Question 1

If the multiplier in an economy is 5, a $20 billion increase in net exports will:

Accepted Answer

A) increase GDP by $100 billion. 
B) reduce GDP by $20 billion. 
C) decrease GDP by $100 billion. 
D) increase GDP by $20 billion. 
A) increase GDP by $100 billion. 
B) reduce GDP by $20 billion. 
C) decrease GDP by $100 billion. 
D) increase GDP by $20 billion. A

Question 2

If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

Accepted Answer

A) True 
 B)False  True

Question 3

In a recessionary expenditure gap, the equilibrium level of real GDP is:

Accepted Answer

A) less than planned investment. 
B) equal to full-employment GDP. 
C) greater than full-employment GDP. 
D) less than full-employment GDP. 
A) less than planned investment. 
B) equal to full-employment GDP. 
C) greater than full-employment GDP. 
D) less than full-employment GDP. D

Question 4

Refer to the above diagram, which applies to a private closed economy.If the initial gross investment Ig1 increases to Ig2, the equilibrium GDP will increase by:

Accepted Answer

A) FE. 
B) AB. 
C) AD. 
D) GE. 
A) FE. 
B) AB. 
C) AD. 
D) GE.

Question 5

The level of aggregate expenditures in the private closed economy is determined by the:

Accepted Answer

A) expenditures of consumers and businesses. 
B) intersection of the saving schedule and the 45-degree line. 
C) equality of the MPC and MPS. 
D) intersection of the saving and consumption schedules. 
A) expenditures of consumers and businesses. 
B) intersection of the saving schedule and the 45-degree line. 
C) equality of the MPC and MPS. 
D) intersection of the saving and consumption schedules.

Question 6

In a mixed closed economy:

Accepted Answer

A) government purchases and saving are injections, while investment and taxes are leakages. 
B) taxes and government purchases are leakages, while investment and saving are injections. 
C) taxes and savings are leakages, while investment and government purchases are injections. 
D) taxes and investment are injections, while saving and government purchases are leakages. 
A) government purchases and saving are injections, while investment and taxes are leakages. 
B) taxes and government purchases are leakages, while investment and saving are injections. 
C) taxes and savings are leakages, while investment and government purchases are injections. 
D) taxes and investment are injections, while saving and government purchases are leakages.

Question 7

Refer to the diagram below.The equilibrium condition for a private closed economy is Ig = S.

Accepted Answer

A) True 
 B)False

Question 8

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy.Planned investment must be:

Accepted Answer

A) $138 billion. 
B) $126 billion. 
C) $38 billion. 
D) $180 billion. 
A) $138 billion. 
B) $126 billion. 
C) $38 billion. 
D) $180 billion.

Question 9

The tax in the above economy is a:

Accepted Answer

A) 10 percent proportional tax. 
B) lump-sum tax of $20. 
C) lump-sum tax of $10. 
D) progressive tax. 
A) 10 percent proportional tax. 
B) lump-sum tax of $20. 
C) lump-sum tax of $10. 
D) progressive tax.

Question 10

Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE3, the:

Accepted Answer

A) inflationary expenditure gap is ed. 
B) inflationary expenditure gap is BC. 
C) recessionary expenditure gap is eg. 
D) economy is in equilibrium, but at less than full employment. 
A) inflationary expenditure gap is ed. 
B) inflationary expenditure gap is BC. 
C) recessionary expenditure gap is eg. 
D) economy is in equilibrium, but at less than full employment.

Question 11

Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

Accepted Answer

A) True 
 B)False

Question 12

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I0 = 30
Refer to the above data.In equilibrium, the level of consumption spending will be:

Accepted Answer

A) 170 
B) 270 
C) 160 
D) 195 
A) 170 
B) 270 
C) 160 
D) 195

Question 13

If APC = .6 and MPC = .7, the immediate impact of an increase in personal taxes of $20 will be to:

Accepted Answer

A) have no effect on consumption. 
B) decrease consumption by $14. 
C) decrease consumption by $12. 
D) increase consumption by $14. 
A) have no effect on consumption. 
B) decrease consumption by $14. 
C) decrease consumption by $12. 
D) increase consumption by $14.

Question 14

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

Accepted Answer

A) is 0.10. 
B) is 10. 
C) is 0.62. 
D) cannot be determined on the basis of the information given. 
A) is 0.10. 
B) is 10. 
C) is 0.62. 
D) cannot be determined on the basis of the information given.

Question 15

The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.C = 26 + .75Y Ig = 60
X = 24
M = 10
The equilibrium level of GDP for the above open economy is:

Accepted Answer

A) $390 
B) $375 
C) $320 
D) $400 
A) $390 
B) $375 
C) $320 
D) $400

Question 16

Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars.   Other things equal, an increase in an economy's exports will:

Accepted Answer

A) lower the marginal propensity to import. 
B) have no effect on domestic GDP because imports will change by an offsetting amount. 
C) decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP. 
D) increase its domestic aggregate expenditures and therefore increase its equilibrium GDP. 
A) lower the marginal propensity to import. 
B) have no effect on domestic GDP because imports will change by an offsetting amount. 
C) decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP. 
D) increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.

Question 17

If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

Accepted Answer

A) economy is in a deep recession. 
B) MPC equals 1. 
C) economy is already operating at full employment. 
D) price level has fallen. 
A) economy is in a deep recession. 
B) MPC equals 1. 
C) economy is already operating at full employment. 
D) price level has fallen.

Question 18

Which of the following statements is incorrect?

Accepted Answer

A) Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes. 
B) Other things unchanged, a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4. 
C) If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a decline in aggregate expenditures of $8 billion. 
D) A government surplus is anti-inflationary; a government deficit is expansionary. 
A) Given the economy's MPS, a $15 billion reduction in government spending will reduce the equilibrium GDP by more than would a $15 billion increase in taxes. 
B) Other things unchanged, a tax reduction of $10 billion will increase the equilibrium GDP by $25 billion when the MPS is 0.4. 
C) If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a decline in aggregate expenditures of $8 billion. 
D) A government surplus is anti-inflationary; a government deficit is expansionary.

Question 19

The table shows a private, open economy.All figures are in billions of dollars.   Refer to the above table.If the marginal propensity to consume in this economy is 0.8, a $10 increase in its net exports would increase its equilibrium real GDP by:

Accepted Answer

A) $25 
B) $50 
C) $100 
D) $200 
A) $25 
B) $50 
C) $100 
D) $200

Question 20

The following information is for a closed economy:   Refer to the above information.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

Accepted Answer

A) will rise to $700. 
B) will rise to $600. 
C) will rise to $500. 
D) may either rise or fall. 
A) will rise to $700. 
B) will rise to $600. 
C) will rise to $500. 
D) may either rise or fall.

Exam 11: B: The Aggregate Expenditures Model

If the multiplier in an economy is 5, a $20 billion increase in net exports will:

If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

In a recessionary expenditure gap, the equilibrium level of real GDP is:

Refer to the above diagram, which applies to a private closed economy.If the initial gross investment Ig1 increases to Ig2, the equilibrium GDP will increase by:

The level of aggregate expenditures in the private closed economy is determined by the:

In a mixed closed economy:

Refer to the diagram below.The equilibrium condition for a private closed economy is Ig = S.

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy.Planned investment must be:

The tax in the above economy is a:

Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE3, the:

Refer to the above diagram.The equilibrium condition for a private open economy is S + M = Ig + X.

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I0 = 30 Refer to the above data.In equilibrium, the level of consumption spending will be:

If APC = .6 and MPC = .7, the immediate impact of an increase in personal taxes of $20 will be to:

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.C = 26 + .75Y Ig = 60 X = 24 M = 10 The equilibrium level of GDP for the above open economy is:

Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars. Other things equal, an increase in an economy's exports will:

If an increase in aggregate expenditures results in no increase in real GDP we can conclude that the:

Which of the following statements is incorrect?

The table shows a private, open economy.All figures are in billions of dollars. Refer to the above table.If the marginal propensity to consume in this economy is 0.8, a $10 increase in its net exports would increase its equilibrium real GDP by:

The following information is for a closed economy: Refer to the above information.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

Filters

Refer to the above diagram, which applies to a private closed economy.If the initial gross investment I_g1 increases to I_g2, the equilibrium GDP will increase by:

Refer to the diagram below.The equilibrium condition for a private closed economy is I_g = S.

Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE₃, the:

Refer to the above diagram.The equilibrium condition for a private open economy is S + M = I_g + X.

The following information is consumption and investment data for a private closed economy.Figures are in billions of dollars.C = 60 + .6Y I = I₀ = 30 Refer to the above data.In equilibrium, the level of consumption spending will be:

The letters Y, C, I_g, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.C = 26 + .75Y I_g = 60 X = 24 M = 10 The equilibrium level of GDP for the above open economy is: