Here is part of my economics quiz I gave to college students showing what a fraud Keynesian economics is. Washington politicians practice and believed this nonsense. Bush, Paul Krugman, Obama, Pelosi, Kosmas, Greenspan, Bernanke, Frank, Dodd, Reid and the majority of economists in the United States believe in this voodoo economics crap that has led us to the point of economic collapse.
John Maynard Keynes. Politicians love his economic theories because they give politicians the green light to spend as much money as they can and feel morally justified doing so. It would be the same as if Budweiser told alcoholics drinking beer everyday is good for you and will make you live longer. Sounds great and might be a lot of fun for awhile but is a complete lie.
In this quiz I put to the test the Keynesian “multiplier” effect of government spending during a recession. According to the theory if the government spends $1 it will create somewhere around $4 of GDP growth.
I cut back the multiplier number for my students just a little to 3.5 to be fair to John Maynard Keynes and our Washington politicians. As you can see below according to Nancy and Barney our economy should be at $21.3 trillion but we seem to be at $14.6 trillion. Just a shortfall of 45% over that predicted by the Keynesian theory. In fact the growth rate for the last two years is 0.76% or not even 1%. And most of that is government spending and debt. Clearly Keynesian economics is not working and we need to scrap it forever into the abyss along with our politicians.
As I ask Scott don’t you wish all economics professors gave a quiz like this?
GDP (Y) Consumption (C) Savings (S) MPC MPS
2005 12379.5 (billions)8609.6 (billions) 3769.9 N/A N/A
3. 2006 13183.5 9148.2 4035.3 0.67 0.33
4. 2007 13795.6 9658.5 4137.1 0.83 0.17
5. 2008 14373.9 10095.1 4278.8 0.75 0.25
6. 2009 14178.0 9987.7 4190.3 -0.55 -0.45
7. 2010 14592.4 10353.5 4238.9 0.88 0.12
8. What is my multiplier if my MPC is = 0.72? Rounded 3.5 is the multiplier according to Keynes.
9. Congress passed the $152 billion Tax Rebates and Economic Stimulus Plan in May of 2008.
Using your multiplier what should the gain in GDP have been? $152 x 3.5 = $532 billion
10. Congress passed the $300 billion Housing and Economic Recovery Act in June of 2008.
Using your multiplier what should the gain in GDP have been? $1,050 billion
11. Congress passed the $700 billion Emergency Economic Stabilization Act of 2008 in November of that year.
Using your multiplier what should the gain in GDP have been? $2,450 billion
12. Congress passed the $825 billion American Recovery and Reinvestment Act of 2009 in February of that year.
Using your multiplier what should the gain in GDP have been? $2,887.5 billion
13. Add the economic gain to the GDP from the four major stimulus packages. $6,919.5 billion.
14. In 2008 the GDP was $14,373.9 (billions) and in 2010 it was $14,592.4.
What was the annual growth rate after spending billions? 0.76%. Not even a 1% growth rate using Keynesian economics.
15. According to the Keynesian model what should the GDP for 2010 have been? Add your summation from problem 13 to the 2008 GDP.
$21,293.4 billion verses a actual GDP of $14,592.4 billion
Bonus. What is your assessment of the Keynesian multiplier affect? It’s a fairy tale only politicians like Suzanne Kosmas, Alan Grayson, Barney Frank, Nancy Pelosi and Barrack Obama believe in. It doesn’t work.
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