The General Theory of Employment, Interest and Money

1. What is the 'liquidity preference' theory?

A) Preference for real estate investment
B) Preference for foreign currency
C) Desire to invest in stocks
D) Demand for money based on interest rates

2. What does the term 'multiplier effect' refer to?

A) The reduction of taxes
B) Interest rate changes
C) Inflationary pressures
D) The impact of spending on national income

3. In Keynesian economics, what role do expectations play?

A) They are irrelevant to the economy
B) They do not affect supply
C) They influence consumption and investment decisions
D) They are only relevant to financial markets

4. Keynes believes that the economy is predominantly driven by which factor?

A) Inflationary trends
B) Aggregate demand fluctuations
C) Long-term supply growth
D) Government interventions

5. What is 'animal spirits' according to Keynes?

A) The instincts that drive investment decisions
B) A type of consumer product
C) Economic indicators
D) Government regulations

6. Keynes argued that during a liquidity trap, what should the government do?

A) Focus on inflation control
B) Decrease tax rates
C) Tighten monetary policy
D) Increase fiscal spending

7. Which of the following is a critique of Keynesian economics?

A) It can lead to budget deficits
B) It does not consider aggregate demand
C) It neglects long-term growth
D) It ignores the role of banks

8. What does Keynes propose regarding interest rates?

A) A fixed interest rate for all loans
B) Higher interest rates to control inflation
C) Lower interest rates to stimulate investment
D) Variable interest rates for risk management

Created with That Quiz — where test making and test taking are made easy for math and other subject areas.