Question 1

In Figure 9.6,if full employment occurs at QB,then aggregate demand is

Accepted Answer

A) Too great,causing cyclical unemployment. 
B) Too great,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right,causing no cyclical unemployment. 
A) Too great,causing cyclical unemployment. 
B) Too great,causing demand-pull inflation. 
C) Too small,causing cyclical unemployment. 
D) Just right,causing no cyclical unemployment. D

Question 2

When aggregate expenditures fall below the full-employment level of output,which of the following types of unemployment is most likely to increase?

Accepted Answer

A) Cyclical. 
B) Seasonal. 
C) Frictional. 
D) Structural. 
A) Cyclical. 
B) Seasonal. 
C) Frictional. 
D) Structural. A

Question 3

In Figure 9.5,a movement from Point A to Point B would result from

Accepted Answer

A) A decrease in wage costs. 
B) An increase in the interest rate. 
C) An increase in disposable income. 
D) An improvement in expectations for future sales. 
A) A decrease in wage costs. 
B) An increase in the interest rate. 
C) An increase in disposable income. 
D) An improvement in expectations for future sales. D

Question 4

Given that C = $500 + 0.8YD,if the level of disposable income is $1,000,the level of saving is

Accepted Answer

A) $300. 
B) -$300. 
C) $500. 
D) -$1,300. 
A) $300. 
B) -$300. 
C) $500. 
D) -$1,300.

Question 5

Which of the following will cause the aggregate demand curve to shift to the left?

Accepted Answer

A) A decrease in consumer and business confidence because of a terrorist attack. 
B) A decrease in the interest rate. 
C) A decrease in business taxes. 
D) An improvement in technology. 
A) A decrease in consumer and business confidence because of a terrorist attack. 
B) A decrease in the interest rate. 
C) A decrease in business taxes. 
D) An improvement in technology.

Question 6

What is investment spending,and what are the factors that impact investment demand? Explain.

Accepted Answer

Investment is expenditures on new plants

Question 7

If the availability of credit increases,then

Accepted Answer

A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right. 
A) There will be a movement to the left along the AD curve. 
B) There will be a movement to the right along the AD curve. 
C) The AD curve will shift to the left. 
D) The AD curve will shift to the right.

Question 8

Favorable expectations about future sales will cause higher investment,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 9

Refer to Table 9.2.(Data are expressed in billions of dollars. ) Table 9.2
$\begin{array}{|r|r|r|c|c|}
\hline \begin{array}{r}
\text { Full Employment } \
\text { Income (Output) }
\end{array} & \begin{array}{c}
\text { Consumers } \
\text { Desire to Spend }
\end{array} & \begin{array}{c}
\text { Investors Desire } \
\text { to Spend }
\end{array} & \begin{array}{c}
\text { Total Private } \
\text { Spending }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Saving }
\end{array} \
\hline \$ 500 & \$ 300 & \$ 250 & \$ & \$ \
\hline 600 & 375 & 250 & \$ & \$ \
\hline 700 & 450 & 250 & \$ & \$ \
\hline 800 & 525 & 250 & \$ & \$ \
\hline
\end{array}$ Given the information in Table 9.2,saving is equal to $200 billion at an output level of

Accepted Answer

A) $500 billion. 
B) $600 billion. 
C) $700 billion. 
D) $800 billion. 
A) $500 billion. 
B) $600 billion. 
C) $700 billion. 
D) $800 billion.

Question 10

Suppose a consumption function is given as C = $500 + 0.75YD.The marginal propensity to consume is

Accepted Answer

A) 200. 
B) 0.75. 
C) 0.25. 
D) -0.75. 
A) 200. 
B) 0.75. 
C) 0.25. 
D) -0.75.

Question 11

If we assume that government expenditure,investment,and net exports are not affected by income,the slope of the consumption function equals

Accepted Answer

A) APC. 
B) The change in income divided by the change in consumption. 
C) The slope of the aggregate expenditure curve. 
D) APS. 
A) APC. 
B) The change in income divided by the change in consumption. 
C) The slope of the aggregate expenditure curve. 
D) APS.

Question 12

Given that C = $1,000 + 0.60YD,if the level of disposable income is $1,000,the level of saving is

Accepted Answer

A) $600. 
B) $400. 
C) -$600. 
D) -$300. 
A) $600. 
B) $400. 
C) -$600. 
D) -$300.

Question 13

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $1,000 to $5,000,then it can be inferred that the MPS equals

Accepted Answer

A) 0.60. 
B) 0.40. 
C) 0.05. 
D) -0.60. 
A) 0.60. 
B) 0.40. 
C) 0.05. 
D) -0.60.

