Question 1

An increase in the real interest rate leads to

Accepted Answer

A) an upward movement along the consumption share line. 
B) a rightward shift in the consumption share line. 
C) a downward movement along the consumption share line. 
D) a leftward shift in the consumption share line. 
E) an ambiguous effect on the consumption share line. 
A) an upward movement along the consumption share line. 
B) a rightward shift in the consumption share line. 
C) a downward movement along the consumption share line. 
D) a leftward shift in the consumption share line. 
E) an ambiguous effect on the consumption share line.

Question 2

The real interest rate is the only factor that affects the consumption share of GDP.

Accepted Answer

A) True 
 B)False

Question 3

The share of GDP purchases is determined by

Accepted Answer

A) the rate of growth of real GDP. 
B) the rate of interest. 
C) the willingness of consumers to save. 
D) the political process. 
E) the exchange rate. 
A) the rate of growth of real GDP. 
B) the rate of interest. 
C) the willingness of consumers to save. 
D) the political process. 
E) the exchange rate.

Question 4

A decline in the investment share of GDP due to an increase in government purchases is known as

Accepted Answer

A) investment blackout. 
B) disinvestment. 
C) crowding out. 
D) of these3.Determining the Equilibrium Interest RateCrowding OutBloom's: Knowledge 
A) investment blackout. 
B) disinvestment. 
C) crowding out. 
D) of these3.Determining the Equilibrium Interest RateCrowding OutBloom's: Knowledge

Question 5

Which of the following is the correct ordering if we want to rank the four spending shares of U.S. GDP in 2015 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

The government purchase share of GDP has no influence on the interest rate.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would lower the amount of investment crowded out by an increase in government purchases?

Accepted Answer

A) A less interest-rate-sensitive exchange rate 
B) Imports becoming less exchange-rate sensitive 
C) A more interest-rate-sensitive exchange rate 
D) Government purchases becoming less interest-rate sensitive 
E) Exports becoming less exchange-rate sensitive 
A) A less interest-rate-sensitive exchange rate 
B) Imports becoming less exchange-rate sensitive 
C) A more interest-rate-sensitive exchange rate 
D) Government purchases becoming less interest-rate sensitive 
E) Exports becoming less exchange-rate sensitive

Question 8

Answer the questions below:

Accepted Answer

The answer of Answer the questions below:
   ...

Question 9

Which of the following situations would best explain why the real long-term interest rate would increase?

Accepted Answer

A) An increase in the consumption share of GDP 
B) A decrease in the investment share of GDP 
C) A decrease in the government share of GDP 
D) A decrease in exports 
E) An increase in imports 
A) An increase in the consumption share of GDP 
B) A decrease in the investment share of GDP 
C) A decrease in the government share of GDP 
D) A decrease in exports 
E) An increase in imports

Question 10

If the government share of GDP increases by a certain percent, the sum of the other shares of GDP will fall by a greater amount.

Accepted Answer

A) True 
 B)False

Question 11

Explain why a continued stock market rally (that is, a continued increase in stock prices) will lead to an increase in consumption.

Accepted Answer

A rise in stock prices will in

Question 12

Suppose the share of government purchases increases by 5 percentage points. Why should we predict that the resulting decline in investment will be less than 5 percent?

Accepted Answer

The increase in the share of government

Question 13

Net exports for the United States have been negative in the past 25 years, with an increasingly larger difference between imports and exports.

Accepted Answer

A) True 
 B)False

Question 14

The real interest rate can never be negative.

Accepted Answer

A) True 
 B)False

Question 15

In a speech to the House of Commons in the U.K. on June 23, 2016, Chancellor of the Exchequer George Osborne expressed concern about which of the following economic trends of the U.K.?

Accepted Answer

A) That exports had grown too large compared to imports. 
B) That inflation was getting dangerously large. 
C) About the long-run path of the budget deficits. 
D) the long-run path of the currency value of the British pound. 
A) That exports had grown too large compared to imports. 
B) That inflation was getting dangerously large. 
C) About the long-run path of the budget deficits. 
D) the long-run path of the currency value of the British pound.

Question 16

In a market economy, if the sum of the consumption, investment, and net export shares of GDP is greater than 1 minus the government share of GDP, market forces will result in

Accepted Answer

A) GDP contracting. 
B) an increase in interest rates. 
C) GDP expanding. 
D) a decrease in interest rates. 
E) an increase in the price level. 
A) GDP contracting. 
B) an increase in interest rates. 
C) GDP expanding. 
D) a decrease in interest rates. 
E) an increase in the price level.

Question 17

According to most estimates, the real interest rate was higher in the 1980s than in the 1970s.

Accepted Answer

A) True 
 B)False

Question 18

The four-diagram approach explains how the price level adjusts in the long run so that the shares of GDP sum to 1.

Accepted Answer

A) True 
 B)False

Question 19

All else being equal, if consumption declines as a share of GDP, then

Accepted Answer

A) people must be saving less. 
B) people will consume less in the future. 
C) there must have been an increase in GDP. 
D) people will consume more in the future. 
E) there must have been a decrease in GDP. 
A) people must be saving less. 
B) people will consume less in the future. 
C) there must have been an increase in GDP. 
D) people will consume more in the future. 
E) there must have been a decrease in GDP.

Question 20

Changes in the government spending share of GDP have no effect on the investment share of GDP.

Accepted Answer

A) True 
 B)False

Exam 19: The Spending Allocation Model

An increase in the real interest rate leads to

The real interest rate is the only factor that affects the consumption share of GDP.

The share of GDP purchases is determined by

A decline in the investment share of GDP due to an increase in government purchases is known as

Which of the following is the correct ordering if we want to rank the four spending shares of U.S. GDP in 2015 in descending (from highest to lowest) order?

The government purchase share of GDP has no influence on the interest rate.

Which of the following would lower the amount of investment crowded out by an increase in government purchases?

Answer the questions below:

Which of the following situations would best explain why the real long-term interest rate would increase?

If the government share of GDP increases by a certain percent, the sum of the other shares of GDP will fall by a greater amount.

Explain why a continued stock market rally (that is, a continued increase in stock prices) will lead to an increase in consumption.

Suppose the share of government purchases increases by 5 percentage points. Why should we predict that the resulting decline in investment will be less than 5 percent?

Net exports for the United States have been negative in the past 25 years, with an increasingly larger difference between imports and exports.

The real interest rate can never be negative.

In a speech to the House of Commons in the U.K. on June 23, 2016, Chancellor of the Exchequer George Osborne expressed concern about which of the following economic trends of the U.K.?

In a market economy, if the sum of the consumption, investment, and net export shares of GDP is greater than 1 minus the government share of GDP, market forces will result in

According to most estimates, the real interest rate was higher in the 1980s than in the 1970s.

The four-diagram approach explains how the price level adjusts in the long run so that the shares of GDP sum to 1.

All else being equal, if consumption declines as a share of GDP, then

Changes in the government spending share of GDP have no effect on the investment share of GDP.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

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

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters