Unit 5: Welfare Economics and Keynesian Economics - Practice Quiz

1 What is the main objective of a consumer in neoclassical economic theory?

2 What is the main objective of a firm in neoclassical economic theory?

3 Utility is best described as the:

4 Hedonistic welfare economics primarily connects welfare with:

5 According to the hedonistic view, an increase in individual pleasure generally indicates:

6 The hedonistic approach to welfare mainly focuses on the experiences of:

7 Piero Sraffa is well known for criticizing the neoclassical theory of:

8 Sraffa's work questioned the treatment of capital as:

9 Sraffa's critique is closely associated with the problem of measuring:

10 Keynes's economic analysis mainly focused on the determination of:

11 Keynes wrote his major work during a period strongly influenced by the:

12 In Keynesian analysis, aggregate demand is the demand for:

13 Keynes argued that an economy could experience unemployment because of insufficient:

14 The marginal productivity theory explains the payment received by a factor according to its:

15 According to marginal productivity theory, wages are mainly related to the marginal productivity of:

16 The marginal product of a factor is the additional output resulting from using:

17 Keynes explained capitalist depression mainly through a deficiency of:

18 During a capitalist depression, businesses typically reduce:

19 Which policy is commonly associated with Keynesian demand management?

20 An increase in government spending can raise aggregate demand by increasing:

21 A consumer has utility , income of , and faces prices and . Which bundle maximizes utility?

22 A competitive firm maximizes profit by producing where which condition holds, assuming the solution is interior?

23 If a consumer's marginal rate of substitution differs from the ratio of commodity prices at an interior bundle, what is the likely result?

24 In a hedonistic approach to welfare economics, an economic policy is considered beneficial primarily when it:

25 What major difficulty arises when welfare is assessed by adding individuals' utilities?

26 Suppose a policy raises the income of one person but lowers the income of another. Under a simple utilitarian criterion, the policy is desirable if:

27 Sraffa's critique of the neoclassical theory of value mainly challenged the idea that:

28 Why did Sraffa emphasize the role of production conditions in the determination of relative prices?

29 The reswitching problem poses a challenge to the neoclassical claim that:

30 In Keynes's analysis, effective demand is best understood as the level of aggregate demand that:

31 Why did Keynes reject the classical claim that a competitive economy automatically reaches full employment?

32 If the marginal propensity to consume is , the simple spending multiplier is:

33 Keynes's defense of marginal productivity theory was mainly directed at explaining:

34 According to marginal productivity reasoning, a firm's demand for labor tends to increase when:

35 Which assumption is important for the traditional marginal productivity theory of distribution?

36 In Keynes's explanation of capitalist depression, a fall in investment can reduce income by more than the initial amount because of:

37 A collapse in business confidence is likely to cause a depression in Keynes's framework because it directly reduces:

38 Why can a depression persist even when workers are willing to work at lower wages?

39 During a recession with idle resources, which fiscal policy is most directly expansionary?

40 If the spending multiplier is , an increase in autonomous expenditure of raises equilibrium income by:

41 A competitive consumer has strictly convex preferences and faces prices and income . If an interior utility maximum satisfies , which additional condition is essential for interpreting the solution as a global maximum rather than merely a stationary point?

42 Suppose a firm has production function that is concave but not strictly concave, and faces competitive factor and product markets. Which statement most accurately describes the relationship between profit maximization and the first-order conditions?

43 In a two-consumer, two-good exchange economy, a competitive equilibrium allocation is Pareto efficient under standard assumptions. Which alteration most directly invalidates this welfare conclusion without necessarily eliminating equilibrium?

44 A hedonistic welfare framework ranks social states by the sum of individual pleasures and pains. Two states generate utilities and for two individuals. Under utilitarian aggregation, which conclusion follows, assuming interpersonal utility units are cardinally comparable?

45 Why does the move from individual utility maximization to a social welfare function require an additional ethical premise?

46 A policy raises aggregate measured utility but lowers the utility of the least advantaged person. Which inference is justified in a strictly hedonistic-utilitarian framework but not in a prioritarian framework?

47 Sraffa's critique of the neoclassical theory of distribution most directly challenges the claim that the rate of return on capital can be determined by a well-defined marginal product of capital because:

48 In a reswitching example, a technique is cost-minimizing at both a low and a high interest rate but not at an intermediate rate. What implication follows for the neoclassical interpretation of a falling interest rate?

49 Why does the possibility of capital reversing weaken the claim that a lower real interest rate necessarily signals greater social patience and justifies a more capital-intensive technique?

50 In Keynes's short-period framework, firms may reduce employment even when workers are willing to accept lower money wages. Which mechanism best explains this result?

51 An economy has unused capacity, sticky prices, and a marginal propensity to consume of . Ignoring taxes, imports, and interest-rate crowding out, an autonomous investment increase of raises equilibrium income by:

52 Keynes's concept of effective demand differs from Say's Law primarily because effective demand is determined at the point where:

53 Keynes's defense of marginal productivity theory of distribution is most consistent with which qualification?

54 If the marginal product of labor is defined for a given capital stock, why can it fail to determine the economy-wide employment level in Keynesian analysis?

55 A sudden collapse in expected profitability causes investment to fall. With a positive spending multiplier and no immediate price adjustment, the most Keynesian sequence is:

56 Why can a generalized attempt by households to increase saving worsen a depression when investment does not respond immediately?

57 During a depression, liquidity preference becomes highly interest-elastic while investment remains pessimistic. Which policy implication follows most directly?

58 An economy has a spending multiplier of , but a fiscal expansion induces import leakage and raises interest rates, reducing the effective multiplier to . What is the required autonomous spending increase to close an output gap of ?

59 Which condition most weakens the effectiveness of deficit-financed fiscal expansion in an economy operating near full capacity?

60 Suppose the government raises taxes and government purchases by the same amount in a simple Keynesian model with a positive marginal propensity to consume. What is the most accurate result for equilibrium income?