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