Question 1

Which of the following equations is correct?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 2

As the import share of GDP increases relative to the export share of GDP, the sum of the consumption, investment, and government shares of GDP will decline.

Accepted Answer

A) True 
 B)False

Question 3

The consumption share of GDP must grow for the living standards of the average person to improve.

Accepted Answer

A) True 
 B)False

Question 4

If an increase in the mortgage rate causes a decline in new home purchases, the consumption share of GDP will fall.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is the correct ordering if we want to rank the four spending shares of U.S. GDP in 2010 in descending (from highest to lowest) order?

Accepted Answer

A)  Consumption, government purchases, investment, net exports 
B)  Consumption, investment, government purchases, net exports 
C)  Government purchases, consumption, investment, net exports 
D)  Consumption, government purchases, net exports, investment 
E)  Consumption, investment, net exports, government purchases 
A)  Consumption, government purchases, investment, net exports 
B)  Consumption, investment, government purchases, net exports 
C)  Government purchases, consumption, investment, net exports 
D)  Consumption, government purchases, net exports, investment 
E)  Consumption, investment, net exports, government purchases

Question 6

Suppose the government share of GDP is 25 percent and the consumption, investment, and net export shares of GDP are 60, 12, and 3 percent, respectively. If the dollar exchange rate increases, then we would expect

Accepted Answer

A)  the government share of GDP to increase. 
B)  the interest rate to decrease. 
C)  the interest rate to increase. 
D)  the government share of GDP to decrease. 
E)  the net export share of GDP to increase. 
A)  the government share of GDP to increase. 
B)  the interest rate to decrease. 
C)  the interest rate to increase. 
D)  the government share of GDP to decrease. 
E)  the net export share of GDP to increase.

Question 7

Which of the following equations is correct?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 8

The spending allocation model is designed to explain

Accepted Answer

A)  short-run (monthly) movements in the economy. 
B)  movements in the CPI. 
C)  movements in the GDP deflator. 
D)  long-run (a period of years) movements in the economy. 
E)  why the production possibilities frontier is not a relevant concept in macroeconomics. 
A)  short-run (monthly) movements in the economy. 
B)  movements in the CPI. 
C)  movements in the GDP deflator. 
D)  long-run (a period of years) movements in the economy. 
E)  why the production possibilities frontier is not a relevant concept in macroeconomics.

Question 9

The generation of people who lived through the Great Depression is much more fiscally conservative than the baby boom generation. The baby boomers have tended to spend more freely, amass more debt, and save significantly less than those who lived through the Great Depression.
(A)As those who lived through the Great Depression pass away, they are leaving their accumulated wealth to their baby boom children. What effect will this have on the consumption share line? Please explain.
(B)As the baby boomers continue to spend freely, how might their spending affect consumption expenditures in the future?

Accepted Answer

(A)When people experience increases in w

Question 10

If the exchange rate measured as yen per dollar increases, the dollar has become more expensive.

Accepted Answer

A) True 
 B)False

Question 11

The real interest rate, in the long run, is determined by

Accepted Answer

A)  the exchange rate. 
B)  the level of taxes. 
C)  the balancing of the total spending with the supply of goods and services in the economy. 
D)  the budget deficit. 
E)  the rate of inflation. 
A)  the exchange rate. 
B)  the level of taxes. 
C)  the balancing of the total spending with the supply of goods and services in the economy. 
D)  the budget deficit. 
E)  the rate of inflation.

Question 12

The nongovernment share of GDP equals

Accepted Answer

A)  saving as a share of GDP. 
B)  the sum of the consumption and investment shares of GDP. 
C)  1 minus the government share of GDP. 
D)  the sum of the investment and net export shares of GDP. 
E)  the sum of the consumption and net export shares of GDP. 
A)  saving as a share of GDP. 
B)  the sum of the consumption and investment shares of GDP. 
C)  1 minus the government share of GDP. 
D)  the sum of the investment and net export shares of GDP. 
E)  the sum of the consumption and net export shares of GDP.

