Question 1

The four components of aggregate spending are consumption,saving,imports,and taxes.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) Just right,causing no cyclical unemployment. 
B) Too great,causing an inflationary gap. 
C) Too small,causing an inflationary gap. 
D) Too great,causing a recessionary gap. 
A) Just right,causing no cyclical unemployment. 
B) Too great,causing an inflationary gap. 
C) Too small,causing an inflationary gap. 
D) Too great,causing a recessionary gap.

Question 3

If the economy depicted in Figure 9.9 produced at a full-employment output level of $50 billion instead of the equilibrium output level,inventory levels would

Accepted Answer

A) Increase by $50 billion. 
B) Increase by $25 billion. 
C) Decrease by $25 billion. 
D) Decrease by $50 billion. 
A) Increase by $50 billion. 
B) Increase by $25 billion. 
C) Decrease by $25 billion. 
D) Decrease by $50 billion.

Question 4

Using the disposable income level at which the consumption function intersects the 45-degree line,we can identify

Accepted Answer

A) Full employment at the intersection point. 
B) An inflationary gap to the right of the intersection point. 
C) Dissaving to the left of the intersection point. 
D) Dissaving to the right of the intersection point. 
A) Full employment at the intersection point. 
B) An inflationary gap to the right of the intersection point. 
C) Dissaving to the left of the intersection point. 
D) Dissaving to the right of the intersection point.

Question 5

The consumption function implies that

Accepted Answer

A) Disposable income inversely influences consumption. 
B) Consumption increases as disposable income increases. 
C) Autonomous consumption changes when people have low incomes. 
D) None of the choices are correct. 
A) Disposable income inversely influences consumption. 
B) Consumption increases as disposable income increases. 
C) Autonomous consumption changes when people have low incomes. 
D) None of the choices are correct.

Question 6

Aggregate demand is the total quantity of output

Accepted Answer

A) Demanded if the economy is in equilibrium. 
B) Demanded at alternative price levels in a given time period. 
C) Producers are willing and able to supply at alternative price levels. 
D) Consumers actually buy. 
A) Demanded if the economy is in equilibrium. 
B) Demanded at alternative price levels in a given time period. 
C) Producers are willing and able to supply at alternative price levels. 
D) Consumers actually buy.

Question 7

Which of the following will cause the investment demand curve to shift to the right?

Accepted Answer

A) A decrease in interest rates. 
B) A decrease in the cost of labor. 
C) An increase in disposable income. 
D) An improvement in technology. 
A) A decrease in interest rates. 
B) A decrease in the cost of labor. 
C) An increase in disposable income. 
D) An improvement in technology.

Question 8

According to Figure 9.3,which of the following is true?

Accepted Answer

A) Dissaving occurs at disposable income levels above $20 billion. 
B) Consumption is $10 billion when disposable income is zero. 
C) The APC is greater than 1 at disposable income levels above $20 billion. 
D) At a disposable income level of $20 billion,consumption is zero. 
A) Dissaving occurs at disposable income levels above $20 billion. 
B) Consumption is $10 billion when disposable income is zero. 
C) The APC is greater than 1 at disposable income levels above $20 billion. 
D) At a disposable income level of $20 billion,consumption is zero.

Question 9

Table 9.1 $$\begin{array} { | l | c | } 
\hline \begin{array} { c } 
\text { Disposable Income } \
\text { (Billions of dollars per year) }
\end{array} & \begin{array} { c } 
\text { Total Consumption } \
\text { (Billions of dollars per year) }
\end{array} \
\hline \text { \$0 } & \$ 50 \
\hline 200 & 210 \
\hline
\end{array}$$ At which income level does consumption equal income according to the information provided in Table 9.1?

Accepted Answer

A) $150 billion. 
B) $600 billion. 
C) $900 billion. 
D) $250 billion. 
A) $150 billion. 
B) $600 billion. 
C) $900 billion. 
D) $250 billion.

Question 10

Suppose a consumption function is given as C = $150 + 0.75YD.The marginal propensity to save is

Accepted Answer

A) 150. 
B) 0.75. 
C) 0.25. 
D) -0.75. 
A) 150. 
B) 0.75. 
C) 0.25. 
D) -0.75.

Question 11

If the full-employment level of income in Figure 9.7 is $300 billion,there is

Accepted Answer

A) A recessionary gap of $50 billion per year. 
B) A recessionary gap of $100 billion per year. 
C) An inflationary gap of $500 billion per year. 
D) Achievement of macro equilibrium. 
A) A recessionary gap of $50 billion per year. 
B) A recessionary gap of $100 billion per year. 
C) An inflationary gap of $500 billion per year. 
D) Achievement of macro equilibrium.

Question 12

Federal,state and local purchases of goods and services sum to about ________ trillion.

Accepted Answer

A) 4 
B) 12 
C) 3 
D) 7 
A) 4 
B) 12 
C) 3 
D) 7

Question 13

In Figure 9.2,if the consumption function shifts from C1 to C2,it can be determined that the

Accepted Answer

A) MPC and APC have increased at each income level. 
B) MPC and APC have decreased at each income level. 
C) MPC has increased and the APC has stayed the same at each income level. 
D) APC has increased and the MPC has stayed the same at each income level. 
A) MPC and APC have increased at each income level. 
B) MPC and APC have decreased at each income level. 
C) MPC has increased and the APC has stayed the same at each income level. 
D) APC has increased and the MPC has stayed the same at each income level.

Question 14

Investment spending includes expenditures on all of the following except

Accepted Answer

A) Stocks and bonds. 
B) Equipment. 
C) Inventory. 
D) Plants or office buildings. 
A) Stocks and bonds. 
B) Equipment. 
C) Inventory. 
D) Plants or office buildings.

Question 15

The consumption function will shift because of a change in current disposable income.

Accepted Answer

A) True 
 B)False

Question 16

If the economy depicted in Figure 9.9 produced at the full-employment output level of $150 billion instead of the equilibrium output level,inventory levels would

Accepted Answer

A) Remain constant. 
B) Increase by $50 billion. 
C) Increase by $25 billion. 
D) Decrease by $100 billion. 
A) Remain constant. 
B) Increase by $50 billion. 
C) Increase by $25 billion. 
D) Decrease by $100 billion.

Question 17

Refer to Table 9.2.(Data are expressed in billions of dollars. ) Table 9.2
$\begin{array}{|r|r|r|c|c|}
\hline \begin{array}{r}
\text { Full Employment } \
\text { Income (Output) }
\end{array} & \begin{array}{c}
\text { Consumers } \
\text { Desire to Spend }
\end{array} & \begin{array}{c}
\text { Investors Desire } \
\text { to Spend }
\end{array} & \begin{array}{c}
\text { Total Private } \
\text { Spending }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Saving }
\end{array} \
\hline \$ 500 & \$ 300 & \$ 250 & \$ & \$ \
\hline 600 & 375 & 250 & \$ & \$ \
\hline 700 & 450 & 250 & \$ & \$ \
\hline 800 & 525 & 250 & \$ & \$ \
\hline
\end{array}$
 If the full-employment level of income (YF)in Table 9.2 is $700 billion,

Accepted Answer

A) The economy is in equilibrium. 
B) There is a recessionary gap of $250 billion. 
C) There is an inflationary gap of $450 billion. 
D) There is an inflationary gap of $700 billion. 
A) The economy is in equilibrium. 
B) There is a recessionary gap of $250 billion. 
C) There is an inflationary gap of $450 billion. 
D) There is an inflationary gap of $700 billion.

Question 18

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Accepted Answer

A) Reduce employment and buy more machinery. 
B) Reduce employment and buy less machinery. 
C) Increase employment and buy more machinery. 
D) Increase employment and buy less machinery. 
A) Reduce employment and buy more machinery. 
B) Reduce employment and buy less machinery. 
C) Increase employment and buy more machinery. 
D) Increase employment and buy less machinery.

Question 19

Given the information in Figure 9.7,dissaving would occur at all income levels below

Accepted Answer

A) $100 billion per year. 
B) $150 billion per year. 
C) $200 billion per year. 
D) $300 billion per year. 
A) $100 billion per year. 
B) $150 billion per year. 
C) $200 billion per year. 
D) $300 billion per year.

Question 20

According to Keynes,cyclical unemployment is caused by too

Accepted Answer

A) Much aggregate demand. 
B) Little aggregate demand. 
C) Much aggregate supply. 
D) Little aggregate supply. 
A) Much aggregate demand. 
B) Little aggregate demand. 
C) Much aggregate supply. 
D) Little aggregate supply.

Exam 9: Aggregate Demand

The four components of aggregate spending are consumption,saving,imports,and taxes.

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

If the economy depicted in Figure 9.9 produced at a full-employment output level of $50 billion instead of the equilibrium output level,inventory levels would

Using the disposable income level at which the consumption function intersects the 45-degree line,we can identify

The consumption function implies that

Aggregate demand is the total quantity of output

Which of the following will cause the investment demand curve to shift to the right?

According to Figure 9.3,which of the following is true?

Table 9.1 Disposable Income (Billions of dollars per year) Total Consumption (Billions of dollars per year) \0 \ 50 200 210 At which income level does consumption equal income according to the information provided in Table 9.1?

Suppose a consumption function is given as C = $150 + 0.75YD.The marginal propensity to save is

If the full-employment level of income in Figure 9.7 is $300 billion,there is

Federal,state and local purchases of goods and services sum to about ________ trillion.

In Figure 9.2,if the consumption function shifts from C1 to C2,it can be determined that the

Investment spending includes expenditures on all of the following except

The consumption function will shift because of a change in current disposable income.

If the economy depicted in Figure 9.9 produced at the full-employment output level of $150 billion instead of the equilibrium output level,inventory levels would

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Given the information in Figure 9.7,dissaving would occur at all income levels below

According to Keynes,cyclical unemployment is caused by too

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_A,then aggregate demand is

Suppose a consumption function is given as C = $150 + 0.75Y_D.The marginal propensity to save is

In Figure 9.2,if the consumption function shifts from C₁ to C₂,it can be determined that the