Question 1

A rise in interest rates will cause

Accepted Answer

A) A decline in investment spending. 
B) A rise in investment spending. 
C) Investment spending to remain constant. 
D) Investment spending to be eliminated from the economy. 
A) A decline in investment spending. 
B) A rise in investment spending. 
C) Investment spending to remain constant. 
D) Investment spending to be eliminated from the economy.

Question 2

A recessionary gap

Accepted Answer

A) Would cause a depletion of inventories. 
B) Would occur if total output were less than aggregate demand. 
C) Is the amount by which the rate of actual spending falls short of full-employment GDP. 
D) Is the amount by which total spending exceeds GDP. 
A) Would cause a depletion of inventories. 
B) Would occur if total output were less than aggregate demand. 
C) Is the amount by which the rate of actual spending falls short of full-employment GDP. 
D) Is the amount by which total spending exceeds GDP.

Question 3

Use the following figure to  answer the questions : Figure9.9
  
- Using Figure 9.9,and assuming the full-employment output level is $50 billion,

Accepted Answer

A) There is an inflationary gap of $50 billion income. 
B) There is a recessionary gap of $50 billion income. 
C) There is an inflationary gap of $25 billion income. 
D) The economy is at macro equilibrium. 
A) There is an inflationary gap of $50 billion income. 
B) There is a recessionary gap of $50 billion income. 
C) There is an inflationary gap of $25 billion income. 
D) The economy is at macro equilibrium.

Question 4

If tax policies become less favorable,then

Accepted Answer

A) The AD curve will not be affected. 
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) The AD curve will not be affected. 
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 5

Use the following figure to  answer the questions : Figure9.9
  
-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.

Question 6

If there is an inflationary gap,then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following lists all the components that are included in aggregate demand?

Accepted Answer

A) Consumption,government spending,net exports,and investment. 
B) Government spending,saving,consumption,and investment. 
C) Investment,imports,exports,consumption,and taxes. 
D) Net exports, government spending, consumption, and transfer payments. 
A) Consumption,government spending,net exports,and investment. 
B) Government spending,saving,consumption,and investment. 
C) Investment,imports,exports,consumption,and taxes. 
D) Net exports, government spending, consumption, and transfer payments.

Question 8

The components of aggregate demand are

Accepted Answer

A) Consumption,government spending,net exports,and investment. 
B) Consumption,exports,imports,and disposable income. 
C) Consumption,inventory,government spending,and disposable income. 
D) Exports, imports, investment, and disposable income. 
A) Consumption,government spending,net exports,and investment. 
B) Consumption,exports,imports,and disposable income. 
C) Consumption,inventory,government spending,and disposable income. 
D) Exports, imports, investment, and disposable income.

Question 9

Use the following table to answer the questions : Table9.2:
  
-Complete Table 9.2.(Data are expressed in billions of dollars. ) Given the information in Table 9.2,saving equals investment at an income 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

Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?

Accepted Answer

A) Inventory accumulation. 
B) Unemployment. 
C) Inflationary gap. 
D) Recessionary gap. 
A) Inventory accumulation. 
B) Unemployment. 
C) Inflationary gap. 
D) Recessionary gap.

Question 11

Which of the following is not a determinant of autonomous consumption?

Accepted Answer

A) Wealth. 
B) Technology. 
C) Tax policy. 
D) Consumer confidence. 
A) Wealth. 
B) Technology. 
C) Tax policy. 
D) Consumer confidence.

Question 12

In a graph with disposable income on the horizontal axis and consumption on the vertical axis,the intersection of the 45-degree line with the

Accepted Answer

A) Consumption function indicates zero saving. 
B) Aggregate spending curve indicates full employment. 
C) Full-employment output indicates equilibrium (macro). 
D) Aggregate demand curve indicates equilibrium. 
A) Consumption function indicates zero saving. 
B) Aggregate spending curve indicates full employment. 
C) Full-employment output indicates equilibrium (macro). 
D) Aggregate demand curve indicates equilibrium.

Question 13

Which of the following statements is not true about the consumption function?

Accepted Answer

A) The equation is written as C = a + bYD. 
B) It indicates the rate of consumer spending that will take place at various disposable income levels. 
C) It indicates that consumption is inversely related to disposable income. 
D) It shows how consumption is influenced by disposable income. 
A) The equation is written as C = a + bYD. 
B) It indicates the rate of consumer spending that will take place at various disposable income levels. 
C) It indicates that consumption is inversely related to disposable income. 
D) It shows how consumption is influenced by disposable income.

Question 14

Which of the following most likely occurs when an inflationary gap exists?

Accepted Answer

A) A bidding war for available goods and services. 
B) More layoffs. 
C) Rising inventories. 
D) Excessive saving. 
A) A bidding war for available goods and services. 
B) More layoffs. 
C) Rising inventories. 
D) Excessive saving.

Question 15

Use the following figure to answer the questions : Figure9.1:
 
-In Figure 9.1,at an income level of $2,000 billion,

Accepted Answer

A) Consumption equals $1,500 billion. 
B) Saving equals $0. 
C) The MPC equals 0.80. 
D) There is dissaving. 
A) Consumption equals $1,500 billion. 
B) Saving equals $0. 
C) The MPC equals 0.80. 
D) There is dissaving.

Question 16

According to Keynesian theory,which of the following is not true at each short-term macro equilibrium?

Accepted Answer

A) The economy may or may not be at full employment. 
B) The aggregate demand curve intersects the aggregate supply curve. 
C) All macroeconomic goals are achieved. 
D) Producers are selling everything they currently produce. 
A) The economy may or may not be at full employment. 
B) The aggregate demand curve intersects the aggregate supply curve. 
C) All macroeconomic goals are achieved. 
D) Producers are selling everything they currently produce.

Question 17

One In the News article titled,"News Release: Personal Income and Outlays" says that personal income increased $20 billion,or 0.17 percent,and consumers are likely to spend more if

Accepted Answer

A) Income increases. 
B) Saving increases. 
C) Interest rates increase. 
D) Taxes increase. 
A) Income increases. 
B) Saving increases. 
C) Interest rates increase. 
D) Taxes increase.

Question 18

Use the following figure to answer the questions : Figure9.1:
  
-Using Figure 9.1,dissaving occurs at all income levels

Accepted Answer

A) Above $2,000 billion. 
B) Above $3,000 billion. 
C) Below $2,000 billion. 
D) Below $3,000 billion. 
A) Above $2,000 billion. 
B) Above $3,000 billion. 
C) Below $2,000 billion. 
D) Below $3,000 billion.

Question 19

The slope of a graph of the consumption function equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 9: Aggregate Demand Appendix: the Keynesian Cross

A rise in interest rates will cause

A recessionary gap

Use the following figure to answer the questions : Figure9.9 - Using Figure 9.9,and assuming the full-employment output level is $50 billion,

If tax policies become less favorable,then

Use the following figure to answer the questions : Figure9.9 -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

If there is an inflationary gap,then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income.

Which of the following lists all the components that are included in aggregate demand?

The components of aggregate demand are

Use the following table to answer the questions : Table9.2: -Complete Table 9.2.(Data are expressed in billions of dollars. ) Given the information in Table 9.2,saving equals investment at an income of

Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?

Which of the following is not a determinant of autonomous consumption?

In a graph with disposable income on the horizontal axis and consumption on the vertical axis,the intersection of the 45-degree line with the

Which of the following statements is not true about the consumption function?

Which of the following most likely occurs when an inflationary gap exists?

Use the following figure to answer the questions : Figure9.1: -In Figure 9.1,at an income level of $2,000 billion,

According to Keynesian theory,which of the following is not true at each short-term macro equilibrium?

One In the News article titled,"News Release: Personal Income and Outlays" says that personal income increased $20 billion,or 0.17 percent,and consumers are likely to spend more if

Use the following figure to answer the questions : Figure9.1: -Using Figure 9.1,dissaving occurs at all income levels

The slope of a graph of the consumption function equals the marginal propensity to consume.

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

Economics: the Core Issues Appendix: Using Graphs

The Us Economy: 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 Appendix: Indifference Curves

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 Glossary Index Reference Tables

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