Question 1

A decrease in stock prices alters the consumption function by:

Accepted Answer

A) increasing the slope. 
B) decreasing the slope. 
C) increasing the vertical intercept. 
D) decreasing the vertical intercept. 
A) increasing the slope. 
B) decreasing the slope. 
C) increasing the vertical intercept. 
D) decreasing the vertical intercept.

Question 2

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40.Autonomous expenditure equals:

Accepted Answer

A) 990. 
B) 940. 
C) 900. 
D) 890. 
A) 990. 
B) 940. 
C) 900. 
D) 890.

Question 3

Menu costs are the costs of:

Accepted Answer

A) running a restaurant. 
B) changing prices. 
C) increasing aggregate demand. 
D) changing production. 
A) running a restaurant. 
B) changing prices. 
C) increasing aggregate demand. 
D) changing production.

Question 4

In the Keynesian model, a $5 billion decrease in autonomous planned investment leads to ______ in short-run equilibrium output.

Accepted Answer

A) a $5 billion increase 
B) a greater than $5 billion decrease 
C) no change. 
D) a $5 billion decrease 
A) a $5 billion increase 
B) a greater than $5 billion decrease 
C) no change. 
D) a $5 billion decrease

Question 5

In the Keynesian cross diagram, the 45-degree line represents the short-run equilibrium condition that:

Accepted Answer

A) Y = PAE. 
B) PAE = C + Ip + G + NX. 
C) I Ip. 
D) Y* = Y. 
A) Y = PAE. 
B) PAE = C + Ip + G + NX. 
C) I Ip. 
D) Y* = Y.

Question 6

In the Keynesian model, consumption depends on:

Accepted Answer

A) whether the government has a budget surplus or deficit. 
B) potential output. 
C) the natural rate of unemployment. 
D) disposable income. 
A) whether the government has a budget surplus or deficit. 
B) potential output. 
C) the natural rate of unemployment. 
D) disposable income.

Question 7

For an economy starting at potential output, an increase in autonomous expenditure in the short run results in a(n):

Accepted Answer

A) expansionary output gap. 
B) recessionary output gap. 
C) increase in potential output. 
D) decrease in potential output. 
A) expansionary output gap. 
B) recessionary output gap. 
C) increase in potential output. 
D) decrease in potential output.

Question 8

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20.Autonomous expenditure equals:

Accepted Answer

A) 320. 
B) 320 + 0.25Y. 
C) 290. 
D) 290 + 0.75Y. 
A) 320. 
B) 320 + 0.25Y. 
C) 290. 
D) 290 + 0.75Y.

Question 9

Refer to the figure below.   Based on the Keynesian cross diagram, short-run equilibrium output equals:

Accepted Answer

A) 3,000. 
B) 3,250. 
C) 4,000. 
D) 4,750. 
A) 3,000. 
B) 3,250. 
C) 4,000. 
D) 4,750.

Question 10

An economic expansion in the United States ______ the demand for exports from Mexico resulting in an increase in Mexican autonomous expenditures and a(n) ______ output gap in Mexico.

Accepted Answer

A) reduces; expansionary 
B) increases; expansionary 
C) reduces; recessionary 
D) increases; recessionary 
A) reduces; expansionary 
B) increases; expansionary 
C) reduces; recessionary 
D) increases; recessionary

Question 11

The slope of the consumption function:

Accepted Answer

A) is vertical. 
B) is horizontal. 
C) equals 1. 
D) equals the marginal propensity to consume. 
A) is vertical. 
B) is horizontal. 
C) equals 1. 
D) equals the marginal propensity to consume.

Question 12

Changes in taxes and transfers affect planned spending:

Accepted Answer

A) only when there is an expansionary gap. 
B) autonomously. 
C) directly, by changing induced expenditures. 
D) indirectly, by changing disposable income and, consequently, consumption. 
A) only when there is an expansionary gap. 
B) autonomously. 
C) directly, by changing induced expenditures. 
D) indirectly, by changing disposable income and, consequently, consumption.

Question 13

Autonomous expenditure is the portion of planned aggregate expenditure that:

Accepted Answer

A) equals aggregate output. 
B) equals planned spending. 
C) equals induced expenditure. 
D) is independent of output. 
A) equals aggregate output. 
B) equals planned spending. 
C) equals induced expenditure. 
D) is independent of output.

Question 14

Data on output and planned aggregate expenditure in Macroland are given below.   Based on these data, the short-run equilibrium level of output is:

Accepted Answer

A) 2,000. 
B) 3,200. 
C) 4,100. 
D) 5,000. 
A) 2,000. 
B) 3,200. 
C) 4,100. 
D) 5,000.

Question 15

In the short-run Keynesian model, if the mpc equals 0.8, then to increase planned aggregate spending by $20 billion at any output level, government spending must be increased by ______ or net taxes must be decreased by _____.

Accepted Answer

A) $20 billion; $20 billion 
B) more than $20 billion; more than $20 billion 
C) less than $20 billion; less than $20 billion 
D) $20 billion; more than $20 billion 
A) $20 billion; $20 billion 
B) more than $20 billion; more than $20 billion 
C) less than $20 billion; less than $20 billion 
D) $20 billion; more than $20 billion

Question 16

The recession of 2007-2009 happened in part because, after the housing bubble burst in 2006, disruptions in the financial market made it difficult:

Accepted Answer

A) for government to finance deficit spending. 
B) to fight inflation. 
C) for businesses and consumers to borrow money. 
D) to shift the PAE line downwarD.After the housing bubble burst, many loans went bad and banks and other lenders reduced availability of loans. 
A) for government to finance deficit spending. 
B) to fight inflation. 
C) for businesses and consumers to borrow money. 
D) to shift the PAE line downwarD.After the housing bubble burst, many loans went bad and banks and other lenders reduced availability of loans.

Question 17

The vertical intercept of the consumption function equals ______ and the slope equals _____.

Accepted Answer

A) the mpc; autonomous consumption 
B) autonomous consumption; the mpc 
C) the unplanned component of consumption; the planned component of consumption 
D) the planned component of consumption; the unplanned component of consumption 
A) the mpc; autonomous consumption 
B) autonomous consumption; the mpc 
C) the unplanned component of consumption; the planned component of consumption 
D) the planned component of consumption; the unplanned component of consumption

Question 18

Refer to the figure below.   Based on the figure, when PAE = 400 + 0.5Y, short-run equilibrium output equals:

Accepted Answer

A) 1,200. 
B) 400. 
C) 600. 
D) 800. 
A) 1,200. 
B) 400. 
C) 600. 
D) 800.

Question 19

In the short-run Keynesian model, to close an expansionary gap of $10 billion dollars government purchases must be:

Accepted Answer

A) increased by $10 billion. 
B) decreased by $10 billion. 
C) increased by more than $10 billion. 
D) decreased by less than $10 billion. 
A) increased by $10 billion. 
B) decreased by $10 billion. 
C) increased by more than $10 billion. 
D) decreased by less than $10 billion.

Question 20

Refer to the figure below.   Based on the Keynesian cross diagram, at short-run equilibrium output,

Accepted Answer

A) there is a recessionary gap. 
B) there is an expansionary gap. 
C) output equals potential output. 
D) firms will be producing more than they can sell. 
A) there is a recessionary gap. 
B) there is an expansionary gap. 
C) output equals potential output. 
D) firms will be producing more than they can sell.

A decrease in stock prices alters the consumption function by:

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40.Autonomous expenditure equals:

Menu costs are the costs of:

In the Keynesian model, a $5 billion decrease in autonomous planned investment leads to ______ in short-run equilibrium output.

In the Keynesian cross diagram, the 45-degree line represents the short-run equilibrium condition that:

In the Keynesian model, consumption depends on:

For an economy starting at potential output, an increase in autonomous expenditure in the short run results in a(n):

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20.Autonomous expenditure equals:

Refer to the figure below. Based on the Keynesian cross diagram, short-run equilibrium output equals:

An economic expansion in the United States the demand for exports from Mexico resulting in an increase in Mexican autonomous expenditures and a(n) output gap in Mexico.

The slope of the consumption function:

Changes in taxes and transfers affect planned spending:

Autonomous expenditure is the portion of planned aggregate expenditure that:

Data on output and planned aggregate expenditure in Macroland are given below. Based on these data, the short-run equilibrium level of output is:

In the short-run Keynesian model, if the mpc equals 0.8, then to increase planned aggregate spending by $20 billion at any output level, government spending must be increased by __ or net taxes must be decreased by _.

The recession of 2007-2009 happened in part because, after the housing bubble burst in 2006, disruptions in the financial market made it difficult:

The vertical intercept of the consumption function equals __ and the slope equals _.

Refer to the figure below. Based on the figure, when PAE = 400 + 0.5Y, short-run equilibrium output equals:

In the short-run Keynesian model, to close an expansionary gap of $10 billion dollars government purchases must be:

Refer to the figure below. Based on the Keynesian cross diagram, at short-run equilibrium output,

Thinking Like an Economist

Comparative Advantage

Spending, Income, and GDP

Inflation and the Price Level

Wages and Unemployment

Economic Growth

Saving, Capital Formation, and Financial Markets

Money, Prices, and the Financial System

Short-Term Economic Fluctuations

Monetary Policy and the Federal Reserve

Aggregate Demand, Aggregate Supply, and Business Cycles

Macroeconomic Policy

Exchange Rates, International Trade, and Capital Flows

Filters

Exam 11: Spending, Output, and Fiscal Policy

A decrease in stock prices alters the consumption function by:

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40.Autonomous expenditure equals:

Menu costs are the costs of:

In the Keynesian model, a $5 billion decrease in autonomous planned investment leads to ______ in short-run equilibrium output.

In the Keynesian cross diagram, the 45-degree line represents the short-run equilibrium condition that:

In the Keynesian model, consumption depends on:

For an economy starting at potential output, an increase in autonomous expenditure in the short run results in a(n):

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20.Autonomous expenditure equals:

Refer to the figure below. Based on the Keynesian cross diagram, short-run equilibrium output equals:

An economic expansion in the United States ______ the demand for exports from Mexico resulting in an increase in Mexican autonomous expenditures and a(n) ______ output gap in Mexico.

The slope of the consumption function:

Changes in taxes and transfers affect planned spending:

Autonomous expenditure is the portion of planned aggregate expenditure that:

Data on output and planned aggregate expenditure in Macroland are given below. Based on these data, the short-run equilibrium level of output is:

In the short-run Keynesian model, if the mpc equals 0.8, then to increase planned aggregate spending by $20 billion at any output level, government spending must be increased by ______ or net taxes must be decreased by _____.

The recession of 2007-2009 happened in part because, after the housing bubble burst in 2006, disruptions in the financial market made it difficult:

The vertical intercept of the consumption function equals ______ and the slope equals _____.

Refer to the figure below. Based on the figure, when PAE = 400 + 0.5Y, short-run equilibrium output equals:

In the short-run Keynesian model, to close an expansionary gap of $10 billion dollars government purchases must be:

Refer to the figure below. Based on the Keynesian cross diagram, at short-run equilibrium output,

Thinking Like an Economist

Comparative Advantage

Spending, Income, and GDP

Inflation and the Price Level

Wages and Unemployment

Economic Growth

Saving, Capital Formation, and Financial Markets

Money, Prices, and the Financial System

Short-Term Economic Fluctuations

Monetary Policy and the Federal Reserve

Aggregate Demand, Aggregate Supply, and Business Cycles

Macroeconomic Policy

Exchange Rates, International Trade, and Capital Flows

Filters

An economic expansion in the United States the demand for exports from Mexico resulting in an increase in Mexican autonomous expenditures and a(n) output gap in Mexico.

In the short-run Keynesian model, if the mpc equals 0.8, then to increase planned aggregate spending by $20 billion at any output level, government spending must be increased by __ or net taxes must be decreased by _.

The vertical intercept of the consumption function equals __ and the slope equals _.