Question 1

Use the table below to determine the marginal propensity to save (MPS).

Accepted Answer

A)  0 
B)  0.1 
C)  0.2 
D)  0.5 
E)  1.0 
A)  0 
B)  0.1 
C)  0.2 
D)  0.5 
E)  1.0 B

Question 2

Automatic stabilizers reduce fluctuations in GDP by

Accepted Answer

A)  eliminating spending shocks 
B)  increasing the amount of spending each year 
C)  reducing the additional spending that occurs in each round of the multiplier 
D)  increasing saving 
E)  reducing the need for government involvement in the economy 
A)  eliminating spending shocks 
B)  increasing the amount of spending each year 
C)  reducing the additional spending that occurs in each round of the multiplier 
D)  increasing saving 
E)  reducing the need for government involvement in the economy C

Question 3

-Consider Figure 11-10 above.Equilibrium GDP occurs at

Accepted Answer

A)  $7 trillion 
B)  $8 trillion 
C)  $9 trillion 
D)  $8.6 trillion 
E)  there is insufficient information to accurately answer the question 
A)  $7 trillion 
B)  $8 trillion 
C)  $9 trillion 
D)  $8.6 trillion 
E)  there is insufficient information to accurately answer the question C

Question 4

The short-run macro model

Accepted Answer

A)  relies on the market-clearing assumption 
B)  is used primarily for long-run analysis 
C)  is used primarily for short-run analysis 
D)  focuses on the supply of and demand for resources 
E)  focuses on fluctuations in the financial markets to explain fluctuations in real GDP 
A)  relies on the market-clearing assumption 
B)  is used primarily for long-run analysis 
C)  is used primarily for short-run analysis 
D)  focuses on the supply of and demand for resources 
E)  focuses on fluctuations in the financial markets to explain fluctuations in real GDP

Question 5

Aggregate expenditure will not equal GDP unless

Accepted Answer

A)  next exports are zero. 
B)  transfer payments are zero. 
C)  inventory investment is positive. 
D)  inventory investment is zero. 
E)  inventory investment is negative. 
A)  next exports are zero. 
B)  transfer payments are zero. 
C)  inventory investment is positive. 
D)  inventory investment is zero. 
E)  inventory investment is negative.

Question 6

Which of the following is not true of a recession?

Accepted Answer

A)  The economy is overheated. 
B)  Cyclical unemployment is high. 
C)  Unemployment is caused by insufficient spending. 
D)  If the economy is in equilibrium,the aggregate expenditure line is too low to create an intersection at the full-employment level. 
E)  If employers hired more workers to reduce unemployment,they would be unable to sell all the extra output those workers would produce. 
A)  The economy is overheated. 
B)  Cyclical unemployment is high. 
C)  Unemployment is caused by insufficient spending. 
D)  If the economy is in equilibrium,the aggregate expenditure line is too low to create an intersection at the full-employment level. 
E)  If employers hired more workers to reduce unemployment,they would be unable to sell all the extra output those workers would produce.

Question 7

Which of the following is inversely related to consumption spending?

Accepted Answer

A)  Wealth 
B)  Interest rates 
C)  Disposable income 
D)  Optimism about future income 
E)  None of the above. 
A)  Wealth 
B)  Interest rates 
C)  Disposable income 
D)  Optimism about future income 
E)  None of the above.

Question 8

In the short-run macro model,what is the relationship between income and investment spending?

Accepted Answer

A)  It is positive and stable. 
B)  It is positive but unstable. 
C)  It is negative and stable. 
D)  It is negative but unstable. 
E)  There is no relationship between the two variables. 
A)  It is positive and stable. 
B)  It is positive but unstable. 
C)  It is negative and stable. 
D)  It is negative but unstable. 
E)  There is no relationship between the two variables.

Question 9

-Consider Figure 11-10 above.If the full employment level of output is $9 trillion,which of the following is true?

Accepted Answer

A)  The economy is currently operating at the full employment level 
B)  The economy is currently operating below than the full employment level 
C)  The economy is currently operating above the full employment level 
D)  The economy is operating neither at equilibrium nor full employment 
E)  Prices are rising 
A)  The economy is currently operating at the full employment level 
B)  The economy is currently operating below than the full employment level 
C)  The economy is currently operating above the full employment level 
D)  The economy is operating neither at equilibrium nor full employment 
E)  Prices are rising

Question 10

If the marginal propensity to consume is 0.7,the expenditure multiplier is

Accepted Answer

A)  7.0 
B)  0.7 
C)  3.0 
D)  3.3 
E)  not determinable without additional information. 
A)  7.0 
B)  0.7 
C)  3.0 
D)  3.3 
E)  not determinable without additional information.

Question 11

When unplanned inventory changes are positive,GDP is current at its equilibrium level

Accepted Answer

A) True 
 B)False

Question 12

If we know that the slope of the consumption function is 0.6,then we know that if real disposable income increased by $1,000 billion,real consumption spending would

Accepted Answer

A)  increase by $60 billion 
B)  increase by $1,000 billion 
C)  increase by $600 billion 
D)  increase by $6,000 billion 
E)  decrease by $6 billion 
A)  increase by $60 billion 
B)  increase by $1,000 billion 
C)  increase by $600 billion 
D)  increase by $6,000 billion 
E)  decrease by $6 billion

Question 13

Which of the following would shift the aggregate expenditure line upward?

Accepted Answer

A)  an increase in labor supply 
B)  a decrease in labor demand 
C)  a decrease in government spending 
D)  a decrease in net exports 
E)  an increase in autonomous consumption spending 
A)  an increase in labor supply 
B)  a decrease in labor demand 
C)  a decrease in government spending 
D)  a decrease in net exports 
E)  an increase in autonomous consumption spending

Question 14

If the marginal propensity to consume is 0.6,what is the value of the expenditure multiplier?

Accepted Answer

A)  1.0 
B)  1.6 
C)  2.0 
D)  2.5 
E)  6.0 
A)  1.0 
B)  1.6 
C)  2.0 
D)  2.5 
E)  6.0

Question 15

Use the table below to find autonomous consumption

Accepted Answer

A)  $100 
B)  $50 
C)  $150 
D)  $200 
E)  $1,050 
A)  $100 
B)  $50 
C)  $150 
D)  $200 
E)  $1,050

Question 16

The largest component of aggregate expenditure is

Accepted Answer

A)  consumption spending 
B)  investment spending 
C)  government purchases 
D)  net exports 
E)  a virtual tie between consumption spending and government purchases 
A)  consumption spending 
B)  investment spending 
C)  government purchases 
D)  net exports 
E)  a virtual tie between consumption spending and government purchases

Question 17

In the short-run macro model,firms that sell more than they produce will respond by

Accepted Answer

A)  reducing output 
B)  increasing output 
C)  reducing prices 
D)  raising prices 
E)  not changing production because the market will adjust on its own 
A)  reducing output 
B)  increasing output 
C)  reducing prices 
D)  raising prices 
E)  not changing production because the market will adjust on its own

Question 18

If the interest rate increased,which of the following would occur?

Accepted Answer

A)  Nothing would occur. 
B)  The consumption-income line would shift downward. 
C)  The consumption-income line would shifts upward. 
D)  There would be an rightward movement along the consumption-income line. 
E)  There would be a leftward movement along the consumption-income line. 
A)  Nothing would occur. 
B)  The consumption-income line would shift downward. 
C)  The consumption-income line would shifts upward. 
D)  There would be an rightward movement along the consumption-income line. 
E)  There would be a leftward movement along the consumption-income line.

Question 19

Suppose that after disposable income increases by $500 billion,consumption expenditures increase by $450 billion.Therefore,the marginal propensity to consume would be

Accepted Answer

A)  1.11 
B)  9.00 
C)  0.09 
D)  0.90 
E)  0.82 
A)  1.11 
B)  9.00 
C)  0.09 
D)  0.90 
E)  0.82

Question 20

Which of the following is an equilibrium condition of the short-run macro model?

Accepted Answer

A)  Taxes equal transfers. 
B)  Imports equal exports. 
C)  Aggregate expenditure equals output. 
D)  Consumption spending equals autonomous consumption spending. 
E)  Consumption spending equals investment spending plus government spending. 
A)  Taxes equal transfers. 
B)  Imports equal exports. 
C)  Aggregate expenditure equals output. 
D)  Consumption spending equals autonomous consumption spending. 
E)  Consumption spending equals investment spending plus government spending.

Use the table below to determine the marginal propensity to save (MPS).

Automatic stabilizers reduce fluctuations in GDP by

-Consider Figure 11-10 above.Equilibrium GDP occurs at

The short-run macro model

Aggregate expenditure will not equal GDP unless

Which of the following is not true of a recession?

Which of the following is inversely related to consumption spending?

In the short-run macro model,what is the relationship between income and investment spending?

-Consider Figure 11-10 above.If the full employment level of output is $9 trillion,which of the following is true?

If the marginal propensity to consume is 0.7,the expenditure multiplier is

When unplanned inventory changes are positive,GDP is current at its equilibrium level

If we know that the slope of the consumption function is 0.6,then we know that if real disposable income increased by $1,000 billion,real consumption spending would

Which of the following would shift the aggregate expenditure line upward?

If the marginal propensity to consume is 0.6,what is the value of the expenditure multiplier?

Use the table below to find autonomous consumption

The largest component of aggregate expenditure is

In the short-run macro model,firms that sell more than they produce will respond by

If the interest rate increased,which of the following would occur?

Suppose that after disposable income increases by $500 billion,consumption expenditures increase by $450 billion.Therefore,the marginal propensity to consume would be

Which of the following is an equilibrium condition of the short-run macro model?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 11: The Short-run Macro Model

Use the table below to determine the marginal propensity to save (MPS).

Automatic stabilizers reduce fluctuations in GDP by

-Consider Figure 11-10 above.Equilibrium GDP occurs at

The short-run macro model

Aggregate expenditure will not equal GDP unless

Which of the following is not true of a recession?

Which of the following is inversely related to consumption spending?

In the short-run macro model,what is the relationship between income and investment spending?

-Consider Figure 11-10 above.If the full employment level of output is $9 trillion,which of the following is true?

If the marginal propensity to consume is 0.7,the expenditure multiplier is

When unplanned inventory changes are positive,GDP is current at its equilibrium level

If we know that the slope of the consumption function is 0.6,then we know that if real disposable income increased by $1,000 billion,real consumption spending would

Which of the following would shift the aggregate expenditure line upward?

If the marginal propensity to consume is 0.6,what is the value of the expenditure multiplier?

Use the table below to find autonomous consumption

The largest component of aggregate expenditure is

In the short-run macro model,firms that sell more than they produce will respond by

If the interest rate increased,which of the following would occur?

Suppose that after disposable income increases by $500 billion,consumption expenditures increase by $450 billion.Therefore,the marginal propensity to consume would be

Which of the following is an equilibrium condition of the short-run macro model?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters