Question 1

If autonomous consumption decreases by 50, then:

Accepted Answer

A)  equilibrium Y will decrease to 300, while equilibrium leakages will remain unchanged. 
B)  equilibrium Y will decrease to 300, while equilibrium leakages will also decrease to 90. 
C)  equilibrium Y will remain unchanged at 400, while equilibrium leakages will decrease to 90. 
D)  equilibrium Y will remain unchanged, while equilibrium leakages will also remain unchanged. 
A)  equilibrium Y will decrease to 300, while equilibrium leakages will remain unchanged. 
B)  equilibrium Y will decrease to 300, while equilibrium leakages will also decrease to 90. 
C)  equilibrium Y will remain unchanged at 400, while equilibrium leakages will decrease to 90. 
D)  equilibrium Y will remain unchanged, while equilibrium leakages will also remain unchanged.

Question 2

It is possible for the economy to be in equilibrium but not at full employment.

Accepted Answer

A) True 
 B)False

Question 3

Table 6.3
-Refer to Table 6.3. Which of the following statements is false?

Accepted Answer

A)  The equilibrium NX is 70. 
B)  The equilibrium (S - I) is 70. 
C)  (I - S) is minus 70. 
D)  (I -S) is greater than (Z - X). 
A)  The equilibrium NX is 70. 
B)  The equilibrium (S - I) is 70. 
C)  (I - S) is minus 70. 
D)  (I -S) is greater than (Z - X).

Question 4

C=60+.8Y
I=IS1U1B10S1U1B0=30
X=40
Z=10+0.2Y
-The equilibrium level of income (Y) is:

Accepted Answer

A)  350. 
B)  300. 
C)  200. 
D)  135. 
A)  350. 
B)  300. 
C)  200. 
D)  135.

Question 5

Where I is planned investment, S is saving, and Y is gross domestic product (GDP).
I = IS1U1B10S1U1B0 = 80 (6.3)
S = -80 + .4Y (6.4)
-Refer to equations (6.3) and (6.4). The equilibrium consumption in a private sector closed economy will be:

Accepted Answer

A)  $400. 
B)  $280. 
C)  $320. 
D)  $360. 
A)  $400. 
B)  $280. 
C)  $320. 
D)  $360.

Question 6

The arithmetic value of 1 - MPS equals:

Accepted Answer

A)  the marginal propensity to invest. 
B)  the investment multiplier. 
C)  the marginal propensity to consume. 
D)  the marginal propensity to tax. 
A)  the marginal propensity to invest. 
B)  the investment multiplier. 
C)  the marginal propensity to consume. 
D)  the marginal propensity to tax.

Question 7

In a closed economy without government, the slope of aggregate expenditure curve is determined by the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 8

If the marginal propensity to import is 0.2, each additional dollar of national income adds ____ to planned
________.

Accepted Answer

A)  2 cents, exports 
B)  2 cents, imports 
C)  20 cents, exports 
D)  20 cents, imports 
A)  2 cents, exports 
B)  2 cents, imports 
C)  20 cents, exports 
D)  20 cents, imports

Question 9

Which one of the following statements about household consumption and saving is false?

Accepted Answer

A)  The slope of the consumption function is the marginal propensity to consume. 
B)  Both the marginal propensity to consume and the marginal propensity to save are positive but less than one. 
C)  The marginal propensity to consume becomes negative when aggregate consumption exceeds aggregate income. 
D)  The slope of the savings function is the marginal propensity to save. 
A)  The slope of the consumption function is the marginal propensity to consume. 
B)  Both the marginal propensity to consume and the marginal propensity to save are positive but less than one. 
C)  The marginal propensity to consume becomes negative when aggregate consumption exceeds aggregate income. 
D)  The slope of the savings function is the marginal propensity to save.

Question 10

-The above graph represents a closed private-sector economy. Which of the following statements is false?

Accepted Answer

A)  Autonomous expenditures equal $150 and equilibrium Y is 300. 
B)  MPS is 0.5. 
C)  The slope of the AE line cannot be found from the graph. 
D)  MPC is constant at 0.5. 
A)  Autonomous expenditures equal $150 and equilibrium Y is 300. 
B)  MPS is 0.5. 
C)  The slope of the AE line cannot be found from the graph. 
D)  MPC is constant at 0.5.

Question 11

The value of the multiplier is equal to the inverse of the marginal propensity to save.

Accepted Answer

A) True 
 B)False

Question 12

The equilibrium GDP in a private sector closed model is the level of output:

Accepted Answer

A)  where consumption equals saving. 
B)  where actual investment equals consumption. 
C)  where planned expenditure by households and business equals output 
D)  where full employment exists. 
A)  where consumption equals saving. 
B)  where actual investment equals consumption. 
C)  where planned expenditure by households and business equals output 
D)  where full employment exists.

Question 13

-A build-up of unwanted inventories:

Accepted Answer

A)  occurs when the consumers are saving more than businesses want to invest. 
B)  never occurs in a closed private economy. 
C)  indicates a lack of confidence by consumers. 
D)  will lead to higher income. 
A)  occurs when the consumers are saving more than businesses want to invest. 
B)  never occurs in a closed private economy. 
C)  indicates a lack of confidence by consumers. 
D)  will lead to higher income.

Question 14

-In Figure 6.1:

Accepted Answer

A)  the point A represents autonomous consumption. 
B)  c represents the slope of the line. 
C)  c represents the marginal propensity to consume. 
D)  all of the above 
A)  the point A represents autonomous consumption. 
B)  c represents the slope of the line. 
C)  c represents the marginal propensity to consume. 
D)  all of the above

Question 15

The arithmetic value of 1 - MPC equals:

Accepted Answer

A)  the marginal propensity to invest. 
B)  the investment multiplier. 
C)  the marginal propensity to save. 
D)  the marginal propensity to tax. 
A)  the marginal propensity to invest. 
B)  the investment multiplier. 
C)  the marginal propensity to save. 
D)  the marginal propensity to tax.

Question 16

If the MPC is 0.8 and if Y= C = 1000, then the autonomous consumption is:

Accepted Answer

A)  1000. 
B)  800. 
C)  500. 
D)  200. 
A)  1000. 
B)  800. 
C)  500. 
D)  200.

Question 17

In an open economy, economy's net exports:

Accepted Answer

A)  increase if domestic income increases. 
B)  increase if foreign income increases. 
C)  increase if MPZ increases. 
D)  investment increases. 
A)  increase if domestic income increases. 
B)  increase if foreign income increases. 
C)  increase if MPZ increases. 
D)  investment increases.

Question 18

Which of the following statements about the consumption function is true?

Accepted Answer

A)  The consumption function describes the relationship between aggregate consumption and the price level. 
B)  The consumption function describes the relationship between aggregate consumption and the level of national income. 
C)  The consumption function describes all equilibrium levels of income where aggregate saving and investment are equal. 
D)  The consumption function describes the relationship between aggregate consumption and the wealth. 
A)  The consumption function describes the relationship between aggregate consumption and the price level. 
B)  The consumption function describes the relationship between aggregate consumption and the level of national income. 
C)  The consumption function describes all equilibrium levels of income where aggregate saving and investment are equal. 
D)  The consumption function describes the relationship between aggregate consumption and the wealth.

Question 19

Net exports will increase if imports ____and exports _______.

Accepted Answer

A)  fall, rise 
B)  fall, fall 
C)  rise, rise 
D)  rise, fall 
A)  fall, rise 
B)  fall, fall 
C)  rise, rise 
D)  rise, fall

Question 20

Which one of the following expressions best describes the marginal propensity to consume? The MPC equals:

Accepted Answer

A)  change in consumption/change in income. 
B)  consumption/income. 
C)  change in consumption/income. 
D)  consumption/change in income. 
A)  change in consumption/change in income. 
B)  consumption/income. 
C)  change in consumption/income. 
D)  consumption/change in income.

If autonomous consumption decreases by 50, then:

It is possible for the economy to be in equilibrium but not at full employment.

Table 6.3 -Refer to Table 6.3. Which of the following statements is false?

C=60+.8Y I=I₀=30 X=40 Z=10+0.2Y -The equilibrium level of income (Y) is:

Where I is planned investment, S is saving, and Y is gross domestic product (GDP). I = I₀ = 80 (6.3) S = -80 + .4Y (6.4) -Refer to equations (6.3) and (6.4). The equilibrium consumption in a private sector closed economy will be:

The arithmetic value of 1 - MPS equals:

In a closed economy without government, the slope of aggregate expenditure curve is determined by the slope of the consumption function.

If the marginal propensity to import is 0.2, each additional dollar of national income adds to planned ____.

Which one of the following statements about household consumption and saving is false?

-The above graph represents a closed private-sector economy. Which of the following statements is false?

The value of the multiplier is equal to the inverse of the marginal propensity to save.

The equilibrium GDP in a private sector closed model is the level of output:

-A build-up of unwanted inventories:

-In Figure 6.1:

The arithmetic value of 1 - MPC equals:

If the MPC is 0.8 and if Y= C = 1000, then the autonomous consumption is:

In an open economy, economy's net exports:

Which of the following statements about the consumption function is true?

Net exports will increase if imports and exports ___.

Which one of the following expressions best describes the marginal propensity to consume? The MPC equals:

Introduction to Key Ideas

Theories, Models and Data

The Classical Marketplace Demand and Supply

Economic Activity and Performance

Output, Business Cycles, Growth Employment

The Government Sector

Money, Banking Money Supply

Financial Markets, Interest Rates, Foreign Exchange Rates & AD

Central Banking and Monetary Policy

A Traditional Ad As Model

An AD As Model of the Inflation Rate and Real GDP

Economic Growth

International Macroeconomics

International Trade

Filters

Exam 6: Aggregate Expenditure Aggregate Demand

If autonomous consumption decreases by 50, then:

It is possible for the economy to be in equilibrium but not at full employment.

Table 6.3 -Refer to Table 6.3. Which of the following statements is false?

C=60+.8Y I=I0=30 X=40 Z=10+0.2Y -The equilibrium level of income (Y) is:

Where I is planned investment, S is saving, and Y is gross domestic product (GDP). I = I0 = 80 (6.3) S = -80 + .4Y (6.4) -Refer to equations (6.3) and (6.4). The equilibrium consumption in a private sector closed economy will be:

The arithmetic value of 1 - MPS equals:

In a closed economy without government, the slope of aggregate expenditure curve is determined by the slope of the consumption function.

If the marginal propensity to import is 0.2, each additional dollar of national income adds ____ to planned ________.

Which one of the following statements about household consumption and saving is false?

-The above graph represents a closed private-sector economy. Which of the following statements is false?

The value of the multiplier is equal to the inverse of the marginal propensity to save.

The equilibrium GDP in a private sector closed model is the level of output:

-A build-up of unwanted inventories:

-In Figure 6.1:

The arithmetic value of 1 - MPC equals:

If the MPC is 0.8 and if Y= C = 1000, then the autonomous consumption is:

In an open economy, economy's net exports:

Which of the following statements about the consumption function is true?

Net exports will increase if imports ____and exports _______.

Which one of the following expressions best describes the marginal propensity to consume? The MPC equals:

Introduction to Key Ideas

Theories, Models and Data

The Classical Marketplace Demand and Supply

Economic Activity and Performance

Output, Business Cycles, Growth Employment

The Government Sector

Money, Banking Money Supply

Financial Markets, Interest Rates, Foreign Exchange Rates & AD

Central Banking and Monetary Policy

A Traditional Ad As Model

An AD As Model of the Inflation Rate and Real GDP

Economic Growth

International Macroeconomics

International Trade

Filters

C=60+.8Y I=I₀=30 X=40 Z=10+0.2Y -The equilibrium level of income (Y) is:

Where I is planned investment, S is saving, and Y is gross domestic product (GDP). I = I₀ = 80 (6.3) S = -80 + .4Y (6.4) -Refer to equations (6.3) and (6.4). The equilibrium consumption in a private sector closed economy will be:

If the marginal propensity to import is 0.2, each additional dollar of national income adds to planned ____.

Net exports will increase if imports and exports ___.