Question 13

When the government share of GDP increases,

Accepted Answer

A)  there is a downward movement along the national saving rate line. 
B)  the national saving rate line shifts to the right. 
C)  the national saving rate line shifts to the left. 
D)  there is an upward movement along the national saving rate line. 
E)  the national saving rate is unaffected. 
A)  there is a downward movement along the national saving rate line. 
B)  the national saving rate line shifts to the right. 
C)  the national saving rate line shifts to the left. 
D)  there is an upward movement along the national saving rate line. 
E)  the national saving rate is unaffected.

Question 14

An increase in interest rates will cause the nongovernment share of GDP to decline.

Accepted Answer

A) True 
 B)False

Question 15

As a result of changes in the tax laws in the late 1980s, interest payments on consumer loans were no longer deductible. How should this change in the tax law affect the consumption expenditure line, assuming everything else held equal?

Accepted Answer

As shown in the figure below, consumptio

Question 16

The real interest rate is equal to the nominal interest rate

Accepted Answer

A)  minus the rate of expected inflation. 
B)  plus the rate of expected inflation. 
C)  minus the unemployment rate. 
D)  plus the unemployment rate. 
A)  minus the rate of expected inflation. 
B)  plus the rate of expected inflation. 
C)  minus the unemployment rate. 
D)  plus the unemployment rate.

Question 17

Which of the following best explains what is meant by the term crowding out?

Accepted Answer

A)  An increase in government purchases causes interest rates to rise and results in a decline in investment expenditures. 
B)  An increase in government purchases causes interest rates to fall and results in a decline in investment expenditures. 
C)  An increase in investment causes interest rates to rise and results in a drop in government purchases. 
D)  Increases in consumption expenditures cause interest rates to rise and result in a decline in investment expenditures. 
E)  An increase in consumption expenditures causes interest rates to rise and results in a decline in government purchases. 
A)  An increase in government purchases causes interest rates to rise and results in a decline in investment expenditures. 
B)  An increase in government purchases causes interest rates to fall and results in a decline in investment expenditures. 
C)  An increase in investment causes interest rates to rise and results in a drop in government purchases. 
D)  Increases in consumption expenditures cause interest rates to rise and result in a decline in investment expenditures. 
E)  An increase in consumption expenditures causes interest rates to rise and results in a decline in government purchases.

Question 18

If the real interest rate increases and the investment tax credit is abolished, the investment share will increase.

Accepted Answer

A) True 
 B)False

Question 19

The government purchase share of GDP is not sensitive to changes in the interest rate.

Accepted Answer

A) True 
 B)False

Question 20

Explain why the nongovernment share line of GDP slopes downward.

Accepted Answer

The nongovernment share line of GDP is,

Exam 7: The Spending Allocation Model

Which of the following equations is correct?

As the import share of GDP increases relative to the export share of GDP, the sum of the consumption, investment, and government shares of GDP will decline.

The consumption share of GDP must grow for the living standards of the average person to improve.

If an increase in the mortgage rate causes a decline in new home purchases, the consumption share of GDP will fall.

Which of the following is the correct ordering if we want to rank the four spending shares of U.S. GDP in 2010 in descending (from highest to lowest) order?

Suppose the government share of GDP is 25 percent and the consumption, investment, and net export shares of GDP are 60, 12, and 3 percent, respectively. If the dollar exchange rate increases, then we would expect

Which of the following equations is correct?

The spending allocation model is designed to explain

If the exchange rate measured as yen per dollar increases, the dollar has become more expensive.

The real interest rate, in the long run, is determined by

The nongovernment share of GDP equals

When the government share of GDP increases,

An increase in interest rates will cause the nongovernment share of GDP to decline.

As a result of changes in the tax laws in the late 1980s, interest payments on consumer loans were no longer deductible. How should this change in the tax law affect the consumption expenditure line, assuming everything else held equal?

The real interest rate is equal to the nominal interest rate

Which of the following best explains what is meant by the term crowding out?

If the real interest rate increases and the investment tax credit is abolished, the investment share will increase.

The government purchase share of GDP is not sensitive to changes in the interest rate.

Explain why the nongovernment share line of GDP slopes downward.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters