In the Keynesian Model, a Decrease in Real Autonomous Spending

question 199

Multiple Choice

In the Keynesian model, a decrease in real autonomous spending results in a more than proportional decrease in real Gross Domestic Product (GDP) because

• A) consumption decreases as a result of lower real disposable income.
• B) consumption increases while real disposable income decreases.
• C) real autonomous spending decreases further as real disposable income decreases.
• D) government spending also decreases.

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Definitions:

Contributed Capital

The total value of the capital that shareholders have directly invested in the company through the purchase of its stock.

Earned Capital

The portion of shareholders' equity derived from profitable operations, representing retained earnings and not contributed capital.

Common Shares

Equity investments that represent a unit of ownership in a corporation and give shareholders voting rights and dividends.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, giving more weight to some numbers than others.