Question 1

A variable which is independent of the level of income is

Accepted Answer

A) endogenous. 
B) exogenous. 
C) autonomous. 
D) irrelevant to any theory of income determination. 
A) endogenous. 
B) exogenous. 
C) autonomous. 
D) irrelevant to any theory of income determination.

Question 2

The rate-of-return line ________ when the interest rate rises.

Accepted Answer

A) shifts to the right 
B) shifts to the left 
C) pivots to become steeper 
D) pivots to become flatter 
E) is not affected 
A) shifts to the right 
B) shifts to the left 
C) pivots to become steeper 
D) pivots to become flatter 
E) is not affected

Question 3

The IS curve shows that higher income levels require ________ interest rates to ensure that income equals ________.

Accepted Answer

A) higher,planned autonomous spending 
B) higher,planned expenditures 
C) lower,planned autonomous spending 
D) lower,planned expenditures 
A) higher,planned autonomous spending 
B) higher,planned expenditures 
C) lower,planned autonomous spending 
D) lower,planned expenditures

Question 4

Figure 3-7
  
-In Figure 3-7 above,when autonomous planned spending is $250,the equilibrium income level is

Accepted Answer

A) $1000. 
B) $1250. 
C) $1500. 
D) $2500. 
A) $1000. 
B) $1250. 
C) $1500. 
D) $2500.

Question 5

Suppose that in producing a GDP of 3000,goods worth 200 go unsold and are unintentionally added to business inventories.These goods

Accepted Answer

A) are not counted in total expenditure. 
B) are part of the investment component of expenditure. 
C) are nonetheless part of the consumption component of expenditure. 
D) are classified as net exports and are subtracted from total expenditures. 
A) are not counted in total expenditure. 
B) are part of the investment component of expenditure. 
C) are nonetheless part of the consumption component of expenditure. 
D) are classified as net exports and are subtracted from total expenditures.

Question 6

If the gap between the actual level of output and the "natural real GDP" is 1000 and the marginal leakage rate is 0.5 then the simple Keynesian model suggests that the government could close the gap by

Accepted Answer

A) increasing autonomous expenditures by 1000. 
B) increasing autonomous expenditures by 250. 
C) increasing autonomous expenditures by 500. 
D) decreasing taxes by 500. 
A) increasing autonomous expenditures by 1000. 
B) increasing autonomous expenditures by 250. 
C) increasing autonomous expenditures by 500. 
D) decreasing taxes by 500.

Question 7

If Ap is total autonomous planned spending,c is the marginal propensity to consume,s is the marginal propensity to save,and Y is the equilibrium income level,then induced saving is

Accepted Answer

A) Ap/Y. 
B) Y = Ap/s. 
C) sY. 
D) cAp. 
A) Ap/Y. 
B) Y = Ap/s. 
C) sY. 
D) cAp.

Question 8

In the simple Keynesian model of the determination of income,the price level is assumed to be

Accepted Answer

A) exogenous and to gradually change. 
B) endogenous and to gradually change. 
C) exogenous and to remain constant. 
D) endogenous and to remain constant. 
A) exogenous and to gradually change. 
B) endogenous and to gradually change. 
C) exogenous and to remain constant. 
D) endogenous and to remain constant.

Question 9

The IS curve represents

Accepted Answer

A) investment and saving when the commodity markets are in disequilibrium. 
B) equilibrium in the commodity markets for every combination of interest rates and output level. 
C) the determination of the level of interest rate. 
D) the determination of the level of income and output. 
A) investment and saving when the commodity markets are in disequilibrium. 
B) equilibrium in the commodity markets for every combination of interest rates and output level. 
C) the determination of the level of interest rate. 
D) the determination of the level of income and output.

Question 10

If Y is income,E is actual expenditure,Ep is planned expenditure,and Iu is unintended inventory investment,then

Accepted Answer

A) Y = E + Iu. 
B) Iu = Y - E. 
C) Y = Ep + Iu. 
D) none of the above. 
A) Y = E + Iu. 
B) Iu = Y - E. 
C) Y = Ep + Iu. 
D) none of the above.

Question 11

An increase in autonomous taxes

Accepted Answer

A) increases autonomous planned spending by an equal amount. 
B) decreases autonomous planned spending by an equal amount. 
C) increases consumption by that amount times the marginal propensity to consume. 
D) decreases saving by that amount times the marginal propensity to save. 
A) increases autonomous planned spending by an equal amount. 
B) decreases autonomous planned spending by an equal amount. 
C) increases consumption by that amount times the marginal propensity to consume. 
D) decreases saving by that amount times the marginal propensity to save.

Question 12

Suppose the only leakages are savings and taxes.The tax rate is 0.2 and the multiplier is 1.92.These values imply that the marginal propensity to consume is

Accepted Answer

A) 0.32. 
B) 0.60. 
C) 0.68. 
D) 0.8. 
A) 0.32. 
B) 0.60. 
C) 0.68. 
D) 0.8.

Question 13

Figure 3-2
  
-Refer to the information above.What is the equilibrium level of GDP?

Accepted Answer

A) 300 
B) 400 
C) 450 
D) 525 
A) 300 
B) 400 
C) 450 
D) 525

Question 14

Figure 3-2
  
-Refer to the information above.What is the equilibrium level of GDP?

Accepted Answer

A) 600 
B) 1000 
C) 1500 
D) 1800 
A) 600 
B) 1000 
C) 1500 
D) 1800

Question 15

An increase in the marginal propensity to import will

Accepted Answer

A) raise imports and raise equilibrium income. 
B) lower imports and raise equilibrium income. 
C) lower the multiplier and reduce equilibrium income. 
D) raise the multiplier and reduce equilibrium income. 
A) raise imports and raise equilibrium income. 
B) lower imports and raise equilibrium income. 
C) lower the multiplier and reduce equilibrium income. 
D) raise the multiplier and reduce equilibrium income.

Question 16

If Y = $200 billion,c = 0.75,autonomous consumption = $10 billion,and T = $20 billion,induced saving is

Accepted Answer

A) $25 billion. 
B) $50 billion. 
C) $75 billion. 
D) $150 billion. 
A) $25 billion. 
B) $50 billion. 
C) $75 billion. 
D) $150 billion.

Question 17

A $1 increase in autonomous spending has a multiplier effect greater than one on total expenditures and output because

Accepted Answer

A) each expenditure is respent in the same amount continuously. 
B) overtime expenditures tend to increase. 
C) total expenditures include autonomous expenditures. 
D) each time an expenditure occurs the recipient respends a proportion of the funds. 
A) each expenditure is respent in the same amount continuously. 
B) overtime expenditures tend to increase. 
C) total expenditures include autonomous expenditures. 
D) each time an expenditure occurs the recipient respends a proportion of the funds.

Question 18

In equilibrium,

Accepted Answer

A) income = planned expenditures. 
B) unplanned inventory investment is zero. 
C) Ep (planned expenditures)crosses the 45-degree income line. 
D) all of the above. 
A) income = planned expenditures. 
B) unplanned inventory investment is zero. 
C) Ep (planned expenditures)crosses the 45-degree income line. 
D) all of the above.

Question 19

One way to view equilibrium in the simple Keynesian model without government spending and taxes is that:

Accepted Answer

A) saving equals planned investment. 
B) saving equals planned expenditures. 
C) saving equals planned autonomous spending. 
D) None of the above. 
A) saving equals planned investment. 
B) saving equals planned expenditures. 
C) saving equals planned autonomous spending. 
D) None of the above.

Question 20

In a country without foreign trade and income taxes,if the government decreases autonomous spending and autonomous taxes by 50 then total expenditures and output will

Accepted Answer

A) increase by 50 if the MPC is 1. 
B) decrease by 50 for any value of the MPS greater than zero. 
C) decrease by 100 if the MPS is 0.5. 
D) increase by 200 if the MPS is 0.25. 
A) increase by 50 if the MPC is 1. 
B) decrease by 50 for any value of the MPS greater than zero. 
C) decrease by 100 if the MPS is 0.5. 
D) increase by 200 if the MPS is 0.25.

A variable which is independent of the level of income is

The rate-of-return line ________ when the interest rate rises.

The IS curve shows that higher income levels require interest rates to ensure that income equals .

