Question 1

Following housing market collapse,U.S.personal saving rates have

Accepted Answer

A) increased. 
B) decreased. 
C) remained the same. 
D) data not yet available. 
A) increased. 
B) decreased. 
C) remained the same. 
D) data not yet available.

Question 2

Figure 3-4
  
-In Figure 3-4 above,an equilibrium income of 2000 occurs when planned autonomous spending is

Accepted Answer

A) 750. 
B) 800. 
C) 1250. 
D) 250. 
A) 750. 
B) 800. 
C) 1250. 
D) 250.

Question 3

If Ep is 2500 and Y is 3000,then companies will

Accepted Answer

A) reduce orders and production by 500. 
B) increase orders and production by 500. 
C) wait for final sales to increase. 
D) wait for final sales to decrease. 
A) reduce orders and production by 500. 
B) increase orders and production by 500. 
C) wait for final sales to increase. 
D) wait for final sales to decrease.

Question 4

Economic model building begins with the construction of greatly oversimplified "benchmark" models,which are brought closer to reality by gradually removing the simplifying assumptions.In this process,more and more ________ variables become ________.

Accepted Answer

A) short-run,long-run 
B) exogenous,endogenous 
C) long-run,short-run 
D) endogenous,exogenous 
E) nominal,real 
A) short-run,long-run 
B) exogenous,endogenous 
C) long-run,short-run 
D) endogenous,exogenous 
E) nominal,real

Question 5

When an economy is not in equilibrium,

Accepted Answer

A) planned expenditures exceed production and income. 
B) there is no savings nor investment. 
C) government tax revenues equal planned government expenditures. 
D) production and income equal planned expenditures. 
A) planned expenditures exceed production and income. 
B) there is no savings nor investment. 
C) government tax revenues equal planned government expenditures. 
D) production and income equal planned expenditures.

Question 6

Automatic stabilization refers to

Accepted Answer

A) the policy of lowering tax rates during a recession. 
B) the policy of increasing autonomous G during a recession. 
C) the effect of income taxes in lowering the multiplier effect of changes in autonomous planned spending. 
D) all of the above. 
A) the policy of lowering tax rates during a recession. 
B) the policy of increasing autonomous G during a recession. 
C) the effect of income taxes in lowering the multiplier effect of changes in autonomous planned spending. 
D) all of the above.

Question 7

The establishment of an income tax,ceteris paribus,will result in

Accepted Answer

A) a lower expenditure multiplier. 
B) a higher expenditure multiplier. 
C) no change in the size of the multiplier. 
D) None of the above. 
A) a lower expenditure multiplier. 
B) a higher expenditure multiplier. 
C) no change in the size of the multiplier. 
D) None of the above.

Question 8

A rise in the income tax rate will

Accepted Answer

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

Question 9

Figure 3-5
  
-In Figure 3-5 above,saving is zero at

Accepted Answer

A) point J. 
B) point K. 
C) point L. 
D) none of the above because saving is never equal to zero under the conditions described in the graph. 
A) point J. 
B) point K. 
C) point L. 
D) none of the above because saving is never equal to zero under the conditions described in the graph.

Question 10

Figure 3-3
  
-In Figure 3-3 above,autonomous planned spending is

Accepted Answer

A) 400. 
B) 400 + 0.6Y. 
C) 0.8Y. 
D) 400 - 0.6Y. 
E) 0. 
A) 400. 
B) 400 + 0.6Y. 
C) 0.8Y. 
D) 400 - 0.6Y. 
E) 0.

Question 11

Assume that the economy is initially at its equilibrium level of GDP.What will happen to the equilibrium level of GDP if planned investment decreases by 20,government spending increases by 30,and taxes increase by 10?

Accepted Answer

A) GDP will decrease by 60 
B) GDP will decrease by 10 
C) there will be no change in GDP 
D) GDP will increase by 10 
A) GDP will decrease by 60 
B) GDP will decrease by 10 
C) there will be no change in GDP 
D) GDP will increase by 10

Question 12

If the interest rate were to fall,we expect that

Accepted Answer

A) the supply of money will fall. 
B) the supply of money will rise. 
C) autonomous expenditures will rise. 
D) the demand for money will fall. 
A) the supply of money will fall. 
B) the supply of money will rise. 
C) autonomous expenditures will rise. 
D) the demand for money will fall.

Question 13

Autonomous planned spending is a function of the

Accepted Answer

A) marginal propensity to consume. 
B) marginal propensity to save. 
C) interest rate. 
D) tax rate. 
A) marginal propensity to consume. 
B) marginal propensity to save. 
C) interest rate. 
D) tax rate.

Question 14

Let the marginal leakage rate be 0.5 while the marginal propensity to consume is 0.8.Then a $50 million reduction in autonomous taxes will cause autonomous consumption to ________ and equilibrium income to ________.

Accepted Answer

A) fall by $50 billion;fall by $100 billion 
B) rise by $50 billion;rise by $100 billion 
C) fall by $40 billion;fall by $200 billion 
D) rise by $40 billion;rise by $80 billion 
A) fall by $50 billion;fall by $100 billion 
B) rise by $50 billion;rise by $100 billion 
C) fall by $40 billion;fall by $200 billion 
D) rise by $40 billion;rise by $80 billion

Question 15

If Ep is 3500 and Y is 3000,then

Accepted Answer

A) planned inventory accumulation is 500. 
B) planned inventory depletion is 500. 
C) unplanned inventory accumulation is 500. 
D) unplanned inventory depletion is 500. 
A) planned inventory accumulation is 500. 
B) planned inventory depletion is 500. 
C) unplanned inventory accumulation is 500. 
D) unplanned inventory depletion is 500.

Question 16

A mass-production bagel factory is considering the purchase of a flash freezer to improve the quality of the raw dough it provides supermarket bakeries.The freezer costs $750,000 and would increase business revenues by $48,000 a year after all expenses besides interest are paid.If the interest rate is 7.8 percent,what is the freezer's annual profit rate?

Accepted Answer

A) 7.8 percent. 
B) 1.4 percent. 
C) -1.4 percent. 
D) 5.9 percent. 
E) -5.9 percent. 
A) 7.8 percent. 
B) 1.4 percent. 
C) -1.4 percent. 
D) 5.9 percent. 
E) -5.9 percent.

Question 17

When stock prices fall significantly,people may feel less wealthy and thus decide to consume less of their current flow of disposable income.In our consumption function,this can be represented by a

Accepted Answer

A) fall in (Y -T). 
B) rise in T. 
C) rise in c. 
D) fall in a. 
A) fall in (Y -T). 
B) rise in T. 
C) rise in c. 
D) fall in a.

Question 18

Which of the following is a possible reason for the improved economic performance between 1985 and 2007?

Accepted Answer

A) Demand Shocks have become smaller and less important. 
B) Monetary and fiscal policy have become more effective. 
C) Change in conditions that make monetary and/or fiscal policy more powerful. 
D) All of the above 
A) Demand Shocks have become smaller and less important. 
B) Monetary and fiscal policy have become more effective. 
C) Change in conditions that make monetary and/or fiscal policy more powerful. 
D) All of the above

Question 19

On a diagram of the consumption function and the 45-degree line,saving at each level of disposable income is the vertical distance

Accepted Answer

A) from the horizontal axis to the intersection point of the consumption line and the 45-degree line. 
B) from the horizontal axis to the 45-degree line. 
C) between the consumption and the 45-degree lines. 
D) from the horizontal axis to where the consumption line intersects the vertical axis. 
A) from the horizontal axis to the intersection point of the consumption line and the 45-degree line. 
B) from the horizontal axis to the 45-degree line. 
C) between the consumption and the 45-degree lines. 
D) from the horizontal axis to where the consumption line intersects the vertical axis.

