Question 1

Suppose that the economy experiences an unplanned increase in its inventories. Firms will react by:

Accepted Answer

A)  increasing their output and as a result, equilibrium income rises. 
B)  not changing their output because the disequilibrium in inventories will be self-correcting. 
C)  reducing their output and as a result, equilibrium income falls. 
D)  reducing their output with no significant change on equilibrium income. 
A)  increasing their output and as a result, equilibrium income rises. 
B)  not changing their output because the disequilibrium in inventories will be self-correcting. 
C)  reducing their output and as a result, equilibrium income falls. 
D)  reducing their output with no significant change on equilibrium income.

Question 2

In a simple economy with no government and no foreign trade, aggregate income is in equilibrium when:

Accepted Answer

A)  tax revenues equal government spending. 
B)  planned savings equals planned investment. 
C)  planned investment equals planned consumption. 
D)  consumption equals aggregate income. 
A)  tax revenues equal government spending. 
B)  planned savings equals planned investment. 
C)  planned investment equals planned consumption. 
D)  consumption equals aggregate income.

Question 3

-Consider table 6.4 to find equilibrium outcomes and select the true statement from the following statements:

Accepted Answer

A)  Leakages are (S + Z), which is 140. 
B)  Injections are (I+X), which is 130. 
C)  Leakages are (Z + X) and injections are (I+
C) . 
D)  Injections are not equal to leakages. 
A)  Leakages are (S + Z), which is 140. 
B)  Injections are (I+X), which is 130. 
C)  Leakages are (Z + X) and injections are (I+
C) . 
D)  Injections are not equal to leakages.

Question 4

The autonomous expenditure multiplier in an open economy is affected by the:

Accepted Answer

A)  marginal propensity to save. 
B)  marginal propensity to tax. 
C)  marginal propensity to import. 
D)  all of the above. 
A)  marginal propensity to save. 
B)  marginal propensity to tax. 
C)  marginal propensity to import. 
D)  all of the above.

Question 5

In the absence of a government sector, household consumption expenditure is as follows:
  
-The marginal propensity to consume is:

Accepted Answer

A)  0.25. 
B)  0.75. 
C)  0.20. 
D)  0.80. 
A)  0.25. 
B)  0.75. 
C)  0.20. 
D)  0.80.

Question 6

Suppose that the macro economy is in short run equilibrium. We can be sure that the level of:

Accepted Answer

A)  income equals the level of output. 
B)  output equals consumption. 
C)  output equals the level of aggregate expenditure. 
D)  investment equals the level of depreciation. 
A)  income equals the level of output. 
B)  output equals consumption. 
C)  output equals the level of aggregate expenditure. 
D)  investment equals the level of depreciation.

Question 7

The relationship between household saving and the household income is the:

Accepted Answer

A)  consumption function. 
B)  savings function. 
C)  investment function. 
D)  aggregate demand function. 
A)  consumption function. 
B)  savings function. 
C)  investment function. 
D)  aggregate demand function.

Question 8

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment
  
-In a closed economy with no government: (a) the marginal propensity to consume is 0.5, (b) autonomous consumption $60 billion and (c) the level of autonomous investment is $40 billion. What is the equilibrium level of income?

Accepted Answer

A)  $250 billion. 
B)  $300 billion. 
C)  $200 billion. 
D)  $100 billion. 
A)  $250 billion. 
B)  $300 billion. 
C)  $200 billion. 
D)  $100 billion.

Question 9

(a) Suppose the consumption function for a closed economy without government is C = 250 + 0.75Y and planned investment is I = 50. What is the equilibrium level of real GDP?
(b) If business increases planned investment expenditure by 50 to 100, what is the new equilibrium real GDP?
(c) What is the slope of the AE function in this economy and the value of the multiplier?

Accepted Answer

(a) Equilibrium Y = 1200
(b) N

Question 10

One of the early signs that an economy should increase its level of aggregate output is:

Accepted Answer

A)  the willingness of firms to increase their level of investment in plant and equipment. 
B)  a reduction in the overall price level. 
C)  a surplus of consumer goods on the market. 
D)  an unplanned reduction in business inventories. 
A)  the willingness of firms to increase their level of investment in plant and equipment. 
B)  a reduction in the overall price level. 
C)  a surplus of consumer goods on the market. 
D)  an unplanned reduction in business inventories.

Question 11

At the point where the aggregate expenditure line crosses the 45 degree line, planned saving is equal to zero.

Accepted Answer

A) True 
 B)False

Question 12

When households attempt to increase saving but end up by saving no more than before the attempt, they have encountered:

Accepted Answer

A)  their budget constraint. 
B)  their permanent income level. 
C)  the paradox of thrift. 
D)  a personal budget deficit. 
A)  their budget constraint. 
B)  their permanent income level. 
C)  the paradox of thrift. 
D)  a personal budget deficit.

Question 13

Other things equal, serious recessions in Canada's trading partners will:

Accepted Answer

A)  have no perceptible impact on the Canadian economy. 
B)  cause inflation in the Canadian economy. 
C)  lead to lower exports, lower real output and lower employment in the Canadian economy. 
D)  lead to higher domestic consumption in the Canadian economy. 
A)  have no perceptible impact on the Canadian economy. 
B)  cause inflation in the Canadian economy. 
C)  lead to lower exports, lower real output and lower employment in the Canadian economy. 
D)  lead to higher domestic consumption in the Canadian economy.

