Question 1

A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax consumption schedule.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following will cause the investment schedule to shift downward?

Accepted Answer

A) an increase in the real interest rate 
B) a decline in wage rates 
C) a significant decline in the real interest rate 
D) a new technological advance which cuts the price of steel by one-half 
A) an increase in the real interest rate 
B) a decline in wage rates 
C) a significant decline in the real interest rate 
D) a new technological advance which cuts the price of steel by one-half

Question 3

Refer to the above diagram where 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, that is, taxes less transfers.The equilibrium level of GDP for this economy is:

Accepted Answer

A) Y4. 
B) Y3. 
C) Y2. 
D) Y1. 
A) Y4. 
B) Y3. 
C) Y2. 
D) Y1.

Question 4

In equilibrium in the above private open economy:

Accepted Answer

A) imports exceed exports. 
B) net exports are a positive amount. 
C) a balance of payments surplus exists. 
D) exports exceed imports. 
A) imports exceed exports. 
B) net exports are a positive amount. 
C) a balance of payments surplus exists. 
D) exports exceed imports.

Question 5

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed, the slope of the economy's aggregate expenditures schedule will be:

Accepted Answer

A) .25. 
B) less than the slope before the imposition of the tax. 
C) greater than the slope before the imposition of the tax. 
D) .75. 
A) .25. 
B) less than the slope before the imposition of the tax. 
C) greater than the slope before the imposition of the tax. 
D) .75.

Question 6

An "inflationary expenditure gap" is the amount by which:

Accepted Answer

A) equilibrium GDP falls short of the full-employment GDP. 
B) aggregate expenditures exceed those just necessary to achieve full-employment GDP. 
C) saving exceeds investment at the full-employment GDP. 
D) aggregate expenditures are less than the full-employment GDP. 
A) equilibrium GDP falls short of the full-employment GDP. 
B) aggregate expenditures exceed those just necessary to achieve full-employment GDP. 
C) saving exceeds investment at the full-employment GDP. 
D) aggregate expenditures are less than the full-employment GDP.

Question 7

The following information is for a closed economy:   Refer to the above information.The addition of a $100 billion lump-sum tax:

Accepted Answer

A) reduces the MPC and increases the multiplier. 
B) increases the MPC and decreases the multiplier. 
C) increases both the MPC and the multiplier. 
D) has no effect on either the MPC or the multiplier. 
A) reduces the MPC and increases the multiplier. 
B) increases the MPC and decreases the multiplier. 
C) increases both the MPC and the multiplier. 
D) has no effect on either the MPC or the multiplier.

Question 8

C = 40 + .8Y _
Ig = Ig = 40
_
X = X = 20
_
M = M = 30
The equilibrium level of GDP = (Y) in the above economy is:

Accepted Answer

A) $200 
B) $245 
C) $320 
D) $350 
A) $200 
B) $245 
C) $320 
D) $350

Question 9

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero.If at the equilibrium income level the public sector's budget shows a surplus:

Accepted Answer

A) Ca + Ig + Xn + G must exceed GDP. 
B) planned investment must exceed saving. 
C) a recessionary expenditure gap must exist. 
D) saving must exceed planned investment. 
A) Ca + Ig + Xn + G must exceed GDP. 
B) planned investment must exceed saving. 
C) a recessionary expenditure gap must exist. 
D) saving must exceed planned investment.

Question 10

Refer to the above diagram.In equilibrium net exports are positive.

Accepted Answer

A) True 
 B)False

Question 11

The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP).Ig = 80 S = -80 + 0.4Y
Refer to the above information.In equilibrium, saving will be:

Accepted Answer

A) $40. 
B) $120. 
C) $60. 
D) $80. 
A) $40. 
B) $120. 
C) $60. 
D) $80.

Question 12

The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars.   Refer to the above table.If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

Accepted Answer

A) $600 
B) $610 
C) $620 
D) $630 
A) $600 
B) $610 
C) $620 
D) $630

Question 13

The marginal propensity to import is:

Accepted Answer

A) the change in imports divided by a change by exports. 
B) the change in imports divided by a change in consumption. 
C) the change in imports divided by a change in GDP. 
D) the change in imports multiplied by a change in GDP. 
A) the change in imports divided by a change by exports. 
B) the change in imports divided by a change in consumption. 
C) the change in imports divided by a change in GDP. 
D) the change in imports multiplied by a change in GDP.

Question 14

Achieving aggregate equilibrium in the economy is indicated by:

Accepted Answer

A) an equality of saving and planned investment. 
B) an equality of aggregate expenditures and domestic output. 
C) the absence of unplanned investment or disinvestment. 
D) all of the above. 
A) an equality of saving and planned investment. 
B) an equality of aggregate expenditures and domestic output. 
C) the absence of unplanned investment or disinvestment. 
D) all of the above.

Question 15

Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

Accepted Answer

A) is expansionary. 
B) is contractionary. 
C) is neutral. 
D) cannot be determined from the information given. 
A) is expansionary. 
B) is contractionary. 
C) is neutral. 
D) cannot be determined from the information given.

Question 16

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

Accepted Answer

A) $400 
B) $300 
C) $250 
D) $375 
A) $400 
B) $300 
C) $250 
D) $375

Question 17

Refer to the above diagram.If (C + Ig) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

Accepted Answer

A) exports are negative. 
B) net exports are positive. 
C) net exports are negative. 
D) exports are positive. 
A) exports are negative. 
B) net exports are positive. 
C) net exports are negative. 
D) exports are positive.

Question 18

Refer to the above diagram for a private closed economy.At the $200 level of GDP:

Accepted Answer

A) consumption will equal GDP. 
B) planned investment will equal saving and unintended investment will be zero. 
C) aggregate expenditures will exceed GDP, causing GDP to rise. 
D) GDP will exceed aggregate expenditures, causing GDP to fall. 
A) consumption will equal GDP. 
B) planned investment will equal saving and unintended investment will be zero. 
C) aggregate expenditures will exceed GDP, causing GDP to rise. 
D) GDP will exceed aggregate expenditures, causing GDP to fall.

Question 19

When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate expenditures schedule:

Accepted Answer

A) exceeds the MPC. 
B) is less than the MPC. 
C) equals the MPS. 
D) equals the MPC. 
A) exceeds the MPC. 
B) is less than the MPC. 
C) equals the MPS. 
D) equals the MPC.

Question 20

If aggregate expenditures exceed the domestic output in a private closed economy:

Accepted Answer

A) leakages will exceed injections. 
B) planned investment will exceed saving. 
C) unplanned investment in inventories will occur. 
D) saving will exceed planned investment. 
A) leakages will exceed injections. 
B) planned investment will exceed saving. 
C) unplanned investment in inventories will occur. 
D) saving will exceed planned investment.

Exam 11: B: The Aggregate Expenditures Model

A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-tax consumption schedule.

Which of the following will cause the investment schedule to shift downward?

Refer to the above diagram where 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, that is, taxes less transfers.The equilibrium level of GDP for this economy is:

In equilibrium in the above private open economy:

If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is imposed, the slope of the economy's aggregate expenditures schedule will be:

An "inflationary expenditure gap" is the amount by which:

The following information is for a closed economy: Refer to the above information.The addition of a $100 billion lump-sum tax:

C = 40 + .8Y _ Ig = Ig = 40 _ X = X = 20 _ M = M = 30 The equilibrium level of GDP = (Y) in the above economy is:

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero.If at the equilibrium income level the public sector's budget shows a surplus:

Refer to the above diagram.In equilibrium net exports are positive.

The following information is for a private closed economy, where Ig is gross investment, S is saving, and Y is gross domestic product (GDP).Ig = 80 S = -80 + 0.4Y Refer to the above information.In equilibrium, saving will be:

The table shows the consumption schedule for a hypothetical economy.All figures are in billions of dollars. Refer to the above table.If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

The marginal propensity to import is:

Achieving aggregate equilibrium in the economy is indicated by:

Refer to the above diagram.The impact of the public sector on the equilibrium GDP:

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

Refer to the above diagram.If (C + Ig) are the private expenditures in the closed economy and Xn2 are the net exports in the open economy:

Refer to the above diagram for a private closed economy.At the $200 level of GDP:

When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate expenditures schedule:

If aggregate expenditures exceed the domestic output in a private closed economy:

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 where 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, that is, taxes less transfers.The equilibrium level of GDP for this economy is:

C = 40 + .8Y _ I_g = I_g = 40 _ X = X = 20 _ M = M = 30 The equilibrium level of GDP = (Y) in the above economy is:

The following information is for a private closed economy, where I_g is gross investment, S is saving, and Y is gross domestic product (GDP).I_g = 80 S = -80 + 0.4Y Refer to the above information.In equilibrium, saving will be:

Refer to the above diagram.If (C + I_g) are the private expenditures in the closed economy and X_n2 are the net exports in the open economy: