumption equal when income equals 600?
What does consumption equal when income equals 600?
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If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by?
If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by?
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Refer to the graph. Point C in the graph represents:
Refer to the graph. Point C in the graph represents:
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Following the multiplier effect, what will the value of the total aggregate expenditures be after the fourth round?
Following the multiplier effect, what will the value of the total aggregate expenditures be after the fourth round?
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Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.
Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.
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In macroeconomics, a _________________ is used to show the relationship between output and the input price level.
In macroeconomics, a _________________ is used to show the relationship between output and the input price level.
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____________________ will not cause a shift of the AS curve in a Keynesian framework.
____________________ will not cause a shift of the AS curve in a Keynesian framework.
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What is the equilibrium level of national income for this economy?
What is the equilibrium level of national income for this economy?
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If the multiplier equals 3 and the government increases spending by 250, how much will output increase by?
If the multiplier equals 3 and the government increases spending by 250, how much will output increase by?
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Aggregate demand is more likely to _________________ than aggregate supply in the short run.
Aggregate demand is more likely to _________________ than aggregate supply in the short run.
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Study Notes
Keynesian Economic Framework
- An increase in government spending shifts the aggregate demand curve to the right, based on the assumption of price and wage stickiness.
- A major trading partner's economic slowdown can trigger a recession without causing inflation.
Phillips Curve
- If high unemployment coincides with low inflation, output is below potential GDP.
- Low unemployment paired with high inflation indicates the economy operates above potential GDP.
National Income
- National income (Y) represents the total income received for contributing resources to the GDP.
Economic Points on Graph
- At full employment, economic conditions are optimal without inflationary pressures.
- Low or negative economic growth reflects a contraction phase in the business cycle.
Consumption and Spending in Keynesian Framework
- With specific parameters, consumption can be calculated as 374 when income is 600.
- Government intervention is vital during a recession; with a multiplier of 2.5, a $200 increase in spending results in a $500 rise in output.
Keynesian Policy Insights
- Keynesian economics recommends policy prescriptions to mitigate effects of recessions.
- The Phillips Curve illustrates the trade-off between output and input price levels.
Aggregate Supply and Demand
- Changes in output prices do not cause shifts in the aggregate supply curve within a Keynesian framework.
- Aggregate demand is more prone to substantial shifts than aggregate supply in the short run.
Economic Equilibrium
- Equilibrium national income is determined at a value of 300 under the given parameters.
- A government expenditure increase of 250, with a multiplier of 3, yields a significant output increase of 750.
Multiplier Effect
- The multiplier effect circulates through multiple rounds of spending, significantly boosting total aggregate expenditures after successive rounds.
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Description
Test your knowledge of key concepts in Chapter 25 of Macroeconomics. This quiz focuses on the Keynesian economic framework and its implications on government spending and aggregate demand. Use these flashcards to reinforce your understanding of macroeconomic principles.
