MCQs in Keynesian Equilibrium Analysis:

1. In Keynesian economics, which of the following components does NOT directly affect aggregate demand (AD)?

 a) Consumption (C)
 b) Investment (I)
 c) Government spending (G)
 d) Net exports (NX)
 **e) Interest rate (r)** (While interest rate affects investment, it is not directly considered in the traditional Keynesian AD equation)

2. According to the Keynesian multiplier, an increase in government spending will lead to a:

 a) Decrease in aggregate demand
 b) No change in aggregate demand
 **c) Multiple increase in aggregate demand**
 d) Multiple decrease in aggregate demand

3. The Keynesian paradox of thrift states that:

 **a) An increase in saving can lead to a decrease in aggregate demand and investment**
 b) An increase in saving always leads to an increase in investment
 c) Consumers and firms always have perfect foresight
 d) The economy is always at full employment

4. Which of the following statements is NOT true about the Keynesian liquidity trap?

 a) In a liquidity trap, interest rates are close to zero.
 b) Monetary policy becomes ineffective in stimulating the economy.
 c) Firms are discouraged from investing due to higher interest rates.
 **d) Fiscal policy can still be used to stimulate the economy.**

5. A recessionary gap occurs when:

 **a) Aggregate demand falls below aggregate supply**
 b) Aggregate demand exceeds aggregate supply
 c) The economy is at full employment
 d) The unemployment rate is naturally low