Question 1

Suppose a $30 billion increase in government purchases increased GDP by $120 billion,what is the value of the MPC?

Accepted Answer

A)  4.00 
B)  0.75 
C)  0.25 
D)  0.50 
E)  0.33 
A)  4.00 
B)  0.75 
C)  0.25 
D)  0.50 
E)  0.33

Question 2

In the short-run macro model,equilibrium occurs when

Accepted Answer

A)  all of the following conditions are satisfied 
B)  the unintended change in inventories is zero 
C)  total sales equals output 
D)  the aggregate expenditure line intersects the 45-degree line 
E)  GDP equals aggregate expenditure 
A)  all of the following conditions are satisfied 
B)  the unintended change in inventories is zero 
C)  total sales equals output 
D)  the aggregate expenditure line intersects the 45-degree line 
E)  GDP equals aggregate expenditure

Question 3

Real consumption spending is inversely related to

Accepted Answer

A)  real disposable income 
B)  the amount of common stock owned 
C)  the amount of real estate owned 
D)  expectations of future income 
E)  the interest rate 
A)  real disposable income 
B)  the amount of common stock owned 
C)  the amount of real estate owned 
D)  expectations of future income 
E)  the interest rate

Question 4

Suppose the marginal propensity to consume is 0.80 and equilibrium GDP resulting from a change in investment spending falls by -$500 billion.What must have been the initial change in investment spending

Accepted Answer

A)  $100 billion 
B)  -$100 billion 
C)  $500 billion 
D)  -$500 billion 
E)  -$400 billion 
A)  $100 billion 
B)  -$100 billion 
C)  $500 billion 
D)  -$500 billion 
E)  -$400 billion

Question 5

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y₁?

Accepted Answer

A)  It is in recession. 
B)  It is in expansion. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall. 
A)  It is in recession. 
B)  It is in expansion. 
C)  It is in equilibrium,but above full employment. 
D)  It is not in equilibrium,and output will increase. 
E)  It is not in equilibrium,and output will fall.

Question 6

The focus of the short-run macro model is on the role of

Accepted Answer

A)  spending in explaining economic fluctuations 
B)  labor in explaining economic fluctuations 
C)  financial markets in explaining economic fluctuations 
D)  output in explaining economic fluctuations 
E)  resources in explaining economic fluctuations. 
A)  spending in explaining economic fluctuations 
B)  labor in explaining economic fluctuations 
C)  financial markets in explaining economic fluctuations 
D)  output in explaining economic fluctuations 
E)  resources in explaining economic fluctuations.

Question 7

Transfer payments

Accepted Answer

A)  shape the structural deficit 
B)  tend to fall in a recession 
C)  automatically increase when positive spending shocks occur 
D)  transfer jobs to the federal bureaucracy 
E)  automatically decline when positive spending shocks occur. 
A)  shape the structural deficit 
B)  tend to fall in a recession 
C)  automatically increase when positive spending shocks occur 
D)  transfer jobs to the federal bureaucracy 
E)  automatically decline when positive spending shocks occur.

Question 8

If the expenditure multiplier is 3.5 and investment spending increases by $2,000 billion,what will be the change in GDP?

Accepted Answer

A)  $2,000 billion 
B)  $5,000 billion 
C)  $571.4 billion 
D)  $3,500 billion 
E)  $7,000 billion 
A)  $2,000 billion 
B)  $5,000 billion 
C)  $571.4 billion 
D)  $3,500 billion 
E)  $7,000 billion

Question 9

Net exports

Accepted Answer

A)  are the second largest component of total spending 
B)  are already included in measures on consumption,investment,and government spending 
C)  are a source of total spending on U.S.output 
D)  are always positive;i.e. ,total exports always exceed total imports 
E)  are always positive;i.e. ,total imports always exceed total exports 
A)  are the second largest component of total spending 
B)  are already included in measures on consumption,investment,and government spending 
C)  are a source of total spending on U.S.output 
D)  are always positive;i.e. ,total exports always exceed total imports 
E)  are always positive;i.e. ,total imports always exceed total exports

Question 10

The marginal propensity to consume (MPC)is typically

Accepted Answer

A)  less than zero or greater than 1.0 
B)  equal to zero 
C)  equal to 1.0 
D)  between -1.0 and 1.0 
E)  between zero and 1.0 
A)  less than zero or greater than 1.0 
B)  equal to zero 
C)  equal to 1.0 
D)  between -1.0 and 1.0 
E)  between zero and 1.0

Question 11

The marginal propensity to consume tells us the intercept of the consumption function.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an important assumption in the short-run macro model?

Accepted Answer

A)  Government spending depends on income. 
B)  Output does not change. 
C)  Firms do not maintain inventories. 
D)  Investment depends on income. 
E)  Prices do not change. 
A)  Government spending depends on income. 
B)  Output does not change. 
C)  Firms do not maintain inventories. 
D)  Investment depends on income. 
E)  Prices do not change.

Question 13

A recession occurs only if there are two consecutive quarters of declining real GDP.

Accepted Answer

A) True 
 B)False

Question 14

Net exports

Accepted Answer

A)  are equal to total exports minus total imports 
B)  are always positive because total imports exceed total exports 
C)  are always negative because total exports exceed total imports 
D)  always exceed total exports 
E)  include goods produced and sold abroad 
A)  are equal to total exports minus total imports 
B)  are always positive because total imports exceed total exports 
C)  are always negative because total exports exceed total imports 
D)  always exceed total exports 
E)  include goods produced and sold abroad

Question 15

If aggregate expenditure was less than GDP,which of the following would happen?

