Question 1

All else being equal, if consumption declines as a share of GDP, then

Accepted Answer

A)  people must be saving less. 
B)  people will consume less in the future. 
C)  there must have been an increase in GDP. 
D)  people will consume more in the future. 
E)  there must have been a decrease in GDP. 
A)  people must be saving less. 
B)  people will consume less in the future. 
C)  there must have been an increase in GDP. 
D)  people will consume more in the future. 
E)  there must have been a decrease in GDP.

Question 2

Which of the following best describes the relationship between real interest rates and net exports?

Accepted Answer

A)  The relationship is positive. 
B)  There is no relationship because both imports and exports are unaffected by real interest rates. 
C)  The relationship is negative. 
D)  It is not possible to determine the relationship between the two because exports are negatively related to interest rates and imports are positively related to real interest rates. 
E)  It is not possible to determine the relationship between the two because exports are positively related to real interest rates and imports are negatively related to real interest rates. 
A)  The relationship is positive. 
B)  There is no relationship because both imports and exports are unaffected by real interest rates. 
C)  The relationship is negative. 
D)  It is not possible to determine the relationship between the two because exports are negatively related to interest rates and imports are positively related to real interest rates. 
E)  It is not possible to determine the relationship between the two because exports are positively related to real interest rates and imports are negatively related to real interest rates.

Question 3

The sum of the consumption, investment, and net exports shares of GDP is called

Accepted Answer

A)  the nongovernment share of GDP. 
B)  the real-economy share of GDP. 
C)  the privately held share of GDP. 
D)  None of these 
A)  the nongovernment share of GDP. 
B)  the real-economy share of GDP. 
C)  the privately held share of GDP. 
D)  None of these

Question 4

If state governments decide to cut both taxes and government spending, what will happen to the national saving rate and interest rates?

Accepted Answer

The effect on the saving rate cannot be

Question 5

If the real interest rate increases and businesses expect that new equipment will significantly reduce their production costs in the future, then the investment share could increase, decrease, or stay the same.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would cause the national saving rate to increase for any given interest rate?

Accepted Answer

A)  An increase in the consumption share of GDP 
B)  A decline in the investment share of GDP 
C)  A decline in the net export share of GDP 
D)  A decline in the government share of GDP 
E)  An increase in the net export share of GDP 
A)  An increase in the consumption share of GDP 
B)  A decline in the investment share of GDP 
C)  A decline in the net export share of GDP 
D)  A decline in the government share of GDP 
E)  An increase in the net export share of GDP

Question 7

If an increase in the mortgage rate causes a decline in new home purchases, the consumption share of GDP will fall.

Accepted Answer

A) True 
 B)False

Question 8

Explain how interest rates affect investment expenditures.

Accepted Answer

Changes in the interest rate affect the

Question 9

Suppose the exchange rate in the year 2010 was 1 euro per dollar, and in 2017 the exchange rate increased to 2 euros per dollar. If the price of a German sweater was 50 euros in both years, the new dollar price in 2017 would be ____ and imports of German sweaters would ____.

Accepted Answer

A)  $25; increase 
B)  $25; decrease 
C)  $100; increase 
D)  $100; decrease 
E)  $50; remain constant 
A)  $25; increase 
B)  $25; decrease 
C)  $100; increase 
D)  $100; decrease 
E)  $50; remain constant

Question 10

The United States currently runs two large deficits, one on its budget account and one on its current account.

Accepted Answer

A) True 
 B)False

Question 11

If GDP increases, then it is possible for all spending shares to increase simultaneously.

Accepted Answer

A) True 
 B)False

Question 12

All else being constant, an increase in the government share of GDP would result in

Accepted Answer

A)  an increase in net exports. 
B)  a higher dollar exchange rate. 
C)  the interest rate remaining constant. 
D)  a lower interest rate. 
E)  a higher interest rate. 
A)  an increase in net exports. 
B)  a higher dollar exchange rate. 
C)  the interest rate remaining constant. 
D)  a lower interest rate. 
E)  a higher interest rate.

Question 13

If the government share of GDP equals 25 percent of GDP and the nongovernment share of GDP equals 85 percent of GDP, then

Accepted Answer

A)  interest rates will increase until the government share of GDP declines to 20 percent. 
B)  nothing will happen unless the government reduces its share of purchases. 
C)  interest rates will decrease, resulting in a decrease in the investment, consumption, and net export shares. 
D)  interest rates will increase, resulting in a decline in the investment, consumption, and net export shares. 
E)  GDP will increase, shrinking each share until the sum of all shares equals 1. 
A)  interest rates will increase until the government share of GDP declines to 20 percent. 
B)  nothing will happen unless the government reduces its share of purchases. 
C)  interest rates will decrease, resulting in a decrease in the investment, consumption, and net export shares. 
D)  interest rates will increase, resulting in a decline in the investment, consumption, and net export shares. 
E)  GDP will increase, shrinking each share until the sum of all shares equals 1.

Question 14

All three nongovernment shares of GDP are negatively related to the interest rate.

Accepted Answer

A) True 
 B)False

Question 15

If the nongovernment share of GDP shifts to the right and the government share of GDP remains constant, then

Accepted Answer

A)  there must be an increase in taxes. 
B)  the dollar exchange rate must weaken. 
C)  there must be a decrease in taxes. 
D)  the interest rate decreases. 
E)  the interest rate increases. 
A)  there must be an increase in taxes. 
B)  the dollar exchange rate must weaken. 
C)  there must be a decrease in taxes. 
D)  the interest rate decreases. 
E)  the interest rate increases.

Question 16

Which of the following is the correct ordering if we want to rank the four spending shares of U.S. GDP in 2015 in descending (from highest to lowest) order?

Accepted Answer

A)  Consumption, government purchases, investment, net exports 
B)  Consumption, investment, government purchases, net exports 
C)  Government purchases, consumption, investment, net exports 
D)  Consumption, government purchases, net exports, investment 
E)  Consumption, investment, net exports, government purchases 
A)  Consumption, government purchases, investment, net exports 
B)  Consumption, investment, government purchases, net exports 
C)  Government purchases, consumption, investment, net exports 
D)  Consumption, government purchases, net exports, investment 
E)  Consumption, investment, net exports, government purchases

Question 17

All else held constant, interest rates will increase if there is an increase in the nongovernment share of GDP.

Accepted Answer

A) True 
 B)False

Question 18

The real interest rate is equal to the nominal interest rate

Accepted Answer

A)  minus the rate of expected inflation. 
B)  plus the rate of expected inflation. 
C)  minus the unemployment rate. 
D)  plus the unemployment rate. 
A)  minus the rate of expected inflation. 
B)  plus the rate of expected inflation. 
C)  minus the unemployment rate. 
D)  plus the unemployment rate.

Question 19

The decline in investment due to an increase in government purchases is called crowding out.

Accepted Answer

A) True 
 B)False

Question 20

The real interest rate affects the incentive to save.

Accepted Answer

A) True 
 B)False

All else being equal, if consumption declines as a share of GDP, then

Which of the following best describes the relationship between real interest rates and net exports?

The sum of the consumption, investment, and net exports shares of GDP is called

If state governments decide to cut both taxes and government spending, what will happen to the national saving rate and interest rates?

If the real interest rate increases and businesses expect that new equipment will significantly reduce their production costs in the future, then the investment share could increase, decrease, or stay the same.

Which of the following would cause the national saving rate to increase for any given interest rate?

If an increase in the mortgage rate causes a decline in new home purchases, the consumption share of GDP will fall.

Explain how interest rates affect investment expenditures.

Suppose the exchange rate in the year 2010 was 1 euro per dollar, and in 2017 the exchange rate increased to 2 euros per dollar. If the price of a German sweater was 50 euros in both years, the new dollar price in 2017 would be and imports of German sweaters would .

The United States currently runs two large deficits, one on its budget account and one on its current account.

If GDP increases, then it is possible for all spending shares to increase simultaneously.

All else being constant, an increase in the government share of GDP would result in

If the government share of GDP equals 25 percent of GDP and the nongovernment share of GDP equals 85 percent of GDP, then

All three nongovernment shares of GDP are negatively related to the interest rate.

If the nongovernment share of GDP shifts to the right and the government share of GDP remains constant, then

Which of the following is the correct ordering if we want to rank the four spending shares of U.S. GDP in 2015 in descending (from highest to lowest) order?

All else held constant, interest rates will increase if there is an increase in the nongovernment share of GDP.

The real interest rate is equal to the nominal interest rate

The decline in investment due to an increase in government purchases is called crowding out.

The real interest rate affects the incentive to save.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth Around the World

International Trade

International Finance

Filters

Exam 7: The Spending Allocation Model

All else being equal, if consumption declines as a share of GDP, then

Which of the following best describes the relationship between real interest rates and net exports?

The sum of the consumption, investment, and net exports shares of GDP is called

If state governments decide to cut both taxes and government spending, what will happen to the national saving rate and interest rates?

If the real interest rate increases and businesses expect that new equipment will significantly reduce their production costs in the future, then the investment share could increase, decrease, or stay the same.

Which of the following would cause the national saving rate to increase for any given interest rate?

If an increase in the mortgage rate causes a decline in new home purchases, the consumption share of GDP will fall.

Explain how interest rates affect investment expenditures.

Suppose the exchange rate in the year 2010 was 1 euro per dollar, and in 2017 the exchange rate increased to 2 euros per dollar. If the price of a German sweater was 50 euros in both years, the new dollar price in 2017 would be ____ and imports of German sweaters would ____.

The United States currently runs two large deficits, one on its budget account and one on its current account.

If GDP increases, then it is possible for all spending shares to increase simultaneously.

All else being constant, an increase in the government share of GDP would result in

If the government share of GDP equals 25 percent of GDP and the nongovernment share of GDP equals 85 percent of GDP, then

All three nongovernment shares of GDP are negatively related to the interest rate.

If the nongovernment share of GDP shifts to the right and the government share of GDP remains constant, then

Which of the following is the correct ordering if we want to rank the four spending shares of U.S. GDP in 2015 in descending (from highest to lowest) order?

All else held constant, interest rates will increase if there is an increase in the nongovernment share of GDP.

The real interest rate is equal to the nominal interest rate

The decline in investment due to an increase in government purchases is called crowding out.

The real interest rate affects the incentive to save.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth Around the World

International Trade

International Finance

Filters

Suppose the exchange rate in the year 2010 was 1 euro per dollar, and in 2017 the exchange rate increased to 2 euros per dollar. If the price of a German sweater was 50 euros in both years, the new dollar price in 2017 would be and imports of German sweaters would .