The sum of consumption (C), investment (I), government spending (G), and net exports (X-M) is called:
a. autonomous spending.
b. aggregate expenditures.
c. Keynesian income
d. wealth.
QUESTION 2Which of the following provides the best explanation of why money is valuable?
a. Money is valuable because it is indivisible.
b. Money is valuable because it is scarce.
c. Money is valuable because it is backed by precious metals, primarily gold and silver.
d. Money is valuable because it has intrinsic value, independent of its use as a means of exchange.
QUESTION 3An increase in a nation's trade deficit occurs when that nation's exports rise and/or its imports fall.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4Within the Keynesian aggregate expenditure-output model, if an economy operates below full employment:
a. a reduction in wage rates and resource prices will soon restore full-employment equilibrium.
b. a reduction in the real interest rate will soon restore full-employment equilibrium.
c. an increase in the real interest rate will soon restore full-employment equilibrium.
d. the economy may remain below full employment unless aggregate expenditures increase.
QUESTION 5Money is:
a. valuable because it is backed by gold.
b. any items used in barter.
c. an illiquid asset.
d. none of these.
QUESTION 6According to the infant industry argument, a new domestic industry needs protection because it has higher costs than established foreign competitors.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 7Within the Keynesian aggregate expenditures model, which of the following autonomous changes would decrease the equilibrium output?
a. A decrease in investment spending.
b. An increase in net exports.
c. An increase in government spending.
d. An increase in consumption expenditures
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