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