Question 1

If the economy is at full employment, inflation will result if:

Accepted Answer

A)  net exports go from a positive to a negative number. 
B)  government purchases and transfers are less than taxes. 
C)  injections into the spending stream exceed leakages from the spending stream. 
D)  expectations of future conditions cause households to delay current purchases. 
A)  net exports go from a positive to a negative number. 
B)  government purchases and transfers are less than taxes. 
C)  injections into the spending stream exceed leakages from the spending stream. 
D)  expectations of future conditions cause households to delay current purchases.

Question 2

Government transfer payments:

Accepted Answer

A)  are income-determined spending. 
B)  are a leakage from the spending stream. 
C)  are a direct injection into the spending stream. 
D)  provide for an injection into the spending stream through households. 
A)  are income-determined spending. 
B)  are a leakage from the spending stream. 
C)  are a direct injection into the spending stream. 
D)  provide for an injection into the spending stream through households.

Question 3

If government purchases increased by $30 billion, investment spending decreased by $20 billion, and 80 percent of additional income was spent on new goods and services, total output would:

Accepted Answer

A)  increase by $8.0 billion. 
B)  increase by $10 billion. 
C)  increase by $20 billion. 
D)  increase by $50 billion. 
A)  increase by $8.0 billion. 
B)  increase by $10 billion. 
C)  increase by $20 billion. 
D)  increase by $50 billion.

Question 4

The multiplier effect:

Accepted Answer

A)  equals the change in total spending divided by the change in total output. 
B)  is larger the greater the portion of total spending going toward the purchase of imports. 
C)  allows for an increase, but not a decrease, in total output and income since wages and other incomes tend not to fall. 
D)  refers to the fact that a change in nonincome-determined spending leads to a larger change in total output and employment. 
A)  equals the change in total spending divided by the change in total output. 
B)  is larger the greater the portion of total spending going toward the purchase of imports. 
C)  allows for an increase, but not a decrease, in total output and income since wages and other incomes tend not to fall. 
D)  refers to the fact that a change in nonincome-determined spending leads to a larger change in total output and employment.

Question 5

Fiscal policy involves:

Accepted Answer

A)  taxes. 
B)  transfer payments. 
C)  government purchases. 
D)  all of the above. 
A)  taxes. 
B)  transfer payments. 
C)  government purchases. 
D)  all of the above.

Question 6

Why does a change in non-income-determined spending lead to a larger change in the economy's levels of output and employment?

Accepted Answer

Non-income-determined spending increases

Question 7

The expectation of inflation has no effect on the overall level of prices.

Accepted Answer

A) True 
 B)False

Question 8

The federal government attempts to control business cycles because:

Accepted Answer

A)  increases in economic activity could lead to inflation. 
B)  decreases in economic activity lead to reduced output. 
C)  decreases in economic activity lead to higher unemployment. 
D)  all of the above. 
A)  increases in economic activity could lead to inflation. 
B)  decreases in economic activity lead to reduced output. 
C)  decreases in economic activity lead to higher unemployment. 
D)  all of the above.

Question 9

Which of the following statements is true?

Accepted Answer

A)  Tax payments to the government are leakages from the spending stream. 
B)  Government purchases of goods and services are direct injections into the spending stream. 
C)  Transfer payments from government to households are a source of injections into the spending stream. 
D)  All of the above. 
A)  Tax payments to the government are leakages from the spending stream. 
B)  Government purchases of goods and services are direct injections into the spending stream. 
C)  Transfer payments from government to households are a source of injections into the spending stream. 
D)  All of the above.

Question 10

Spending by businesses on newly produced goods such as machinery, buildings, and the like, is termed:

Accepted Answer

A)  a leakage. 
B)  production spending. 
C)  investment spending. 
D)  business consumption expenditures. 
A)  a leakage. 
B)  production spending. 
C)  investment spending. 
D)  business consumption expenditures.

Question 11

The change in total output that occurs following a change in nonincome-determined spending is:

Accepted Answer

A)  referred to as the multiplier effect. 
B)  larger than the change in nonincome-determined spending. 
C)  due to the fact that the nonincome-determined spending creates income, which in turn is spent. 
D)  all of the above. 
A)  referred to as the multiplier effect. 
B)  larger than the change in nonincome-determined spending. 
C)  due to the fact that the nonincome-determined spending creates income, which in turn is spent. 
D)  all of the above.

Question 12

Why would the level of economic activity never change if the only spending were household income-determined spending, and households spent all that they earned?

Accepted Answer

If households spent all that t

Question 13

Net exports is positive when:

Accepted Answer

A)  transfer payments exceed taxes. 
B)  taxes exceed transfer payments. 
C)  exports exceed imports. 
D)  imports exceed exports. 
A)  transfer payments exceed taxes. 
B)  taxes exceed transfer payments. 
C)  exports exceed imports. 
D)  imports exceed exports.

Question 14

Typically, the phases of business cycles in the U.S. economy are of differing lengths and intensities.

Accepted Answer

A) True 
 B)False

Question 15

What tax and expenditure policies should the government pursue during a recession?

Accepted Answer

In a recession, the government

Question 16

All else equal, investment spending would likely decrease following a decrease in the interest rate for borrowed funds.

Accepted Answer

A) True 
 B)False

Question 17

Inflationary pressure will intensify when the economy is at full employment if leakages from the spending stream are greater than injections.

Accepted Answer

A) True 
 B)False

Question 18

The payment of taxes by households and businesses is:

Accepted Answer

A)  income-determined spending. 
B)  nonincome-determined spending. 
C)  a leakage from the spending stream. 
D)  none of the above. 
A)  income-determined spending. 
B)  nonincome-determined spending. 
C)  a leakage from the spending stream. 
D)  none of the above.

Question 19

According to Application 5.1, "Interest Rates and Investment Spending,"the total interest paid on a $200,000 five-year loan at 18 percent is:

Accepted Answer

A)  $36,000. 
B)  $180,000. 
C)  less than three times as great as the total interest paid at 6 percent. 
D)  more than three times as great as the total interest paid at 6 percent. 
A)  $36,000. 
B)  $180,000. 
C)  less than three times as great as the total interest paid at 6 percent. 
D)  more than three times as great as the total interest paid at 6 percent.

Question 20

Expectations of an economic downturn will most likely produce a recession if businesses:

Accepted Answer

A)  reduce investment spending and households reduce their saving. 
B)  reduce investment spending and households increase their saving. 
C)  increase investment spending and households reduce their saving. 
D)  increase investment spending and households increase their saving. 
A)  reduce investment spending and households reduce their saving. 
B)  reduce investment spending and households increase their saving. 
C)  increase investment spending and households reduce their saving. 
D)  increase investment spending and households increase their saving.

If the economy is at full employment, inflation will result if:

Government transfer payments:

If government purchases increased by $30 billion, investment spending decreased by $20 billion, and 80 percent of additional income was spent on new goods and services, total output would:

The multiplier effect:

Fiscal policy involves:

Why does a change in non-income-determined spending lead to a larger change in the economy's levels of output and employment?

The expectation of inflation has no effect on the overall level of prices.

The federal government attempts to control business cycles because:

Which of the following statements is true?

Spending by businesses on newly produced goods such as machinery, buildings, and the like, is termed:

The change in total output that occurs following a change in nonincome-determined spending is:

Why would the level of economic activity never change if the only spending were household income-determined spending, and households spent all that they earned?

Net exports is positive when:

Typically, the phases of business cycles in the U.S. economy are of differing lengths and intensities.

What tax and expenditure policies should the government pursue during a recession?

All else equal, investment spending would likely decrease following a decrease in the interest rate for borrowed funds.

Inflationary pressure will intensify when the economy is at full employment if leakages from the spending stream are greater than injections.

The payment of taxes by households and businesses is:

According to Application 5.1, "Interest Rates and Investment Spending,"the total interest paid on a $200,000 five-year loan at 18 percent is:

Expectations of an economic downturn will most likely produce a recession if businesses:

Introduction to Economics

Economic Decision Making and Economic Systems

Demand, Supply, and the Determination of Price

Goals and Problems of the Macroeconomy: Employment, Prices and Production

The Role of Government in the Macroeconomy

Money, Financial Institutions, and the Federal Reserve

Money Creation, Monetary Theory, and Monetary Policy

Macroeconomic Viewpoints and Models

Households and Businesses: An Overview

Benefits, Costs, and Maximization

Production and the Costs of Production

Competition and Market Structures

Government and the Markets

Labor Markets, Unions, and the Distribution of Income-A

International Trade

International Finance

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Exam 5: Foundations of the Macroeconomy

If the economy is at full employment, inflation will result if:

Government transfer payments:

If government purchases increased by $30 billion, investment spending decreased by $20 billion, and 80 percent of additional income was spent on new goods and services, total output would:

The multiplier effect:

Fiscal policy involves:

Why does a change in non-income-determined spending lead to a larger change in the economy's levels of output and employment?

The expectation of inflation has no effect on the overall level of prices.

The federal government attempts to control business cycles because:

Which of the following statements is true?

Spending by businesses on newly produced goods such as machinery, buildings, and the like, is termed:

The change in total output that occurs following a change in nonincome-determined spending is:

Why would the level of economic activity never change if the only spending were household income-determined spending, and households spent all that they earned?

Net exports is positive when:

Typically, the phases of business cycles in the U.S. economy are of differing lengths and intensities.

What tax and expenditure policies should the government pursue during a recession?

All else equal, investment spending would likely decrease following a decrease in the interest rate for borrowed funds.

Inflationary pressure will intensify when the economy is at full employment if leakages from the spending stream are greater than injections.

The payment of taxes by households and businesses is:

According to Application 5.1, "Interest Rates and Investment Spending,"the total interest paid on a $200,000 five-year loan at 18 percent is:

Expectations of an economic downturn will most likely produce a recession if businesses:

Introduction to Economics

Economic Decision Making and Economic Systems

Demand, Supply, and the Determination of Price

Goals and Problems of the Macroeconomy: Employment, Prices and Production

The Role of Government in the Macroeconomy

Money, Financial Institutions, and the Federal Reserve

Money Creation, Monetary Theory, and Monetary Policy

Macroeconomic Viewpoints and Models

Households and Businesses: An Overview

Benefits, Costs, and Maximization

Production and the Costs of Production

Competition and Market Structures

Government and the Markets

Labor Markets, Unions, and the Distribution of Income-A

International Trade

International Finance

Filters