Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo
Principles of Macroeconomics 2e

Self-Check Questions

Principles of Macroeconomics 2eSelf-Check Questions
1.

In the Keynesian framework, which of the following events might cause a recession? Which might cause inflation? Sketch AD/AS diagrams to illustrate your answers.

  1. A large increase in the price of the homes people own.
  2. Rapid growth in the economy of a major trading partner.
  3. The development of a major new technology offers profitable opportunities for business.
  4. The interest rate rises.
  5. The good imported from a major trading partner become much less expensive.
2.

In a Keynesian framework, using an AD/AS diagram, which of the following government policy choices offer a possible solution to recession? Which offer a possible solution to inflation?

  1. A tax increase on consumer income.
  2. A surge in military spending.
  3. A reduction in taxes for businesses that increase investment.
  4. A major increase in what the U.S. government spends on healthcare.
3.

Use the AD/AS model to explain how an inflationary gap occurs, beginning from the initial equilibrium in Figure 12.6.

4.

Suppose the U.S. Congress cuts federal government spending in order to balance the Federal budget. Use the AD/AS model to analyze the likely impact on output and employment. Hint: revisit Figure 12.6.

5.

How would a decrease in energy prices affect the Phillips curve?

6.

Does Keynesian economics require government to set controls on prices, wages, or interest rates?

7.

List three practical problems with the Keynesian perspective.

PreviousNext
Order a print copy
Citation/Attribution

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-macroeconomics-2e/pages/1-introduction
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-macroeconomics-2e/pages/1-introduction
Citation information

© Jun 15, 2022 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.