Question 14

The economy will not reach and maintain its goals of full employment and price stability unless the economy is

Accepted Answer

A) At full employment and the price level is stable. 
B) Above full employment and the price level is stable. 
C) Below full employment and the price level is stable. 
D) None of the choices are correct. 
A) At full employment and the price level is stable. 
B) Above full employment and the price level is stable. 
C) Below full employment and the price level is stable. 
D) None of the choices are correct.

Question 15

All of the following will shift the investment curve except

Accepted Answer

A) Innovation. 
B) Improvements in available technology. 
C) Changes to expectations. 
D) Changes to the interest rate. 
A) Innovation. 
B) Improvements in available technology. 
C) Changes to expectations. 
D) Changes to the interest rate.

Question 16

Table 9.1 $$\begin{array} { | l | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ What is the marginal propensity to consume in Table 9.1?

Accepted Answer

A) 0.15. 
B) 0.80. 
C) 0.85. 
D) 0.90. 
A) 0.15. 
B) 0.80. 
C) 0.85. 
D) 0.90.

Question 17

When the APC is greater than 1,the APS must be

Accepted Answer

A) Equal to 1. 
B) Greater than 1 also. 
C) Between 0 and 1. 
D) Negative. 
A) Equal to 1. 
B) Greater than 1 also. 
C) Between 0 and 1. 
D) Negative.

Question 18

The MPC indicates the fraction of

Accepted Answer

A) An additional dollar of disposable income that will be saved. 
B) An additional dollar of disposable income that will be spent. 
C) Total income that will be saved. 
D) Total income that will be spent. 
A) An additional dollar of disposable income that will be saved. 
B) An additional dollar of disposable income that will be spent. 
C) Total income that will be saved. 
D) Total income that will be spent.

Question 19

Which of the following will not cause an increase in U.S.gross exports?

Accepted Answer

A) An increase in foreign business investment. 
B) An increase in foreign wealth. 
C) An increase in foreign consumer income. 
D) A decrease in U.S.imports. 
A) An increase in foreign business investment. 
B) An increase in foreign wealth. 
C) An increase in foreign consumer income. 
D) A decrease in U.S.imports.

Question 20

In Figure 9.9,at a full-employment output level of $150 billion,the gap by which actual aggregate income or GDP is different from full-employment income or GDP is

Accepted Answer

A) An inflationary gap of $25 billion income. 
B) A recessionary gap of $50 billion income. 
C) An inflationary gap of $50 billion income. 
D) Expenditure equilibrium. 
A) An inflationary gap of $25 billion income. 
B) A recessionary gap of $50 billion income. 
C) An inflationary gap of $50 billion income. 
D) Expenditure equilibrium.

Exam 9: Aggregate Demand

In Figure 9.6,if full employment occurs at QB,then aggregate demand is

When aggregate expenditures fall below the full-employment level of output,which of the following types of unemployment is most likely to increase?

In Figure 9.5,a movement from Point A to Point B would result from

Given that C = $500 + 0.8YD,if the level of disposable income is $1,000,the level of saving is

Which of the following will cause the aggregate demand curve to shift to the left?

What is investment spending,and what are the factors that impact investment demand? Explain.

If the availability of credit increases,then

Favorable expectations about future sales will cause higher investment,ceteris paribus.

Suppose a consumption function is given as C = $500 + 0.75YD.The marginal propensity to consume is

If we assume that government expenditure,investment,and net exports are not affected by income,the slope of the consumption function equals

Given that C = $1,000 + 0.60YD,if the level of disposable income is $1,000,the level of saving is

If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $1,000 to $5,000,then it can be inferred that the MPS equals

The economy will not reach and maintain its goals of full employment and price stability unless the economy is

All of the following will shift the investment curve except

Table 9.1 Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \0 \ 50 200 210 What is the marginal propensity to consume in Table 9.1?

When the APC is greater than 1,the APS must be

The MPC indicates the fraction of

Which of the following will not cause an increase in U.S.gross exports?

In Figure 9.9,at a full-employment output level of $150 billion,the gap by which actual aggregate income or GDP is different from full-employment income or GDP is

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters

In Figure 9.6,if full employment occurs at Q_B,then aggregate demand is

Given that C = $500 + 0.8Y_D,if the level of disposable income is $1,000,the level of saving is

Suppose a consumption function is given as C = $500 + 0.75Y_D.The marginal propensity to consume is

Given that C = $1,000 + 0.60Y_D,if the level of disposable income is $1,000,the level of saving is