Question 1

A decrease in domestic national income will cause a ________ the net exports (NX)function.

Accepted Answer

A) movement to the left along 
B) parallel downward shift of 
C) parallel upward shift of 
D) rotation upward in 
E) rotation downward in 
A) movement to the left along 
B) parallel downward shift of 
C) parallel upward shift of 
D) rotation upward in 
E) rotation downward in A

Question 2

Consider the net tax rate,denoted by t.Which of the following correctly defines the net tax rate?

Accepted Answer

A) it is total tax revenue minus transfer payments 
B) it is the sum of the federal income tax rate plus an average of provincial income tax rates 
C) it is the increase in net tax revenue when national income rises by one dollar 
D) it is the sum of all government tax revenues 
E) both A and C are correct 
A) it is total tax revenue minus transfer payments 
B) it is the sum of the federal income tax rate plus an average of provincial income tax rates 
C) it is the increase in net tax revenue when national income rises by one dollar 
D) it is the sum of all government tax revenues 
E) both A and C are correct C

Question 3

The G and T components in the national-income accounts measure purchases and net taxes collected by

Accepted Answer

A) all levels of government. 
B) only provincial governments and the federal government. 
C) only the federal government. 
D) only provincial governments. 
E) only local governments. 
A) all levels of government. 
B) only provincial governments and the federal government. 
C) only the federal government. 
D) only provincial governments. 
E) only local governments. A

Question 4

In our simple macro model with government,which statement is correct regarding the following equation: T = (0.2)Y?

Accepted Answer

A) Total tax revenues are equal to 20% of disposable income. 
B) Total tax revenues are equal to 20% of real GDP. 
C) Net tax revenues are equal to 20% of disposable income. 
D) If national income increases by $1.00,then net tax revenue increases by $0.20. 
E) If total tax revenue increases by $0.20,then national income increases by $1.00. 
A) Total tax revenues are equal to 20% of disposable income. 
B) Total tax revenues are equal to 20% of real GDP. 
C) Net tax revenues are equal to 20% of disposable income. 
D) If national income increases by $1.00,then net tax revenue increases by $0.20. 
E) If total tax revenue increases by $0.20,then national income increases by $1.00.

Question 5

A parallel upward shift in the net export (NX)function can be caused by

Accepted Answer

A) an increase in domestic national income. 
B) an increase in foreign national income. 
C) an increase in domestic prices relative to foreign prices. 
D) a decrease in the Canadian-dollar price of foreign currency. 
E) a decrease in foreign prices relative to domestic prices. 
A) an increase in domestic national income. 
B) an increase in foreign national income. 
C) an increase in domestic prices relative to foreign prices. 
D) a decrease in the Canadian-dollar price of foreign currency. 
E) a decrease in foreign prices relative to domestic prices.

Question 6

Consider the following macro model with demand-determined output: C = 150 + 0.9Yd,Yd= 0.8Y,I = 400,G = 700,T = (0.2)Y,X = 130,IM = (0.08)Y.Equilibrium national income is

Accepted Answer

A) 1380.00. 
B) 1916.67. 
C) 2156.25. 
D) 3833.33. 
E) 4928.57. 
A) 1380.00. 
B) 1916.67. 
C) 2156.25. 
D) 3833.33. 
E) 4928.57.

Question 7

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.Equilibrium national income is

Accepted Answer

A) 1816. 
B) 5750. 
C) 7307. 
D) 7935. 
E) 17 250. 
A) 1816. 
B) 5750. 
C) 7307. 
D) 7935. 
E) 17 250.

Question 8

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Desired consumption expenditure at equilibrium national income is

Accepted Answer

A) 3113.5. 
B) 3307.7. 
C) 3824.6. 
D) 4250. 
E) Not enough information to determine 
A) 3113.5. 
B) 3307.7. 
C) 3824.6. 
D) 4250. 
E) Not enough information to determine

Question 9

If the governmentʹs net tax rate increases,then for a given level of national income disposable income will________ and net tax revenue will ________.

Accepted Answer

A) decrease; decrease 
B) decrease; increase 
C) increase; increase 
D) increase; decrease 
E) not change; increase 
A) decrease; decrease 
B) decrease; increase 
C) increase; increase 
D) increase; decrease 
E) not change; increase

Question 10

Governmentʹs transfer payments to individuals affect desired aggregate expenditure

Accepted Answer

A) directly. 
B) through the consumption function. 
C) through the investment function. 
D) through net exports. 
E) through the governmentʹs budget deficit. 
A) directly. 
B) through the consumption function. 
C) through the investment function. 
D) through net exports. 
E) through the governmentʹs budget deficit.

Question 11

In our simple macro model with government,which statement correctly describes the following equation: YD = (0.75)Y?

Accepted Answer

A) If disposable income increases by $0.75,then national income increases by $1.00 and total tax revenue rises by $0.75. 
B) Net tax revenue is equal to 75% of national income. 
C) If national income increases by $1.00,then disposable income increases by $0.75 and net tax revenue increases by $0.25. 
D) Net tax revenue is equal to 25% of disposable income. 
E) If national income increases by $1.00,then disposable income increases by $0.25 and net tax revenue increases by $0.75. 
A) If disposable income increases by $0.75,then national income increases by $1.00 and total tax revenue rises by $0.75. 
B) Net tax revenue is equal to 75% of national income. 
C) If national income increases by $1.00,then disposable income increases by $0.75 and net tax revenue increases by $0.25. 
D) Net tax revenue is equal to 25% of disposable income. 
E) If national income increases by $1.00,then disposable income increases by $0.25 and net tax revenue increases by $0.75.

Question 12

Consider the governmentʹs budget balance.Suppose G = 300 and the governmentʹs net tax revenue is equal to 0.12Y.The government budget is balanced when Y equals

Accepted Answer

A) 350. 
B) 1000. 
C) 2000. 
D) 2500. 
E) 3600. 
A) 350. 
B) 1000. 
C) 2000. 
D) 2500. 
E) 3600.

Question 13

Consider the governmentʹs budget balance.Suppose G = 2500 and the governmentʹs net tax revenue is equal to 0.2Y.The government budget is balanced when Y equals

Accepted Answer

A) 9500. 
B) 10 500. 
C) 11 500. 
D) 12 500. 
E) 13 500. 
A) 9500. 
B) 10 500. 
C) 11 500. 
D) 12 500. 
E) 13 500.

Question 14

Consider a consumption function in a simple macro model with government and taxes.Given a marginal propensity to consume out of disposable income of 0.8 and a net tax rate of 20% of national income,the marginal propensity to consume out of national income is

Accepted Answer

A) 0.36. 
B) 0.64. 
C) 0.80. 
D) 0.90. 
E) 1.00. 
A) 0.36. 
B) 0.64. 
C) 0.80. 
D) 0.90. 
E) 1.00.

Question 15

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.The vertical intercept of the AE function is

Accepted Answer

A) 60.0. 
B) 210.0. 
C) 300.0. 
D) 414.4. 
E) 560.0. 
A) 60.0. 
B) 210.0. 
C) 300.0. 
D) 414.4. 
E) 560.0.

Question 16

A movement along the net export (NX)function can be caused by a change in

Accepted Answer

A) domestic national income. 
B) foreign national income. 
C) domestic prices. 
D) the exchange rate. 
E) foreign prices. 
A) domestic national income. 
B) foreign national income. 
C) domestic prices. 
D) the exchange rate. 
E) foreign prices.

Question 17

Consider a macro model with demand-determined output.The equations are: C = 150 + 0.8Yd,Yd = Y-T,I = 400,G = 700,T = 0.2Y,X = 130,and IM = 0.14Y.Equilibrium national income in this model is

Accepted Answer

A) 1120. 
B) 1350. 
C) 2240. 
D) 2760. 
E) 5400. 
A) 1120. 
B) 1350. 
C) 2240. 
D) 2760. 
E) 5400.

Question 18

Consider the governmentʹs budget balance.Suppose G = 300 and the governmentʹs net tax revenue is 0.3Y.The government budget is in surplus only when Y is

Accepted Answer

A) less than 350. 
B) less than 1000. 
C) greater than 1000. 
D) greater than 2500. 
E) greater than 3000. 
A) less than 350. 
B) less than 1000. 
C) greater than 1000. 
D) greater than 2500. 
E) greater than 3000.

Question 19

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.A national income of 1200 results in desired aggregate expenditure of

Accepted Answer

A) 560. 
B) 926. 
C) 1004. 
D) 1016. 
E) 1148. 
A) 560. 
B) 926. 
C) 1004. 
D) 1016. 
E) 1148.

Question 20

A rise in domestic prices relative to foreign prices,other things being equal,causes the net export (NX)function to shift ________ and ________.

Accepted Answer

A) upward; become flatter 
B) upward; become steeper 
C) downward; become flatter 
D) downward; keep the same slope 
E) downward; become steeper 
A) upward; become flatter 
B) upward; become steeper 
C) downward; become flatter 
D) downward; keep the same slope 
E) downward; become steeper

Exam 22: Adding Government and Trade to the Simple Macro Model

A decrease in domestic national income will cause a ________ the net exports (NX)function.

Consider the net tax rate,denoted by t.Which of the following correctly defines the net tax rate?

The G and T components in the national-income accounts measure purchases and net taxes collected by

In our simple macro model with government,which statement is correct regarding the following equation: T = (0.2)Y?

A parallel upward shift in the net export (NX)function can be caused by

Consider the following macro model with demand-determined output: C = 150 + 0.9Yd,Yd= 0.8Y,I = 400,G = 700,T = (0.2)Y,X = 130,IM = (0.08)Y.Equilibrium national income is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.Equilibrium national income is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Desired consumption expenditure at equilibrium national income is

If the governmentʹs net tax rate increases,then for a given level of national income disposable income will________ and net tax revenue will ________.

Governmentʹs transfer payments to individuals affect desired aggregate expenditure

In our simple macro model with government,which statement correctly describes the following equation: YD = (0.75)Y?

Consider the governmentʹs budget balance.Suppose G = 300 and the governmentʹs net tax revenue is equal to 0.12Y.The government budget is balanced when Y equals

Consider the governmentʹs budget balance.Suppose G = 2500 and the governmentʹs net tax revenue is equal to 0.2Y.The government budget is balanced when Y equals

Consider a consumption function in a simple macro model with government and taxes.Given a marginal propensity to consume out of disposable income of 0.8 and a net tax rate of 20% of national income,the marginal propensity to consume out of national income is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.The vertical intercept of the AE function is

A movement along the net export (NX)function can be caused by a change in

Consider a macro model with demand-determined output.The equations are: C = 150 + 0.8Yd,Yd = Y-T,I = 400,G = 700,T = 0.2Y,X = 130,and IM = 0.14Y.Equilibrium national income in this model is

Consider the governmentʹs budget balance.Suppose G = 300 and the governmentʹs net tax revenue is 0.3Y.The government budget is in surplus only when Y is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.A national income of 1200 results in desired aggregate expenditure of

A rise in domestic prices relative to foreign prices,other things being equal,causes the net export (NX)function to shift ________ and ________.

Economic Issues and Concepts

Economic Theories, data, and Graphs

Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Exchange Rates and the Balance of Payments

Filters

If the governmentʹs net tax rate increases,then for a given level of national income disposable income will and net tax revenue will .

A rise in domestic prices relative to foreign prices,other things being equal,causes the net export (NX)function to shift and .