Question 1

All else equal, the level of economic activity would most likely increase if household saving:

Accepted Answer

A)  and business investment spending both increased. 
B)  and business investment spending both decreased. 
C)  increased, and business investment spending decreased. 
D)  decreased, and business investment spending increased. 
A)  and business investment spending both increased. 
B)  and business investment spending both decreased. 
C)  increased, and business investment spending decreased. 
D)  decreased, and business investment spending increased.

Question 2

The multiplier effect refers to the change in total output caused by a smaller change in income-determined spending.

Accepted Answer

A) True 
 B)False

Question 3

If 75% of additional income received by households was spent, the economy's total output would grow by:

Accepted Answer

A)  25% of the initial change in nonincome-determined spending. 
B)  75% of the initial change in nonincome-determined spending. 
C)  1.33 times the initial change in nonincome-determined spending. 
D)  4.00 times the initial change in nonincome-determined spending. 
A)  25% of the initial change in nonincome-determined spending. 
B)  75% of the initial change in nonincome-determined spending. 
C)  1.33 times the initial change in nonincome-determined spending. 
D)  4.00 times the initial change in nonincome-determined spending.

Question 4

Total spending is the combined spending of all:

Accepted Answer

A)  households and governments. 
B)  households, governments, and businesses. 
C)  households, governments, businesses, and foreign buyers. 
D)  governments. 
A)  households and governments. 
B)  households, governments, and businesses. 
C)  households, governments, businesses, and foreign buyers. 
D)  governments.

Question 5

The use of government taxes and expenditures to control the level of economic activity is:

Accepted Answer

A)  fiscal policy. 
B)  monetary policy. 
C)  demand-correction policy. 
D)  nonincome-management policy. 
A)  fiscal policy. 
B)  monetary policy. 
C)  demand-correction policy. 
D)  nonincome-management policy.

Question 6

If leakages from, and injections into, the spending stream are equal, the level of economic activity will not change.

Accepted Answer

A) True 
 B)False

Question 7

Financial institutions:

Accepted Answer

A)  help channel money from savers to users of funds. 
B)  are organizations such as banks, insurance companies, and brokerage houses. 
C)  perform various services for holders of money, stocks, and other financial instruments. 
D)  all of the above. 
A)  help channel money from savers to users of funds. 
B)  are organizations such as banks, insurance companies, and brokerage houses. 
C)  perform various services for holders of money, stocks, and other financial instruments. 
D)  all of the above.

Question 8

The main determinant of total household spending is the:

Accepted Answer

A)  size of household income. 
B)  stock of household wealth. 
C)  level of household borrowing. 
D)  availability of government transfer payments. 
A)  size of household income. 
B)  stock of household wealth. 
C)  level of household borrowing. 
D)  availability of government transfer payments.

Question 9

How can the relationship between leakages from and injections into the spending stream cause inflation when the economy is close to full employment?

Accepted Answer

If injections into the economy

Question 10

Assume total output has increased by $80 billion and nonincome-determined spending has increased by $10 billion, what is the percentage of income that is spent?

Accepted Answer

A)  80.0%. 
B)  85.0%. 
C)  87.5%. 
D)  92.5%. 
A)  80.0%. 
B)  85.0%. 
C)  87.5%. 
D)  92.5%.

Question 11

The multiplier effect on total output in the economy occurs because an initial change in:

Accepted Answer

A)  income-determined spending leads to further changes in income-determined spending. 
B)  nonincome-determined spending leads to further changes in income-determined spending. 
C)  income-determined spending leads to further changes in nonincome-determined spending. 
D)  nonincome-determined spending leads to further changes in nonincome-determined spending. 
A)  income-determined spending leads to further changes in income-determined spending. 
B)  nonincome-determined spending leads to further changes in income-determined spending. 
C)  income-determined spending leads to further changes in nonincome-determined spending. 
D)  nonincome-determined spending leads to further changes in nonincome-determined spending.

Question 12

Household spending accounts for the largest percentage of total spending.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is a leakage from the spending stream by households?

Accepted Answer

A)  Saving. 
B)  A decrease in earned income. 
C)  The receipt of transfer payments. 
D)  Borrowing from financial institutions. 
A)  Saving. 
B)  A decrease in earned income. 
C)  The receipt of transfer payments. 
D)  Borrowing from financial institutions.

Question 14

Exports minus imports:

Accepted Answer

A)  is termed net exports. 
B)  has been a small but positive number for the U.S. economy since 1980. 
C)  has created more of an injection into, than a leakage from, the U.S. economy since 1980. 
D)  has little effect on the economy because it involves dealings with other countries. 
A)  is termed net exports. 
B)  has been a small but positive number for the U.S. economy since 1980. 
C)  has created more of an injection into, than a leakage from, the U.S. economy since 1980. 
D)  has little effect on the economy because it involves dealings with other countries.

Question 15

If the government spends one billion dollars on goods and services and increases income taxes by one billion dollars, this policy will cause:

Accepted Answer

A)  the level of economic activity to increase. 
B)  the level of economic activity to decrease. 
C)  no change in the level of economic activity. 
D)  the level of economic activity to decrease initially and then stabilize. 
A)  the level of economic activity to increase. 
B)  the level of economic activity to decrease. 
C)  no change in the level of economic activity. 
D)  the level of economic activity to decrease initially and then stabilize.

Question 16

Which of the following scenarios leads to the largest change in output and income?

Accepted Answer

A)  The government spends $2 million fixing a bridge and the public spends 75% of additional income earned. 
B)  The government spends $5 million fixing a bridge and the public spends 50% of additional income earned. 
C)  The government spends $1 million fixing a bridge and the public spends 80% of additional income earned. 
D)  The government spends $1.5 million fixing a bridge and the public spends 90% of additional income earned. 
A)  The government spends $2 million fixing a bridge and the public spends 75% of additional income earned. 
B)  The government spends $5 million fixing a bridge and the public spends 50% of additional income earned. 
C)  The government spends $1 million fixing a bridge and the public spends 80% of additional income earned. 
D)  The government spends $1.5 million fixing a bridge and the public spends 90% of additional income earned.

Question 17

Personal consumption expenditures would likely increase if there were a decrease in:

Accepted Answer

A)  households' incomes. 
B)  saving by households. 
C)  borrowing by households. 
D)  transfer payments to households. 
A)  households' incomes. 
B)  saving by households. 
C)  borrowing by households. 
D)  transfer payments to households.

Question 18

The two main categories of government expenditures are:

Accepted Answer

A)  defense expenditures and tax refunds. 
B)  purchases of goods and purchases of services. 
C)  purchases of goods and services, and transfer payments. 
D)  income determined and nonincome-determined spending. 
A)  defense expenditures and tax refunds. 
B)  purchases of goods and purchases of services. 
C)  purchases of goods and services, and transfer payments. 
D)  income determined and nonincome-determined spending.

Question 19

The level of activity in the economy as a whole will remain unchanged if:

Accepted Answer

A)  exports equal imports. 
B)  saving equals investment. 
C)  taxes equal government spending. 
D)  total leakages equal total injections. 
A)  exports equal imports. 
B)  saving equals investment. 
C)  taxes equal government spending. 
D)  total leakages equal total injections.

Question 20

The sequence of events in an expansion can be categorized as:

Accepted Answer

A)  increased spending$\rightarrow$ higher output $\rightarrow$ higher employment $\rightarrow$ higher income. 
B)  increased spending $\rightarrow$ higher income $\rightarrow$ higher employment $\rightarrow$ higher output. 
C)  increased spending $\rightarrow$higher employment $\rightarrow$ higher income $\rightarrow$ higher output. 
D)  increased spending $\rightarrow$ higher income $\rightarrow$ higher output $\rightarrow$ higher employment. 
A)  increased spending$\rightarrow$ higher output $\rightarrow$ higher employment $\rightarrow$ higher income. 
B)  increased spending $\rightarrow$ higher income $\rightarrow$ higher employment $\rightarrow$ higher output. 
C)  increased spending $\rightarrow$higher employment $\rightarrow$ higher income $\rightarrow$ higher output. 
D)  increased spending $\rightarrow$ higher income $\rightarrow$ higher output $\rightarrow$ higher employment.

All else equal, the level of economic activity would most likely increase if household saving:

The multiplier effect refers to the change in total output caused by a smaller change in income-determined spending.

If 75% of additional income received by households was spent, the economy's total output would grow by:

Total spending is the combined spending of all:

The use of government taxes and expenditures to control the level of economic activity is:

If leakages from, and injections into, the spending stream are equal, the level of economic activity will not change.

Financial institutions:

The main determinant of total household spending is the:

How can the relationship between leakages from and injections into the spending stream cause inflation when the economy is close to full employment?

Assume total output has increased by $80 billion and nonincome-determined spending has increased by $10 billion, what is the percentage of income that is spent?

The multiplier effect on total output in the economy occurs because an initial change in:

Household spending accounts for the largest percentage of total spending.

Which of the following is a leakage from the spending stream by households?

Exports minus imports:

If the government spends one billion dollars on goods and services and increases income taxes by one billion dollars, this policy will cause:

Which of the following scenarios leads to the largest change in output and income?

Personal consumption expenditures would likely increase if there were a decrease in:

The two main categories of government expenditures are:

The level of activity in the economy as a whole will remain unchanged if:

The sequence of events in an expansion can be categorized as:

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

Exam 5: Foundations of the Macroeconomy

All else equal, the level of economic activity would most likely increase if household saving:

The multiplier effect refers to the change in total output caused by a smaller change in income-determined spending.

If 75% of additional income received by households was spent, the economy's total output would grow by:

Total spending is the combined spending of all:

The use of government taxes and expenditures to control the level of economic activity is:

If leakages from, and injections into, the spending stream are equal, the level of economic activity will not change.

Financial institutions:

The main determinant of total household spending is the:

How can the relationship between leakages from and injections into the spending stream cause inflation when the economy is close to full employment?

Assume total output has increased by $80 billion and nonincome-determined spending has increased by $10 billion, what is the percentage of income that is spent?

The multiplier effect on total output in the economy occurs because an initial change in:

Household spending accounts for the largest percentage of total spending.

Which of the following is a leakage from the spending stream by households?

Exports minus imports:

If the government spends one billion dollars on goods and services and increases income taxes by one billion dollars, this policy will cause:

Which of the following scenarios leads to the largest change in output and income?

Personal consumption expenditures would likely increase if there were a decrease in:

The two main categories of government expenditures are:

The level of activity in the economy as a whole will remain unchanged if:

The sequence of events in an expansion can be categorized as:

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