1) According to Keynes' speculative money demand theory, if interest rates are above the "normal" 1) level, then interest rates are expected to _____ and bond prices are expected to ______; the person will thus choose to store his or her wealth in _________.

A) fall; rise; bonds B) fall; fall; bonds C) fall; rise; money D) rise; fall; money

2) In the simple Keynesian model, a $1bn decrease in net taxes (T) will lead to an increase in output of 2) _____, other things equal.

A) $1bn B) more than $1bn C) less than $1bn D) $0

3) If the interest rate sensitivity of investment is high, then the ____ curve will be relatively ________. 3)

A) IS; flat B) LM; steep C) IS; steep D) LM; flat

4) According to Keynesian theory; savings is primarily a function of _______ whereas in the classical 4) model savings is primarily a function of ________.

A) government policy; stock market valuations B) interest rates; tax policy C) herd mentality; income D) disposable income; interest rates

5) Keynes believed that the instability in the economy was primarily caused by volatility in

A) government spending. B) consumption and savings. C) taxes. D) investment

1} According to Keynes' speculative money demand theory; if interest rates are above die "normal" level, then interest rates are expected to and bond prices are expected to ; the person will thus choose to store his or her wealth in A} fall; rise; bonds B) fall; fall; bonds C] fall; rise; money D] rise; fall; money 2] ln the simple Keynesian model, a $1bn decrease in net taxes (T) will lead to an increase in output of , other things equal. A] $1bn B] more than $1bn C) less than $1bn D) $0 3] If the interest rate sensitivity of investment is high, then the curve will be relatively A} IS; at B) LM; steep C) 15; steep D) 1M;at 4] According to Kemsian theory; savings is primarily a function of whereas in the classical model savings is primarily a function of A} govemment policy; stock market valuations B] interest rates; tax policy C) herd mentality; income D} disposable income; interest rates 5] Keynes believed that the instability in the economy was primarily caused by volatility in A} government spending. B) consumption and savings. C) taxes. D) investment. 2) 3) 4) 5)