Question 14

Consider a no government open economy. If the marginal propensity is 0.75 and the marginal propensity to import is 0.15, the multiplier will be:

Accepted Answer

A)  4.0. 
B)  2.5. 
C)  0.15. 
D)  None of the above. 
A)  4.0. 
B)  2.5. 
C)  0.15. 
D)  None of the above.

Question 15

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 GDP in a no-government closed economy will be:

Accepted Answer

A)  $160. 
B)  $400. 
C)  $360. 
D)  $480. 
A)  $160. 
B)  $400. 
C)  $360. 
D)  $480.

Question 16

Other things constant, an increase in households' willingness to save more at every level of income will cause:

Accepted Answer

A)  the consumption function to become flatter because the MPC rises. 
B)  the consumption function to make a downward parallel shift. 
C)  the consumption function to remain stationary but the saving function to shift upward. 
D)  the consumption function to become steeper because the MPC declines. 
A)  the consumption function to become flatter because the MPC rises. 
B)  the consumption function to make a downward parallel shift. 
C)  the consumption function to remain stationary but the saving function to shift upward. 
D)  the consumption function to become steeper because the MPC declines.

Question 17

If S = -60 + 0.25Y and I = I0 = 60, where S is saving, I0 is planned investment, and Y is gross domestic product (GDP), then he equilibrium GDP in a private sector closed economy will be:

Accepted Answer

A)  $200. 
B)  $320. 
C)  $360. 
D)  $480. 
A)  $200. 
B)  $320. 
C)  $360. 
D)  $480.

Question 18

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment
  
-Equilibrium Y (GDP) in a no-government closed economy is:

Accepted Answer

A)  $100. 
B)  $200. 
C)  $300. 
D)  $400. 
A)  $100. 
B)  $200. 
C)  $300. 
D)  $400.

Question 19

Higher is the marginal propensity to import, lower is the net spending on domestic goods, lower is the slope of the AE curve and lower is the multiplier.

Accepted Answer

A) True 
 B)False

Question 20

Induced expenditures do not change with income, but autonomous expenditures do.

Accepted Answer

A) True 
 B)False

Suppose that the economy experiences an unplanned increase in its inventories. Firms will react by:

In a simple economy with no government and no foreign trade, aggregate income is in equilibrium when:

-Consider table 6.4 to find equilibrium outcomes and select the true statement from the following statements:

The autonomous expenditure multiplier in an open economy is affected by the:

In the absence of a government sector, household consumption expenditure is as follows: -The marginal propensity to consume is:

Suppose that the macro economy is in short run equilibrium. We can be sure that the level of:

The relationship between household saving and the household income is the:

One of the early signs that an economy should increase its level of aggregate output is:

At the point where the aggregate expenditure line crosses the 45 degree line, planned saving is equal to zero.

When households attempt to increase saving but end up by saving no more than before the attempt, they have encountered:

Other things equal, serious recessions in Canada's trading partners will:

Consider a no government open economy. If the marginal propensity is 0.75 and the marginal propensity to import is 0.15, the multiplier will be:

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 GDP in a no-government closed economy will be:

Other things constant, an increase in households' willingness to save more at every level of income will cause:

If S = -60 + 0.25Y and I = I₀ = 60, where S is saving, I₀ is planned investment, and Y is gross domestic product (GDP), then he equilibrium GDP in a private sector closed economy will be:

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment -Equilibrium Y (GDP) in a no-government closed economy is:

Higher is the marginal propensity to import, lower is the net spending on domestic goods, lower is the slope of the AE curve and lower is the multiplier.

Induced expenditures do not change with income, but autonomous expenditures do.

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

Suppose that the economy experiences an unplanned increase in its inventories. Firms will react by:

In a simple economy with no government and no foreign trade, aggregate income is in equilibrium when:

-Consider table 6.4 to find equilibrium outcomes and select the true statement from the following statements:

The autonomous expenditure multiplier in an open economy is affected by the:

In the absence of a government sector, household consumption expenditure is as follows: -The marginal propensity to consume is:

Suppose that the macro economy is in short run equilibrium. We can be sure that the level of:

The relationship between household saving and the household income is the:

One of the early signs that an economy should increase its level of aggregate output is:

At the point where the aggregate expenditure line crosses the 45 degree line, planned saving is equal to zero.

When households attempt to increase saving but end up by saving no more than before the attempt, they have encountered:

Other things equal, serious recessions in Canada's trading partners will:

Consider a no government open economy. If the marginal propensity is 0.75 and the marginal propensity to import is 0.15, the multiplier will be:

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 GDP in a no-government closed economy will be:

Other things constant, an increase in households' willingness to save more at every level of income will cause:

If S = -60 + 0.25Y and I = I0 = 60, where S is saving, I0 is planned investment, and Y is gross domestic product (GDP), then he equilibrium GDP in a private sector closed economy will be:

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment -Equilibrium Y (GDP) in a no-government closed economy is:

Higher is the marginal propensity to import, lower is the net spending on domestic goods, lower is the slope of the AE curve and lower is the multiplier.

Induced expenditures do not change with income, but autonomous expenditures do.

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

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 GDP in a no-government closed economy will be:

If S = -60 + 0.25Y and I = I₀ = 60, where S is saving, I₀ is planned investment, and Y is gross domestic product (GDP), then he equilibrium GDP in a private sector closed economy will be: