Question 1

If government increases lump-sum taxes by $20 billion and the economy's MPC is .6, then the:

Accepted Answer

A) consumption schedule will shift upward by $12 billion. 
B) consumption schedule will shift downward by $12 billion. 
C) equilibrium GDP will increase by $40 billion. 
D) equilibrium GDP will decrease by $12 billion. 
A) consumption schedule will shift upward by $12 billion. 
B) consumption schedule will shift downward by $12 billion. 
C) equilibrium GDP will increase by $40 billion. 
D) equilibrium GDP will decrease by $12 billion.

Question 2

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion at the $280 billion level of domestic output.Thus:

Accepted Answer

A) saving is $10 billion. 
B) unplanned disinvestment of $10 billion will occur. 
C) the MPC is.80. 
D) unplanned investment of $10 billion will occur. 
A) saving is $10 billion. 
B) unplanned disinvestment of $10 billion will occur. 
C) the MPC is.80. 
D) unplanned investment of $10 billion will occur.

Question 3

In a private closed economy (a) the marginal propensity to save is 0.25, (b) consumption equals income when consumption is $120 billion, and (c) the level of investment is $40 billion.What is the equilibrium level of income?

Accepted Answer

A) $280 billion 
B) $320 billion 
C) $262 billion 
D) $198 billion 
A) $280 billion 
B) $320 billion 
C) $262 billion 
D) $198 billion

Question 4

Other things equal, serious recession in the economies of Canada's trading partners will:

Accepted Answer

A) have no perceptible impact on the Canadian economy. 
B) cause inflation in the Canadian economy. 
C) depress real output and employment in the Canadian economy. 
D) stimulate real output and employment in the Canadian economy. 
A) have no perceptible impact on the Canadian economy. 
B) cause inflation in the Canadian economy. 
C) depress real output and employment in the Canadian economy. 
D) stimulate real output and employment in the Canadian economy.

Question 5

In the aggregate expenditures model, equilibrium GDP in a private closed economy is indicated by:

Accepted Answer

A) the equality of saving and planned investment. 
B) the intersection of aggregate expenditures and the 45-degree line. 
C) the absence of unplanned changes in inventories. 
D) all of the above. 
A) the equality of saving and planned investment. 
B) the intersection of aggregate expenditures and the 45-degree line. 
C) the absence of unplanned changes in inventories. 
D) all of the above.

Question 6

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Accepted Answer

A) a rightward shift in the investment-demand schedule. 
B) an $8 billion downshift in the consumption schedule. 
C) a $4 billion upshift in the consumption schedule. 
D) a $12 billion downshift in the consumption schedule. 
A) a rightward shift in the investment-demand schedule. 
B) an $8 billion downshift in the consumption schedule. 
C) a $4 billion upshift in the consumption schedule. 
D) a $12 billion downshift in the consumption schedule.

Question 7

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 saving will be:

Accepted Answer

A) 30 
B) 26 
C) 25 
D) 60 
A) 30 
B) 26 
C) 25 
D) 60

Question 8

A lump-sum tax causes the after-tax consumption schedule:

Accepted Answer

A) and the before-tax consumption schedule to coincide. 
B) to be steeper than the before-tax consumption schedule. 
C) to be flatter than the before-tax consumption schedule. 
D) to be parallel to the before-tax consumption schedule. 
A) and the before-tax consumption schedule to coincide. 
B) to be steeper than the before-tax consumption schedule. 
C) to be flatter than the before-tax consumption schedule. 
D) to be parallel to the before-tax consumption schedule.

Question 9

A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures.

Accepted Answer

A) True 
 B)False

Question 10

The following information is for a closed economy:   Refer to the above information.The introduction of $80 billion of government spending has:

Accepted Answer

A) lowered the multiplier from 2.5 to 2.0. 
B) increased the multiplier from 2.5 to 3.0. 
C) increased the multiplier from 2.0 to 2.5. 
D) had no effect on the size of the multiplier. 
A) lowered the multiplier from 2.5 to 2.0. 
B) increased the multiplier from 2.5 to 3.0. 
C) increased the multiplier from 2.0 to 2.5. 
D) had no effect on the size of the multiplier.

Question 11

The above diagram represents a:

Accepted Answer

A) mixed closed economy. 
B) mixed open economy. 
C) private closed economy. 
D) private open economy. 
A) mixed closed economy. 
B) mixed open economy. 
C) private closed economy. 
D) private open economy.

Question 12

In reality, if a nation imposes tarrifs, then the final result will be that:

Accepted Answer

A) net exports and GDP will increase. 
B) net exports and GDP will decrease. 
C) there will be is no long term effect on net exports and GDP. 
D) there will be a decrease in imports and an increase in GDP. 
A) net exports and GDP will increase. 
B) net exports and GDP will decrease. 
C) there will be is no long term effect on net exports and GDP. 
D) there will be a decrease in imports and an increase in GDP.

Question 13

Refer to the above diagram for a private closed economy.Planned and actual investment will be equal at:

Accepted Answer

A) all levels of GDP below $200. 
B) all levels of GDP above $200. 
C) all levels of GDP between $200 and $600. 
D) $600 only. 
A) all levels of GDP below $200. 
B) all levels of GDP above $200. 
C) all levels of GDP between $200 and $600. 
D) $600 only.

Question 14

If the MPC is.50, all taxes are lump-sum taxes, and the equilibrium GDP is $40 billion below the full-employment GDP, then the size of the recessionary expenditure gap:

Accepted Answer

A) is $40 billion. 
B) is $20 billion. 
C) is $60 billion. 
D) cannot be determined from the information given. 
A) is $40 billion. 
B) is $20 billion. 
C) is $60 billion. 
D) cannot be determined from the information given.

Question 15

Which of the following equations hold true at equilibrium GDP in a private closed economy?

Accepted Answer

A) S = Ig 
B) S - Ig g = 1 
D) S > Ig 
A) S = Ig 
B) S - Ig g = 1 
D) S > Ig

Question 16

Refer to the above information.If the real interest rate is 9 percent, the equilibrium level of GDP will be:

Accepted Answer

A) $600 
B) $500 
C) $400 
D) $300 
A) $600 
B) $500 
C) $400 
D) $300

Question 17

When the public sector is added to the aggregate expenditures model:

Accepted Answer

A) the equilibrium condition becomes G + S = T + Ig + X. 
B) the equilibrium condition becomes G + T = S + Ig + X. 
C) the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP. 
D) we add a new leakage in the form of taxes and a new injection in the form of government spending. 
A) the equilibrium condition becomes G + S = T + Ig + X. 
B) the equilibrium condition becomes G + T = S + Ig + X. 
C) the equilibrium condition becomes Ca + Ig + Xn + G + T = GDP. 
D) we add a new leakage in the form of taxes and a new injection in the form of government spending.

Question 18

Refer to the above diagram for a private closed economy.In this economy investment:

Accepted Answer

A) decreases as GDP increases. 
B) increases as GDP increases. 
C) is $40 billion at all levels of GDP. 
D) is $60 billion at all levels of GDP. 
A) decreases as GDP increases. 
B) increases as GDP increases. 
C) is $40 billion at all levels of GDP. 
D) is $60 billion at all levels of GDP.

Question 19

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 gross investment remains at $10 at all levels of GDP, the after-tax equilibrium level of GDP will be:

Accepted Answer

A) $220 
B) $190 
C) $180 
D) $160 
A) $220 
B) $190 
C) $180 
D) $160

Question 20

In a private closed economy, aggregate expenditures will equal GDP where:

Accepted Answer

A) consumption equals investment. 
B) consumption plus investment equals aggregate expenditures. 
C) planned investment equals saving. 
D) disposable income equals consumption minus saving. 
A) consumption equals investment. 
B) consumption plus investment equals aggregate expenditures. 
C) planned investment equals saving. 
D) disposable income equals consumption minus saving.

Exam 11: B: The Aggregate Expenditures Model

If government increases lump-sum taxes by $20 billion and the economy's MPC is .6, then the:

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion at the $280 billion level of domestic output.Thus:

In a private closed economy (a) the marginal propensity to save is 0.25, (b) consumption equals income when consumption is $120 billion, and (c) the level of investment is $40 billion.What is the equilibrium level of income?

Other things equal, serious recession in the economies of Canada's trading partners will:

In the aggregate expenditures model, equilibrium GDP in a private closed economy is indicated by:

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

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 saving will be:

A lump-sum tax causes the after-tax consumption schedule:

A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures.

The following information is for a closed economy: Refer to the above information.The introduction of $80 billion of government spending has:

The above diagram represents a:

In reality, if a nation imposes tarrifs, then the final result will be that:

Refer to the above diagram for a private closed economy.Planned and actual investment will be equal at:

If the MPC is.50, all taxes are lump-sum taxes, and the equilibrium GDP is $40 billion below the full-employment GDP, then the size of the recessionary expenditure gap:

Which of the following equations hold true at equilibrium GDP in a private closed economy?

Refer to the above information.If the real interest rate is 9 percent, the equilibrium level of GDP will be:

When the public sector is added to the aggregate expenditures model:

Refer to the above diagram for a private closed economy.In this economy investment:

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 gross investment remains at $10 at all levels of GDP, the after-tax equilibrium level of GDP will be:

In a private closed economy, aggregate expenditures will equal GDP where:

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 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 saving will be: