In the Simplest Keynesian Model of the Determination of Income,interest

question 40

Multiple Choice

In the simplest Keynesian model of the determination of income,interest rates are assumed to be

• A)exogenous and to gradually change.
• B)endogenous and to gradually change.
• C)exogenous and to remain constant.
• D)endogenous and to remain constant.

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Definitions:

Multiplier

In economics, a factor by which an increase in spending leads to a greater increase in national income.

Open-market Purchase

Transactions where central banks buy securities in the open market to increase the money supply and stimulate economic activity.

Interest Rates

The cost of borrowing money or the return earned from lending money, often expressed as a percentage of the principal.

Aggregate Demand

The aggregate need for various products and services across an economy at varying price points, throughout a particular timeframe.