Question 20

If total planned spending (E(p))exceeds GDP,we expect that

Accepted Answer

A) inventories will be falling. 
B) inventories will be rising. 
C) GDP will be falling. 
D) government expenditures must be rising. 
A) inventories will be falling. 
B) inventories will be rising. 
C) GDP will be falling. 
D) government expenditures must be rising.

Following housing market collapse,U.S.personal saving rates have

Figure 3-4 -In Figure 3-4 above,an equilibrium income of 2000 occurs when planned autonomous spending is

If Ep is 2500 and Y is 3000,then companies will

Economic model building begins with the construction of greatly oversimplified "benchmark" models,which are brought closer to reality by gradually removing the simplifying assumptions.In this process,more and more variables become .

When an economy is not in equilibrium,

Automatic stabilization refers to

The establishment of an income tax,ceteris paribus,will result in

A rise in the income tax rate will

Figure 3-5 -In Figure 3-5 above,saving is zero at

Figure 3-3 -In Figure 3-3 above,autonomous planned spending is

Assume that the economy is initially at its equilibrium level of GDP.What will happen to the equilibrium level of GDP if planned investment decreases by 20,government spending increases by 30,and taxes increase by 10?

If the interest rate were to fall,we expect that

Autonomous planned spending is a function of the

Let the marginal leakage rate be 0.5 while the marginal propensity to consume is 0.8.Then a $50 million reduction in autonomous taxes will cause autonomous consumption to and equilibrium income to .

If Ep is 3500 and Y is 3000,then

When stock prices fall significantly,people may feel less wealthy and thus decide to consume less of their current flow of disposable income.In our consumption function,this can be represented by a

Which of the following is a possible reason for the improved economic performance between 1985 and 2007?

On a diagram of the consumption function and the 45-degree line,saving at each level of disposable income is the vertical distance

If total planned spending (E(p))exceeds GDP,we expect that

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

Following housing market collapse,U.S.personal saving rates have

Figure 3-4 -In Figure 3-4 above,an equilibrium income of 2000 occurs when planned autonomous spending is

If Ep is 2500 and Y is 3000,then companies will

Economic model building begins with the construction of greatly oversimplified "benchmark" models,which are brought closer to reality by gradually removing the simplifying assumptions.In this process,more and more ________ variables become ________.

When an economy is not in equilibrium,

Automatic stabilization refers to

The establishment of an income tax,ceteris paribus,will result in

A rise in the income tax rate will

Figure 3-5 -In Figure 3-5 above,saving is zero at

Figure 3-3 -In Figure 3-3 above,autonomous planned spending is

Assume that the economy is initially at its equilibrium level of GDP.What will happen to the equilibrium level of GDP if planned investment decreases by 20,government spending increases by 30,and taxes increase by 10?

If the interest rate were to fall,we expect that

Autonomous planned spending is a function of the

Let the marginal leakage rate be 0.5 while the marginal propensity to consume is 0.8.Then a $50 million reduction in autonomous taxes will cause autonomous consumption to ________ and equilibrium income to ________.

If Ep is 3500 and Y is 3000,then

When stock prices fall significantly,people may feel less wealthy and thus decide to consume less of their current flow of disposable income.In our consumption function,this can be represented by a

Which of the following is a possible reason for the improved economic performance between 1985 and 2007?

On a diagram of the consumption function and the 45-degree line,saving at each level of disposable income is the vertical distance

If total planned spending (E(p))exceeds GDP,we expect that

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

Economic model building begins with the construction of greatly oversimplified "benchmark" models,which are brought closer to reality by gradually removing the simplifying assumptions.In this process,more and more variables become .

Let the marginal leakage rate be 0.5 while the marginal propensity to consume is 0.8.Then a $50 million reduction in autonomous taxes will cause autonomous consumption to and equilibrium income to .