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The General Theory of Employment, Interest and Money
  • 1. What is the 'liquidity preference' theory?
A) Demand for money based on interest rates
B) Desire to invest in stocks
C) Preference for real estate investment
D) Preference for foreign currency
  • 2. What does the term 'multiplier effect' refer to?
A) Interest rate changes
B) The reduction of taxes
C) Inflationary pressures
D) The impact of spending on national income
  • 3. In Keynesian economics, what role do expectations play?
A) They are only relevant to financial markets
B) They are irrelevant to the economy
C) They do not affect supply
D) They influence consumption and investment decisions
  • 4. Keynes believes that the economy is predominantly driven by which factor?
A) Government interventions
B) Aggregate demand fluctuations
C) Inflationary trends
D) Long-term supply growth
  • 5. What is 'animal spirits' according to Keynes?
A) Government regulations
B) Economic indicators
C) The instincts that drive investment decisions
D) A type of consumer product
  • 6. Keynes argued that during a liquidity trap, what should the government do?
A) Tighten monetary policy
B) Decrease tax rates
C) Increase fiscal spending
D) Focus on inflation control
  • 7. Which of the following is a critique of Keynesian economics?
A) It ignores the role of banks
B) It does not consider aggregate demand
C) It neglects long-term growth
D) It can lead to budget deficits
  • 8. What does Keynes propose regarding interest rates?
A) Lower interest rates to stimulate investment
B) A fixed interest rate for all loans
C) Higher interest rates to control inflation
D) Variable interest rates for risk management
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