Question 1

The equation representing the final demand approach to calculating GDP is

Accepted Answer

A) Y = C + I + X + IM. 
B) Y = C + I + G. 
C) Y = G + I + X − IM. 
D) Y = C+ I + G + (X − IM). 
A) Y = C + I + X + IM. 
B) Y = C + I + G. 
C) Y = G + I + X − IM. 
D) Y = C+ I + G + (X − IM).

Question 2

When aggregate demand decreases rapidly, the economy is likely to experience

Accepted Answer

A) inflation. 
B) an economic boom. 
C) economic growth. 
D) recession. 
A) inflation. 
B) an economic boom. 
C) economic growth. 
D) recession.

Question 3

The most volatile part of wealth is

Accepted Answer

A) transfer payments. 
B) Bonds. 
C) the stockmarket. 
D) savings accounts. 
A) transfer payments. 
B) Bonds. 
C) the stockmarket. 
D) savings accounts.

Question 4

If real interest rates decrease, we generally expect

Accepted Answer

A) saving to increase. 
B) saving to decrease. 
C) consumption spending to decrease. 
D) no significant change in saving. 
A) saving to increase. 
B) saving to decrease. 
C) consumption spending to decrease. 
D) no significant change in saving.

Question 5

Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?

Accepted Answer

A) An increase in corporate income taxes 
B) An increase in real interest rates 
C) An increase in warnings of a coming recession 
D) An increase in tax deductions for investment spending 
A) An increase in corporate income taxes 
B) An increase in real interest rates 
C) An increase in warnings of a coming recession 
D) An increase in tax deductions for investment spending

Question 6

A major employer in a small town announces upcoming major layoffs of employees.What should we expect to happen to the consumption functions of the affected employees?

Accepted Answer

A) The consumption functions will shift upward. 
B) Most employees will move upward along their consumption functions 
C) The consumption functions will shift downward 
D) Most employees will move downward along their consumption functions 
A) The consumption functions will shift upward. 
B) Most employees will move upward along their consumption functions 
C) The consumption functions will shift downward 
D) Most employees will move downward along their consumption functions

Question 7

Disposable income is obtained by

Accepted Answer

A) subtracting personal income taxes from personal income. 
B) subtracting personal income taxes from national income. 
C) adding transfer payments to national income. 
D) adding transfer payments to personal income. 
A) subtracting personal income taxes from personal income. 
B) subtracting personal income taxes from national income. 
C) adding transfer payments to national income. 
D) adding transfer payments to personal income.

Question 8

Based on the relative size of factor payments, the most important resource in the U.S.economy is

Accepted Answer

A) capital. 
B) land. 
C) labor. 
D) natural resources. 
A) capital. 
B) land. 
C) labor. 
D) natural resources.

Question 9

Goods produced that go into inventories are

Accepted Answer

A) not counted in GDP. 
B) only counted in GDP when they are ultimately sold. 
C) counted in GDP even though they are not sold. 
D) counted if they completely depreciate within the calendar year. 
A) not counted in GDP. 
B) only counted in GDP when they are ultimately sold. 
C) counted in GDP even though they are not sold. 
D) counted if they completely depreciate within the calendar year.

Question 10

The value of both exports and imports are added to the value of national product.

Accepted Answer

A) True 
 B)False

Question 11

National income minus personal taxes net of transfer payments equals disposable income.

Accepted Answer

A) True 
 B)False

Question 12

Government transfer payments are income earned by individuals who work for the federal government.

Accepted Answer

A) True 
 B)False

Question 13

The sum of all factor payments in the economy yields

Accepted Answer

A) gross domestic product. 
B) national income. 
C) disposable income. 
D) net domestic product. 
A) gross domestic product. 
B) national income. 
C) disposable income. 
D) net domestic product.

Question 14

Pat Robertson, a TV evangelist and former Republican Party candidate for president, once said that "debt is an affront to God," so good Christians should not spend beyond their incomes.Indeed, Robertson wants Christians to save more.If more Americans, Christians as well as others, took his message seriously, how would we represent the result using a Keynesian macroeconomic model?

Accepted Answer

A) A downward movement along the consumption function 
B) An upward movement along the consumption function 
C) A downward shift of the consumption function 
D) An upward shift of the consumption function 
A) A downward movement along the consumption function 
B) An upward movement along the consumption function 
C) A downward shift of the consumption function 
D) An upward shift of the consumption function

Question 15

Which of the following transactions is excluded from GDP?

Accepted Answer

A) You buy a government bond for $100. 
B) Intel buys a new jet to ferry its workers from its Folsom, CA headquarters to Santa Clara. 
C) The local government spends $500,000 for a new park. 
D) The Brazilian air force buys jets from the U.S.air force. 
A) You buy a government bond for $100. 
B) Intel buys a new jet to ferry its workers from its Folsom, CA headquarters to Santa Clara. 
C) The local government spends $500,000 for a new park. 
D) The Brazilian air force buys jets from the U.S.air force.

Question 16

Table 8-1  
-According to the data in Table 8-1, the value of NNP is

Accepted Answer

A) 900 
B) 805 
C) 750 
D) 705 
A) 900 
B) 805 
C) 750 
D) 705

Question 17

Aggregate demand is the sum of

Accepted Answer

A) C + I + G + (X − IM). 
B) C + I + X. 
C) C + I + X − IM. 
D) C + I + G. 
A) C + I + G + (X − IM). 
B) C + I + X. 
C) C + I + X − IM. 
D) C + I + G.

Question 18

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

Accepted Answer

A) −0.45. 
B) 0.45. 
C) −0.90. 
D) 0.90. 
E) 0.50. 
A) −0.45. 
B) 0.45. 
C) −0.90. 
D) 0.90. 
E) 0.50.

Question 19

Define investment?
The meaning of investment is different for economists.Explain.

Accepted Answer

Investment is an asset or item that is p

Question 20

Which of the following is an example of wealth?

Accepted Answer

A) A yearly salary of $40,000 
B) A mutual fund balance of $1,000 
C) Rental payments of $3,000 per month 
D) Stock dividends of $500 per quarter 
A) A yearly salary of $40,000 
B) A mutual fund balance of $1,000 
C) Rental payments of $3,000 per month 
D) Stock dividends of $500 per quarter

Exam 24: Aggregate Demand and the Powerful Consumer

The equation representing the final demand approach to calculating GDP is

When aggregate demand decreases rapidly, the economy is likely to experience

The most volatile part of wealth is

If real interest rates decrease, we generally expect

Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?

A major employer in a small town announces upcoming major layoffs of employees.What should we expect to happen to the consumption functions of the affected employees?

Disposable income is obtained by

Based on the relative size of factor payments, the most important resource in the U.S.economy is

Goods produced that go into inventories are

The value of both exports and imports are added to the value of national product.

National income minus personal taxes net of transfer payments equals disposable income.

Government transfer payments are income earned by individuals who work for the federal government.

The sum of all factor payments in the economy yields

Which of the following transactions is excluded from GDP?

Table 8-1 -According to the data in Table 8-1, the value of NNP is

Aggregate demand is the sum of

If DI falls by $100 billion, and C falls by $90 billion, the slope of the consumption is

Define investment? The meaning of investment is different for economists.Explain.

Which of the following is an example of wealth?

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

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