Question 1

The level of aggregate expenditures in the private closed economy is determined by the

Accepted Answer

A)  expenditures of consumers and businesses. 
B)  intersection of the saving schedule and the 45-degree line. 
C)  equality of the MPC and MPS. 
D)  intersection of the saving and consumption schedules. 
A)  expenditures of consumers and businesses. 
B)  intersection of the saving schedule and the 45-degree line. 
C)  equality of the MPC and MPS. 
D)  intersection of the saving and consumption schedules.

Question 2

Refer to the diagrams. Other things equal, an interest rate decrease will

Accepted Answer

A)  shift curve A to the right and shift curve B upward. 
B)  shift curve A to the left and shift curve B downward. 
C)  leave curve A in place but shift curve B downward. 
D)  leave curve A in place but shift curve B upward. 
A)  shift curve A to the right and shift curve B upward. 
B)  shift curve A to the left and shift curve B downward. 
C)  leave curve A in place but shift curve B downward. 
D)  leave curve A in place but shift curve B upward.

Question 3

Refer to the diagram. The sizes of the multipliers associated with changes in investment and government spending in this economy are

Accepted Answer

A)  2.5 and 1.5, respectively. 
B)  3 and 2, respectively. 
C)  both 2.5. 
D)  2 and 3, respectively. 
A)  2.5 and 1.5, respectively. 
B)  3 and 2, respectively. 
C)  both 2.5. 
D)  2 and 3, respectively.

Question 4

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because

Accepted Answer

A)  government spending is more employment intensive than is either consumption or investment spending. 
B)  government spending increases the money supply and a tax reduction does not. 
C)  a portion of a tax cut will be saved. 
D)  taxes vary directly with income. 
A)  government spending is more employment intensive than is either consumption or investment spending. 
B)  government spending increases the money supply and a tax reduction does not. 
C)  a portion of a tax cut will be saved. 
D)  taxes vary directly with income.

Question 5

Other things equal, if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn), GDP will

Accepted Answer

A)  increase by $100 billion. 
B)  increase by less than $100 billion. 
C)  increase by more than $100 billion. 
D)  fall by $100 billion. 
A)  increase by $100 billion. 
B)  increase by less than $100 billion. 
C)  increase by more than $100 billion. 
D)  fall by $100 billion.

Question 6

Refer to the diagram. If ( $$\text { If } \left( C + I _ { g } \right) \text { are the private expenditures in the closed economy and } X _ { n 2 }$$ are the net
Exports in the open economy, we can conclude that

Accepted Answer

A)  exports are negative. 
B)  net exports are positive. 
C)  net exports are negative. 
D)  trade is balanced. 
A)  exports are negative. 
B)  net exports are positive. 
C)  net exports are negative. 
D)  trade is balanced.

Question 7

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy is

Accepted Answer

A)  3. 
B)  4. 
C)  5. 
D)  10. 
A)  3. 
B)  4. 
C)  5. 
D)  10.

Question 8

$$\begin{array} { | c | c | } 
\hline G D P & C \
\hline \$ 140 & \$ 150 \
\hline 180 & 180 \
\hline 220 & 210 \
\hline 260 & 240 \
\hline 300 & 270 \
\hline
\end{array}$$ The accompanying schedule contains data for a private closed economy. All ?gures are in billions. If gross investment is $10 at all levels of GDP, the equilibrium GDP will be

Accepted Answer

A)  $300. 
B)  $260. 
C)  $220. 
D)  $180. 
A)  $300. 
B)  $260. 
C)  $220. 
D)  $180.

Question 9

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

Accepted Answer

A)  $C _ { a } + I _ { g } + X _ { n } + G \text { must exceed GDP. }$ 
B)  planned investment must exceed saving. 
C)  a recessionary expenditure gap must exist. 
D)  saving must exceed planned investment. 
A)  $C _ { a } + I _ { g } + X _ { n } + G \text { must exceed GDP. }$ 
B)  planned investment must exceed saving. 
C)  a recessionary expenditure gap must exist. 
D)  saving must exceed planned investment.

