Keynesian Theory

question 93

Multiple Choice

Keynesian theory:

• A) states that open market operations and an increase in the money supply lead people to buy bonds, causing bond prices to rise and interest rates to fall, and increase the investment component of aggregate demand.
• B) states that changes in the money supply have no impact on GDP in either the short or long run.
• C) is the same as the classical transmission mechanism in all essential elements.
• D) states that an increase in the money supply will lower interest rates and thereby shift the long-run aggregate supply curve to the right.

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Definitions:

Elastic Demand

Describes a situation where the quantity demanded of a product changes significantly in response to changes in its price.

Strong Union

Represents a labor union with significant bargaining power, often due to a large membership or strategic importance, capable of negotiating favorable terms for its members.

Capital Substitute

An investment or process that replaces or reduces the need for capital investment, often through technology or innovative methods.

Unionized

The state of being organized into a union or labor organization to negotiate collectively with employers.