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The General Theory of Employment, Interest and Money
  • 1. What is the 'liquidity preference' theory?
A) Desire to invest in stocks
B) Preference for foreign currency
C) Demand for money based on interest rates
D) Preference for real estate investment
  • 2. What does the term 'multiplier effect' refer to?
A) Inflationary pressures
B) Interest rate changes
C) The reduction of taxes
D) The impact of spending on national income
  • 3. In Keynesian economics, what role do expectations play?
A) They are only relevant to financial markets
B) They do not affect supply
C) They are irrelevant to the economy
D) They influence consumption and investment decisions
  • 4. What does Keynes propose regarding interest rates?
A) A fixed interest rate for all loans
B) Lower interest rates to stimulate investment
C) Higher interest rates to control inflation
D) Variable interest rates for risk management
  • 5. Which of the following is a critique of Keynesian economics?
A) It can lead to budget deficits
B) It neglects long-term growth
C) It does not consider aggregate demand
D) It ignores the role of banks
  • 6. 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
  • 7. Keynes argued that during a liquidity trap, what should the government do?
A) Tighten monetary policy
B) Focus on inflation control
C) Decrease tax rates
D) Increase fiscal spending
  • 8. Keynes believes that the economy is predominantly driven by which factor?
A) Inflationary trends
B) Government interventions
C) Long-term supply growth
D) Aggregate demand fluctuations
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