Accepted Answer

A)  Inventories would shrink and GDP would drop in future periods. 
B)  Inventories would grow and GDP would drop in future periods. 
C)  Inventories would shrink and GDP would increase in future periods. 
D)  Inventories would grow and GDP would increase in future periods. 
E)  Inventories would not change and GDP would drop in future periods. 
A)  Inventories would shrink and GDP would drop in future periods. 
B)  Inventories would grow and GDP would drop in future periods. 
C)  Inventories would shrink and GDP would increase in future periods. 
D)  Inventories would grow and GDP would increase in future periods. 
E)  Inventories would not change and GDP would drop in future periods.

Question 16

If aggregate expenditure exceeds GDP,we expect inventories to shrink and firms to increase production.

Accepted Answer

A) True 
 B)False

Question 17

If investment spending decreases by $500 billion and if MPC = 0.6,

Accepted Answer

A)  equilibrium GDP will rise by $1,250 billion 
B)  equilibrium GDP will fall by $500 billion 
C)  equilibrium GDP will fall by $1,250 billion 
D)  equilibrium GDP will rise by $500 billion 
E)  nothing will happen in the short run 
A)  equilibrium GDP will rise by $1,250 billion 
B)  equilibrium GDP will fall by $500 billion 
C)  equilibrium GDP will fall by $1,250 billion 
D)  equilibrium GDP will rise by $500 billion 
E)  nothing will happen in the short run

Question 18

When finding GDP algebraically,what is the final,unique equation that can be used?

Accepted Answer

A)  GDP = C + Ip + G + NX 
B)  GDP = AE + NX + T 
C)  GDP = C + I + G + NX 
D)  GDP = Y + T + G 
E)  GDP = C + I + NX 
A)  GDP = C + Ip + G + NX 
B)  GDP = AE + NX + T 
C)  GDP = C + I + G + NX 
D)  GDP = Y + T + G 
E)  GDP = C + I + NX

Question 19

Use the table below to find the marginal propensity to consume.

Accepted Answer

A)  the marginal propensity to consume cannot be determined from the information given 
B)  0.4 
C)  0.5 
D)  0.6 
E)  0.8 
A)  the marginal propensity to consume cannot be determined from the information given 
B)  0.4 
C)  0.5 
D)  0.6 
E)  0.8

Question 20

Fiscal policy

Accepted Answer

A)  is dangerous in the short run because it crowds out investment spending 
B)  can change equilibrium GDP in the short run 
C)  can change equilibrium GDP in the long run 
D)  can change equilibrium GDP in both the long and the short run 
E)  is dangerous in the long run because it triggers a multiplier effect 
A)  is dangerous in the short run because it crowds out investment spending 
B)  can change equilibrium GDP in the short run 
C)  can change equilibrium GDP in the long run 
D)  can change equilibrium GDP in both the long and the short run 
E)  is dangerous in the long run because it triggers a multiplier effect

Suppose a $30 billion increase in government purchases increased GDP by $120 billion,what is the value of the MPC?

In the short-run macro model,equilibrium occurs when

Real consumption spending is inversely related to

Suppose the marginal propensity to consume is 0.80 and equilibrium GDP resulting from a change in investment spending falls by -$500 billion.What must have been the initial change in investment spending

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y₁?

The focus of the short-run macro model is on the role of

Transfer payments

If the expenditure multiplier is 3.5 and investment spending increases by $2,000 billion,what will be the change in GDP?

Net exports

The marginal propensity to consume (MPC)is typically

The marginal propensity to consume tells us the intercept of the consumption function.

Which of the following is an important assumption in the short-run macro model?

A recession occurs only if there are two consecutive quarters of declining real GDP.

Net exports

If aggregate expenditure was less than GDP,which of the following would happen?

If aggregate expenditure exceeds GDP,we expect inventories to shrink and firms to increase production.

If investment spending decreases by $500 billion and if MPC = 0.6,

When finding GDP algebraically,what is the final,unique equation that can be used?

Use the table below to find the marginal propensity to consume.

Fiscal policy

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

Suppose a $30 billion increase in government purchases increased GDP by $120 billion,what is the value of the MPC?

In the short-run macro model,equilibrium occurs when

Real consumption spending is inversely related to

Suppose the marginal propensity to consume is 0.80 and equilibrium GDP resulting from a change in investment spending falls by -$500 billion.What must have been the initial change in investment spending

-Refer to Figure 11-8.If YFE represents the full-employment level of output,what can we say about the state of the economy at Y₁?

The focus of the short-run macro model is on the role of

Transfer payments

If the expenditure multiplier is 3.5 and investment spending increases by $2,000 billion,what will be the change in GDP?

Net exports

The marginal propensity to consume (MPC)is typically

The marginal propensity to consume tells us the intercept of the consumption function.

Which of the following is an important assumption in the short-run macro model?

A recession occurs only if there are two consecutive quarters of declining real GDP.

Net exports

If aggregate expenditure was less than GDP,which of the following would happen?

If aggregate expenditure exceeds GDP,we expect inventories to shrink and firms to increase production.

If investment spending decreases by $500 billion and if MPC = 0.6,

When finding GDP algebraically,what is the final,unique equation that can be used?

Use the table below to find the marginal propensity to consume.

Fiscal policy

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