1. (i) Which of the following is not true of the Keynesian model? Select one: A. The wage bargain is struck in terms of money wages. B. An increase in the expected price level would cause labour supply to decline. C. Imperfect information about prices explains fluctuations in output and employment. D. Price expectations are essentially forward-looking. E. An increase in the money wage for a given value of the expected price level would increase labour supply. (ii) Which of the following statement is not true? Select one: A. If money demand is completely interest insensitive, the LM curve is vertical. B. An increase in money demand for speculation shifts the LM schedule to the left. C. In the liquidity trap situation, increments to wealth would be held in the form of money. D. Keynes assumes that investors have a relatively fixed conception of the critical interest. rates E. A shift in the money demand function is also known as a shift in liquidity preference.

1. (i) Which of the following is not true of the Keynesian model? Select one: A. The wage bargain is struck in terms of money wages. B. An increase in the expected price level would cause labour supply to decline. C. Imperfect information about prices explains fluctuations in output and employment. D. Price expectations are essentially forward-looking. E. An increase in the money wage for a given value of the expected price level would increase labour supply. (ii) Which of the following statement is not true? Select one: A. If money demand is completely interest insensitive, the LM curve is vertical. B. An increase in money demand for speculation shifts the LM schedule to the left. C. In the liquidity trap situation, increments to wealth would be held in the form of money. D. Keynes assumes that investors have a relatively fixed conception of the critical interest. rates E. A shift in the money demand function is also known as a shift in liquidity preference.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter25: The Keynesian Perspective

Section: Chapter Questions

Problem 16RQ: How did the Keynesian perspective address the economic market failure of the Great Depression?

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