Figure 3-7 -In Figure 3-7 above,when autonomous planned spending is $250,the equilibrium income level is

Suppose that in producing a GDP of 3000,goods worth 200 go unsold and are unintentionally added to business inventories.These goods

If the gap between the actual level of output and the "natural real GDP" is 1000 and the marginal leakage rate is 0.5 then the simple Keynesian model suggests that the government could close the gap by

If Ap is total autonomous planned spending,c is the marginal propensity to consume,s is the marginal propensity to save,and Y is the equilibrium income level,then induced saving is

In the simple Keynesian model of the determination of income,the price level is assumed to be

The IS curve represents

If Y is income,E is actual expenditure,Ep is planned expenditure,and Iu is unintended inventory investment,then

An increase in autonomous taxes

Suppose the only leakages are savings and taxes.The tax rate is 0.2 and the multiplier is 1.92.These values imply that the marginal propensity to consume is

Figure 3-2 -Refer to the information above.What is the equilibrium level of GDP?

Figure 3-2 -Refer to the information above.What is the equilibrium level of GDP?

An increase in the marginal propensity to import will

If Y = $200 billion,c = 0.75,autonomous consumption = $10 billion,and T = $20 billion,induced saving is

A $1 increase in autonomous spending has a multiplier effect greater than one on total expenditures and output because

In equilibrium,

One way to view equilibrium in the simple Keynesian model without government spending and taxes is that:

In a country without foreign trade and income taxes,if the government decreases autonomous spending and autonomous taxes by 50 then total expenditures and output will

What Is Macroeconomics

The Measurement of Income,prices,and Unemployment

Strong and Weak Policy Effects in the Is-Lm Model

Financial Markets, financial Regulation, and Economic Instability

The Government Budget, the Government Debt, and the Limitations of Fiscal Policy

International Trade, exchange Rates, and Macroeconomic Policy

Aggregate Demand, aggregate Supply, and the Great Depression

Inflation: Its Causes and Cures

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

Money,banks,and the Federal Reserve

The Goals, tools, and Rules of Monetary Policy

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro and New Keynesian Macro

Conclusion: Where We Stand

Filters

Exam 3: Income and Interest Rates: the Keynesian Cross Model and the Is Curve

A variable which is independent of the level of income is

The rate-of-return line ________ when the interest rate rises.

The IS curve shows that higher income levels require ________ interest rates to ensure that income equals ________.

Figure 3-7 -In Figure 3-7 above,when autonomous planned spending is $250,the equilibrium income level is

Suppose that in producing a GDP of 3000,goods worth 200 go unsold and are unintentionally added to business inventories.These goods

If the gap between the actual level of output and the "natural real GDP" is 1000 and the marginal leakage rate is 0.5 then the simple Keynesian model suggests that the government could close the gap by

If Ap is total autonomous planned spending,c is the marginal propensity to consume,s is the marginal propensity to save,and Y is the equilibrium income level,then induced saving is

In the simple Keynesian model of the determination of income,the price level is assumed to be

The IS curve represents

If Y is income,E is actual expenditure,Ep is planned expenditure,and Iu is unintended inventory investment,then

An increase in autonomous taxes

Suppose the only leakages are savings and taxes.The tax rate is 0.2 and the multiplier is 1.92.These values imply that the marginal propensity to consume is

Figure 3-2 -Refer to the information above.What is the equilibrium level of GDP?

Figure 3-2 -Refer to the information above.What is the equilibrium level of GDP?

An increase in the marginal propensity to import will

If Y = $200 billion,c = 0.75,autonomous consumption = $10 billion,and T = $20 billion,induced saving is

A $1 increase in autonomous spending has a multiplier effect greater than one on total expenditures and output because

In equilibrium,

One way to view equilibrium in the simple Keynesian model without government spending and taxes is that:

In a country without foreign trade and income taxes,if the government decreases autonomous spending and autonomous taxes by 50 then total expenditures and output will

What Is Macroeconomics

The Measurement of Income,prices,and Unemployment

Strong and Weak Policy Effects in the Is-Lm Model

Financial Markets, financial Regulation, and Economic Instability

The Government Budget, the Government Debt, and the Limitations of Fiscal Policy

International Trade, exchange Rates, and Macroeconomic Policy

Aggregate Demand, aggregate Supply, and the Great Depression

Inflation: Its Causes and Cures

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

Money,banks,and the Federal Reserve

The Goals, tools, and Rules of Monetary Policy

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro and New Keynesian Macro

Conclusion: Where We Stand

Filters

The IS curve shows that higher income levels require interest rates to ensure that income equals .