Question 1

Refer to the above diagram for a private closed economy.Aggregate saving in this economy will be zero when:

Accepted Answer

A) C + Ig cuts the 45-degree line. 
B) GDP is $180 billion. 
C) GDP is $60 billion. 
D) GDP is also zero. 
A) C + Ig cuts the 45-degree line. 
B) GDP is $180 billion. 
C) GDP is $60 billion. 
D) GDP is also zero.

Question 2

The basic assumption of the Keynesian aggregate expenditures model is that prices are fixed.This assumption is based on the observation that prices did not change sufficiently during:

Accepted Answer

A) the Great Depression. 
B) the financial crisis of 2008-2009. 
C) World War I. 
D) World War II. 
A) the Great Depression. 
B) the financial crisis of 2008-2009. 
C) World War I. 
D) World War II.

Question 3

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.6, what change in aggregate expenditures is needed to achieve full employment?

Accepted Answer

A) a decrease of $24 billion 
B) an increase of $24 billion 
C) a decrease of $16 billion 
D) an increase of $16 billion 
A) a decrease of $24 billion 
B) an increase of $24 billion 
C) a decrease of $16 billion 
D) an increase of $16 billion

Question 4

Actual investment may be defined as:

Accepted Answer

A) gross investment less replacement investment. 
B) the ratio of planned to unplanned investment. 
C) unintended less planned investment. 
D) planned plus unplanned investment. 
A) gross investment less replacement investment. 
B) the ratio of planned to unplanned investment. 
C) unintended less planned investment. 
D) planned plus unplanned investment.

Question 5

In an aggregate expenditures diagram equal increases in government spending and in lump-sum taxes will:

Accepted Answer

A) shift the aggregate expenditures line downward. 
B) shift the aggregate expenditures line upward. 
C) not affect the aggregate expenditures line. 
D) reduce the equilibrium GDP. 
A) shift the aggregate expenditures line downward. 
B) shift the aggregate expenditures line upward. 
C) not affect the aggregate expenditures line. 
D) reduce the equilibrium GDP.

Question 6

The following schedule contains data for a private closed economy.All figures are in billions.Assume that gross investment is $10 billion.   Refer to the above data.If a lump-sum tax of $20 is imposed, the consumption schedule will become:

Accepted Answer

A) Column A 
B) Column B 
C) Column C 
D) Column D 
A) Column A 
B) Column B 
C) Column C 
D) Column D

Question 7

In reality, if a nation imposes tariffs, then the final result will be that net exports and GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 8

If an unplanned increase in business inventories occurs:

Accepted Answer

A) we can expect aggregate production to be unaffected. 
B) we can expect businesses to increase the level of production. 
C) we can expect businesses to lower the level of production. 
D) aggregate expenditures must exceed the domestic output. 
A) we can expect aggregate production to be unaffected. 
B) we can expect businesses to increase the level of production. 
C) we can expect businesses to lower the level of production. 
D) aggregate expenditures must exceed the domestic output.

Question 9

If the MPC is.9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the above diagram.The level of government spending:

Accepted Answer

A) is equal to tax collections at each level of GDP. 
B) is the same at all levels of GDP. 
C) varies inversely with the level of GDP. 
D) varies directly with the level of GDP. 
A) is equal to tax collections at each level of GDP. 
B) is the same at all levels of GDP. 
C) varies inversely with the level of GDP. 
D) varies directly with the level of GDP.

Question 11

Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

Accepted Answer

A) is $60 billion. 
B) is $180 billion. 
C) is between $60 and $180 billion. 
D) cannot be determined from the information given. 
A) is $60 billion. 
B) is $180 billion. 
C) is between $60 and $180 billion. 
D) cannot be determined from the information given.

Question 12

An upward shift of the aggregate expenditures schedule might be caused by:

Accepted Answer

A) a decrease in exports, with no change in imports. 
B) a decrease in imports, with no change in exports. 
C) an increase in exports, with an equal decrease in investment spending. 
D) an increase in imports, with no change in exports. 
A) a decrease in exports, with no change in imports. 
B) a decrease in imports, with no change in exports. 
C) an increase in exports, with an equal decrease in investment spending. 
D) an increase in imports, with no change in exports.

Question 13

Taxes represent:

Accepted Answer

A) a leakage of purchasing power, like saving. 
B) an injection of purchasing power, like investment. 
C) an injection of purchasing power, like government spending. 
D) a leakage of purchasing power, like government spending. 
A) a leakage of purchasing power, like saving. 
B) an injection of purchasing power, like investment. 
C) an injection of purchasing power, like government spending. 
D) a leakage of purchasing power, like government spending.

Question 14

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the:

Accepted Answer

A) saving schedule will shift upward by $5 billion. 
B) consumption schedule will shift downward by $25 billion. 
C) consumption schedule will shift downward by $20 billion. 
D) consumption schedule will shift upward by $25 billion. 
A) saving schedule will shift upward by $5 billion. 
B) consumption schedule will shift downward by $25 billion. 
C) consumption schedule will shift downward by $20 billion. 
D) consumption schedule will shift upward by $25 billion.

Question 15

The Sa + M + T schedule has a negative slope.

Accepted Answer

A) True 
 B)False

Question 16

Refer to the above information.When the real interest rate is 10 percent, unplanned changes in inventories are equal to:

Accepted Answer

A) $40 
B) -$30. 
C) $20 
D) -$60. 
A) $40 
B) -$30. 
C) $20 
D) -$60.

Question 17

The equilibrium level of GDP always coincides with the full-employment GDP.

Accepted Answer

A) True 
 B)False

Question 18

The economy will expand when:

Accepted Answer

A) actual GDP is less than potential GDP. 
B) planned investment exceeds saving. 
C) saving exceeds planned investment. 
D) unplanned investment occurs. 
A) actual GDP is less than potential GDP. 
B) planned investment exceeds saving. 
C) saving exceeds planned investment. 
D) unplanned investment occurs.

Question 19

Refer to the diagram given below.   In the above diagram Ig is gross investment, X is exports, G is government purchases, S and Sa are saving before and after taxes, respectively.M is imports, and T is net taxes, which is taxes less transfers.The effect of the public budget is to:

Accepted Answer

A) lower the equilibrium level of GDP from Y4 to Y2. 
B) raise the equilibrium level of GDP from Y2 to Y4. 
C) lower the equilibrium level of GDP from Y4 to Y3. 
D) raise the equilibrium level of GDP from Y2 to Y3. 
A) lower the equilibrium level of GDP from Y4 to Y2. 
B) raise the equilibrium level of GDP from Y2 to Y4. 
C) lower the equilibrium level of GDP from Y4 to Y3. 
D) raise the equilibrium level of GDP from Y2 to Y3.

Question 20

If the economy is in equilibrium at the $400 billion level of GDP and the full-employment level of GDP is $500 billion:

Accepted Answer

A) real and nominal GDP will both increase. 
B) economy does not reach full-employment unless aggregate expenditures increases. 
C) real GDP will increase, but nominal GDP will decrease. 
D) the price level will increase. 
A) real and nominal GDP will both increase. 
B) economy does not reach full-employment unless aggregate expenditures increases. 
C) real GDP will increase, but nominal GDP will decrease. 
D) the price level will increase.

Exam 11: B: The Aggregate Expenditures Model

Refer to the above diagram for a private closed economy.Aggregate saving in this economy will be zero when:

The basic assumption of the Keynesian aggregate expenditures model is that prices are fixed.This assumption is based on the observation that prices did not change sufficiently during:

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.6, what change in aggregate expenditures is needed to achieve full employment?

Actual investment may be defined as:

In an aggregate expenditures diagram equal increases in government spending and in lump-sum taxes will:

The following schedule contains data for a private closed economy.All figures are in billions.Assume that gross investment is $10 billion. Refer to the above data.If a lump-sum tax of $20 is imposed, the consumption schedule will become:

In reality, if a nation imposes tariffs, then the final result will be that net exports and GDP will decrease.

If an unplanned increase in business inventories occurs:

If the MPC is.9, a $20 billion increase in a lump-sum tax will reduce GDP by $200 billion.

Refer to the above diagram.The level of government spending:

Refer to the above diagram for a private closed economy.The equilibrium level of GDP in this economy:

An upward shift of the aggregate expenditures schedule might be caused by:

Taxes represent:

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the:

The Sa + M + T schedule has a negative slope.

Refer to the above information.When the real interest rate is 10 percent, unplanned changes in inventories are equal to:

The equilibrium level of GDP always coincides with the full-employment GDP.

The economy will expand when:

Refer to the diagram given below. In the above diagram Ig is gross investment, X is exports, G is government purchases, S and Sa are saving before and after taxes, respectively.M is imports, and T is net taxes, which is taxes less transfers.The effect of the public budget is to:

If the economy is in equilibrium at the $400 billion level of GDP and the full-employment level of GDP is $500 billion:

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

The S_a + M + T schedule has a negative slope.

Refer to the diagram given below. In the above diagram I_g is gross investment, X is exports, G is government purchases, S and S_a are saving before and after taxes, respectively.M is imports, and T is net taxes, which is taxes less transfers.The effect of the public budget is to: