John Maynard Keynes

Question 1

what was the main point that John Maynard Keynes argued?

Answer 1

demand drives supply and that healthy economies spend more than they save.governments use expansionary fiscal policies to promote a healthy economy

Question 2

what did John Maynard Keynes argue a government should do if they are moving towards a recession?

Answer 2

INJECT by increasing government spending or cutting taxes. this leads to rising incomes, rising consumption and ultimately lower unemployment

Question 3

what is the trouble with Keynes?

Answer 3

if we over inject and the economy expands exponentially we get back to the fundamental economic problem where wants are unlimited and resources are scarce

Question 4

according to John Maynard Keynes, what happens if consumption keeps rising?

Answer 4

firms will find it more difficult to purchase the factors of production which push up their prices ultimately raising their costs

Question 5

what is the multiplier effect effected by?

Answer 5

the amount that is leaking because the bigger the leakage smaller the multiplier because when the money flows around the economy it will ‘finish’ quicker

Question 6

what does the circular flow model show us?

Answer 6

how money flows around the economy

Question 7

when the economy is slowing what does the Keynesian approach call for?

Answer 7

injections

Question 8

when the economy is over heating what does the Keynesian approach call for?

Answer 8

leakages

Question 9

what does the multiplier effect tell us?

Answer 9

the impact any injection has on the economy and how big the impact is

Question 10

what did Keynes mean when the negative output gap (recession) had expansionary policies?

Answer 10

it was slow

decrease in interest rates

increase in government spending

decrease taxes

Question 11

what did Keynes mean when the positive output gap (boom) had contractionary policies?

Answer 11

it was fast

increase in interest rates

decrease in government spending

increase in taxes