Question 1

The simple macro model that is considered in Chapters 21 and 22 of the textbook is characterized by

Accepted Answer

A) a given (constant)price level,and equilibrium national income determined by demand and supply. 
B) an endogenous price level,and national income that is solely demand determined. 
C) a given (constant)price level,and national income that is solely demand determined. 
D) an endogenous price level,and equilibrium national income determined by demand and supply. 
E) an open economy with an endogenous exchange rate. 
A) a given (constant)price level,and equilibrium national income determined by demand and supply. 
B) an endogenous price level,and national income that is solely demand determined. 
C) a given (constant)price level,and national income that is solely demand determined. 
D) an endogenous price level,and equilibrium national income determined by demand and supply. 
E) an open economy with an endogenous exchange rate.

Question 2

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.Equilibrium national income is

Accepted Answer

A) 2037.48. 
B) 3615.24. 
C) 4000.00. 
D) 4307.70. 
E) 8000.00. 
A) 2037.48. 
B) 3615.24. 
C) 4000.00. 
D) 4307.70. 
E) 8000.00.

Question 3

The net export (NX)function crosses the horizontal axis at a level of national income where the

Accepted Answer

A) X and IM curves intersect. 
B) X curve reaches the horizontal axis. 
C) IM curve reaches the horizontal axis. 
D) X and IM curves are at their farthest distance apart. 
E) X curve reaches its maximum. 
A) X and IM curves intersect. 
B) X curve reaches the horizontal axis. 
C) IM curve reaches the horizontal axis. 
D) X and IM curves are at their farthest distance apart. 
E) X curve reaches its maximum.

Question 4

Consider the governmentʹs budget balance.Suppose G = 400 and the governmentʹs net tax revenue is 20% of national income (Y).Government saving is negative for all values of Y

Accepted Answer

A) above 10 000. 
B) above 8000. 
C) above 2000. 
D) below 8000. 
E) below 2000. 
A) above 10 000. 
B) above 8000. 
C) above 2000. 
D) below 8000. 
E) below 2000.

Question 5

When economists use the term ʺbudget surplusʺ they are referring to

Accepted Answer

A) net tax revenues minus government purchases. 
B) national income minus transfer payments. 
C) national income minus consumption. 
D) disposable income minus consumption. 
E) net tax revenues minus transfer payments. 
A) net tax revenues minus government purchases. 
B) national income minus transfer payments. 
C) national income minus consumption. 
D) disposable income minus consumption. 
E) net tax revenues minus transfer payments.

Question 6

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.Equilibrium national income is

Accepted Answer

A) 560.00. 
B) 888.89. 
C) 1142.85. 
D) 1302.33. 
E) 1513.50. 
A) 560.00. 
B) 888.89. 
C) 1142.85. 
D) 1302.33. 
E) 1513.50.

Question 7

Suppose that real national income (Y)is equal to 800 and that government purchases are equal to 200.If the governmentʹs net tax revenues are equal to tY,where t is the net tax rate,then what is the value of t necessary for the government to have a balanced budget?

Accepted Answer

A) 20% 
B) 25% 
C) 30% 
D) 35% 
E) 40% 
A) 20% 
B) 25% 
C) 30% 
D) 35% 
E) 40%

Question 8

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

Accepted Answer

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

Question 9

Suppose that the marginal propensity to consume out of disposable income is 0.6 and the marginal propensity to import is 0.14.If the net tax rate is 0.1,then what is the marginal propensity to spend in this economy?

Accepted Answer

A) 0.30 
B) 0.40 
C) 0.46 
D) 0.50 
E) 0.60 
A) 0.30 
B) 0.40 
C) 0.46 
D) 0.50 
E) 0.60

Question 10

In our simple macro model with government and foreign trade, the marginal propensity to consume out of disposable income is ________ whereas the marginal propensity to consume out of national income is ________.

Accepted Answer

A) MPC; MPC(1 - t) 
B) MPC(1 - t); MPC 
C) MPC(1 - t)- m; MPC(1 - t) 
D) MPC; MPC(1 - t)- m 
E) MPC(1 - t); MPC(1 - t)- m 
A) MPC; MPC(1 - t) 
B) MPC(1 - t); MPC 
C) MPC(1 - t)- m; MPC(1 - t) 
D) MPC; MPC(1 - t)- m 
E) MPC(1 - t); MPC(1 - t)- m

Question 11

Consider the governmentʹs budget balance.Suppose G = 300 and the governmentʹs net tax revenue is equal to 0.14Y.When Y = 2000,the government is running a budget

Accepted Answer

A) deficit of 20. 
B) surplus of 20. 
C) balance. 
D) deficit of -20. 
E) surplus of 40. 
A) deficit of 20. 
B) surplus of 20. 
C) balance. 
D) deficit of -20. 
E) surplus of 40.

Question 12

Why are government expenditures such as Old Age Security payments,employment insurance payments,or welfare benefits paid to individuals not considered part of G,the government component of aggregate expenditure?

Accepted Answer

A) These are transfer payments and place no direct demand on Canadaʹs total output. 
B) These payments are directly included as part of C,consumption,because they become consumption expenditure for the recipient. 
C) Since the revenues from which these payments are made did not originate from tax collection,they are not considered part of G. 
D) Since these expenditures are transfers from recipients to taxpayers,they are not included in G. 
E) These payments are included in G only when the payments are made directly by the federal government. 
A) These are transfer payments and place no direct demand on Canadaʹs total output. 
B) These payments are directly included as part of C,consumption,because they become consumption expenditure for the recipient. 
C) Since the revenues from which these payments are made did not originate from tax collection,they are not considered part of G. 
D) Since these expenditures are transfers from recipients to taxpayers,they are not included in G. 
E) These payments are included in G only when the payments are made directly by the federal government.

Question 13

Consider a simple macro model with a constant price level and demand-determined output.The inclusion of government in such a model affects desired aggregate expenditure directly through ________ and indirectly through ________.

Accepted Answer

A) the net taxes; the government purchases of goods and services 
B) the net taxes; its affect on disposable income 
C) the government purchases of goods and services; its effect on net exports 
D) the government purchases of goods and services; its effect on disposable income 
E) the government purchases of goods and services; its effect on investment 
A) the net taxes; the government purchases of goods and services 
B) the net taxes; its affect on disposable income 
C) the government purchases of goods and services; its effect on net exports 
D) the government purchases of goods and services; its effect on disposable income 
E) the government purchases of goods and services; its effect on investment

Question 14

In a simple macro model,it is generally assumed that a countryʹs exports

Accepted Answer

A) and imports are autonomous. 
B) and imports are induced. 
C) are autonomous whereas imports are induced. 
D) are induced whereas imports are autonomous. 
E) are always equal to investment. 
A) and imports are autonomous. 
B) and imports are induced. 
C) are autonomous whereas imports are induced. 
D) are induced whereas imports are autonomous. 
E) are always equal to investment.

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

The simple macro model that is considered in Chapters 21 and 22 of the textbook is characterized by

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.Equilibrium national income is

The net export (NX)function crosses the horizontal axis at a level of national income where the

Consider the governmentʹs budget balance.Suppose G = 400 and the governmentʹs net tax revenue is 20% of national income (Y).Government saving is negative for all values of Y

When economists use the term ʺbudget surplusʺ they are referring to

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.Equilibrium national income is

Suppose that real national income (Y)is equal to 800 and that government purchases are equal to 200.If the governmentʹs net tax revenues are equal to tY,where t is the net tax rate,then what is the value of t necessary for the government to have a balanced budget?

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

Suppose that the marginal propensity to consume out of disposable income is 0.6 and the marginal propensity to import is 0.14.If the net tax rate is 0.1,then what is the marginal propensity to spend in this economy?

In our simple macro model with government and foreign trade, the marginal propensity to consume out of disposable income is ________ whereas the marginal propensity to consume out of national income is ________.

Consider the governmentʹs budget balance.Suppose G = 300 and the governmentʹs net tax revenue is equal to 0.14Y.When Y = 2000,the government is running a budget

Why are government expenditures such as Old Age Security payments,employment insurance payments,or welfare benefits paid to individuals not considered part of G,the government component of aggregate expenditure?

Consider a simple macro model with a constant price level and demand-determined output.The inclusion of government in such a model affects desired aggregate expenditure directly through ________ and indirectly through ________.

In a simple macro model,it is generally assumed that a countryʹs exports

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Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

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How Factor Markets Work

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Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

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The Simplest Short-Run Macro Model

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

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Unemployment Fluctuations and the Nairu

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In our simple macro model with government and foreign trade, the marginal propensity to consume out of disposable income is whereas 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 inclusion of government in such a model affects desired aggregate expenditure directly through and indirectly through .