Question 10

Exports have the same effect on the current size of GDP as

Accepted Answer

A)  imports. 
B)  investment. 
C)  taxes. 
D)  saving. 
A)  imports. 
B)  investment. 
C)  taxes. 
D)  saving.

Question 11

If aggregate expenditures exceed GDP 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.

Question 12

The aggregate expenditures model is built upon which of the following assumptions?

Accepted Answer

A)  Prices are ﬁxed. 
B)  The economy is at full employment. 
C)  Prices are fully ﬂexible. 
D)  Government spending policy has no ability to affect the level of output. 
A)  Prices are ﬁxed. 
B)  The economy is at full employment. 
C)  Prices are fully ﬂexible. 
D)  Government spending policy has no ability to affect the level of output.

Question 13

$\begin{array} { l } 
C = 40 + 0.8 \mathrm { Y } \
I _ { g } = 40 \
X = 20 \
M = 30
\end{array}$
(Advanced analysis) The equations give information for a private open economy. The letters $Y , C , I _ { g } , X$, and $M$ stand for GDP, consumption, gross investment, exports, and imports, respectively. Figures are in billions of dollars. International trade in this case

Accepted Answer

A)  has an expansionary effect on GDP. 
B)  has a contractionary effect on GDP. 
C)  has no effect on GDP. 
D)  is causing in?ation in this economy. 
A)  has an expansionary effect on GDP. 
B)  has a contractionary effect on GDP. 
C)  has no effect on GDP. 
D)  is causing in?ation in this economy.

Question 14

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

Accepted Answer

A)  shift upward. 
B)  shift downward. 
C)  not move. (Net exports do not affect aggregate expenditures.) 
D)  become steeper. 
A)  shift upward. 
B)  shift downward. 
C)  not move. (Net exports do not affect aggregate expenditures.) 
D)  become steeper.

Question 15

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \text { Gross Domestic Product } & \text { Consumption } \
\hline \$ 100 & \$ 120 \
\hline 200 & 180 \
\hline 300 & 240 \
\hline 400 & 300 \
\hline 500 & 360 \
\hline
\end{array}\\
\begin{array} { | c | c | } 
\hline \text { Expected Rate of Return } & \text { Amount of Investment } \
\hline 25 \% & \$ 0 \
\hline 20 & 20 \
\hline 15 & 40 \
\hline 10 & 60 \
\hline 5 & 80 \
\hline
\end{array}
\end{array}$$ Refer to the tables of information for a private closed economy. The multiplier for this economy is

Accepted Answer

A)  2. 
B)  2.5. 
C)  3. 
D)  4. 
A)  2. 
B)  2.5. 
C)  3. 
D)  4.

Question 16

Refer to the diagram, which applies to a private closed economy. If gross investment is Ig1, the equilibrium GDP and the level of consumption will be

Accepted Answer

A)  H and HB, respectively. 
B)  J and JI, respectively. 
C)  J and JK, respectively. 
D)  H and HF, respectively. 
A)  H and HB, respectively. 
B)  J and JI, respectively. 
C)  J and JK, respectively. 
D)  H and HF, respectively.

Question 17

Refer to the diagram for a private closed economy. At the equilibrium level of GDP, investment and saving are both

Accepted Answer

A)  $50. 
B)  $100. 
C)  $20. 
D)  $40. 
A)  $50. 
B)  $100. 
C)  $20. 
D)  $40.

Question 18

Refer to the diagram for a private closed economy. The MPC and MPS are

Accepted Answer

A)  0.6 and 0.4, respectively. 
B)  0.7 and 0.3, respectively. 
C)  both 0.5. 
D)  both 0.7. 
A)  0.6 and 0.4, respectively. 
B)  0.7 and 0.3, respectively. 
C)  both 0.5. 
D)  both 0.7.

Question 19

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by

Accepted Answer

A)  $100 billion. 
B)  $50 billion. 
C)  $500 billion. 
D)  $5 billion. 
A)  $100 billion. 
B)  $50 billion. 
C)  $500 billion. 
D)  $5 billion.

Question 20

$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Possible Levels of Domestic Output and } \
\text { Income } ( G D P = D I )
\end{array} & \text { Consumption } \
\hline \$ 320 & \$ 320 \
\hline 330 & 327 \
\hline 340 & 334 \
\hline 350 & 341 \
\hline 360 & 348 \
\hline 370 & 355 \
\hline 380 & 362 \
\hline
\end{array}$$ The table gives data for a private closed economy. The MPS is

Accepted Answer

A)  7/10. 
B)  3/10. 
C)  2/5. 
D)  3/5. 
A)  7/10. 
B)  3/10. 
C)  2/5. 
D)  3/5.

The level of aggregate expenditures in the private closed economy is determined by the

Refer to the diagrams. Other things equal, an interest rate decrease will

Refer to the diagram. The sizes of the multipliers associated with changes in investment and government spending in this economy are

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because

Other things equal, if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn), GDP will

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy is

GDP C \ 140 \ 150 180 180 220 210 260 240 300 270 The accompanying schedule contains data for a private closed economy. All ?gures are in billions. If gross investment is $10 at all levels of GDP, the equilibrium GDP will be

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

Exports have the same effect on the current size of GDP as

If aggregate expenditures exceed GDP in a private closed economy,

The aggregate expenditures model is built upon which of the following assumptions?

C=40+0.8 =40 X=20 M=30 (Advanced analysis) The equations give information for a private open economy. The letters $Y , C , I _ { g } , X$ , and $M$ stand for GDP, consumption, gross investment, exports, and imports, respectively. Figures are in billions of dollars. International trade in this case

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

Gross Domestic Product Consumption \ 100 \ 120 200 180 300 240 400 300 500 360 Expected Rate of Return Amount of Investment 25\% \ 0 20 20 15 40 10 60 5 80 Refer to the tables of information for a private closed economy. The multiplier for this economy is

Refer to the diagram, which applies to a private closed economy. If gross investment is Ig1, the equilibrium GDP and the level of consumption will be

Refer to the diagram for a private closed economy. At the equilibrium level of GDP, investment and saving are both

Refer to the diagram for a private closed economy. The MPC and MPS are

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by

Possible Levels of Domestic Output and Income (GDP=DI) Consumption \ 320 \ 320 330 327 340 334 350 341 360 348 370 355 380 362 The table gives data for a private closed economy. The MPS is

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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Exam 11: The Aggregate Expenditures Model

The level of aggregate expenditures in the private closed economy is determined by the

Refer to the diagrams. Other things equal, an interest rate decrease will

Refer to the diagram. The sizes of the multipliers associated with changes in investment and government spending in this economy are

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because

Other things equal, if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn), GDP will

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy is

GDP C \ 140 \ 150 180 180 220 210 260 240 300 270 The accompanying schedule contains data for a private closed economy. All ?gures are in billions. If gross investment is $10 at all levels of GDP, the equilibrium GDP will be

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

Exports have the same effect on the current size of GDP as

If aggregate expenditures exceed GDP in a private closed economy,

The aggregate expenditures model is built upon which of the following assumptions?

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

Gross Domestic Product Consumption \ 100 \ 120 200 180 300 240 400 300 500 360 Expected Rate of Return Amount of Investment 25\% \ 0 20 20 15 40 10 60 5 80 Refer to the tables of information for a private closed economy. The multiplier for this economy is

Refer to the diagram, which applies to a private closed economy. If gross investment is Ig1, the equilibrium GDP and the level of consumption will be

Refer to the diagram for a private closed economy. At the equilibrium level of GDP, investment and saving are both

Refer to the diagram for a private closed economy. The MPC and MPS are

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by

Possible Levels of Domestic Output and Income (GDP=DI) Consumption \ 320 \ 320 330 327 340 334 350 341 360 348 370 355 380 362 The table gives data for a private closed economy. The MPS is

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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