Question 1

Net exports are a leakage from the circular flow.

Accepted Answer

A) True 
 B)False  False

Question 2

If net exports increase by $350 billion at every level of income, the net export line will

Accepted Answer

A) shift upward by $350 billion 
B) shift downward by $350 billion 
C) shift upward by more than $350 billion because of the multiplier effect 
D) shift upward by less than $350 billion 
E) shift downward by more than $350 billion because of the multiplier effect 
A) shift upward by $350 billion 
B) shift downward by $350 billion 
C) shift upward by more than $350 billion because of the multiplier effect 
D) shift upward by less than $350 billion 
E) shift downward by more than $350 billion because of the multiplier effect A

Question 3

If net exports increase by $450 billion at every level of income, equilibrium real GDP demanded will

Accepted Answer

A) increase by $450 billion 
B) decrease by $450 billion 
C) increase by more than $450 billion because of the multiplier effect 
D) increase by less than $450 billion 
E) decrease by more than $450 billion because of the multiplier effect 
A) increase by $450 billion 
B) decrease by $450 billion 
C) increase by more than $450 billion because of the multiplier effect 
D) increase by less than $450 billion 
E) decrease by more than $450 billion because of the multiplier effect C

Question 4

The concept of variable net exports is that as domestic income (Y) increases,

Accepted Answer

A) exports will increase 
B) exports will decrease 
C) imports will decrease 
D) imports will increase 
E) imports and exports will remain constant 
A) exports will increase 
B) exports will decrease 
C) imports will decrease 
D) imports will increase 
E) imports and exports will remain constant

Question 5

When variable net exports are added to the aggregate expenditure line, the resulting planned aggregate expenditure line becomes

Accepted Answer

A) steeper because net exports increase as real domestic income increases 
B) flatter because net exports increase as real domestic income increases 
C) steeper because net exports decrease as real domestic income increases 
D) flatter because net exports decrease as real domestic income increases 
E) flatter because imports decrease as real domestic income increases 
A) steeper because net exports increase as real domestic income increases 
B) flatter because net exports increase as real domestic income increases 
C) steeper because net exports decrease as real domestic income increases 
D) flatter because net exports decrease as real domestic income increases 
E) flatter because imports decrease as real domestic income increases

Question 6

In a model which includes variable net exports, the spending multiplier equals 1/(MPS + MPM).

Accepted Answer

A) True 
 B)False

Question 7

The larger the marginal propensity to import, the __________ during each round of spending and __________ the resulting spending multiplier.

Accepted Answer

A) greater the leakage; the smaller 
B) smaller the leakage; the smaller 
C) smaller the leakage; the larger 
D) greater the leakage; the larger 
E) smaller the injection; the larger 
A) greater the leakage; the smaller 
B) smaller the leakage; the smaller 
C) smaller the leakage; the larger 
D) greater the leakage; the larger 
E) smaller the injection; the larger

Question 8

The spending multiplier with variable net exports is

Accepted Answer

A) (1 + MP
C) /MPM 
B) 1/(1 - MP
C)  
C) 1/(1 - MPC + MPM) 
D) 1/(1 - MPC - MPM) 
E) MPC/MPM 
A) (1 + MP
C) /MPM 
B) 1/(1 - MP
C)  
C) 1/(1 - MPC + MPM) 
D) 1/(1 - MPC - MPM) 
E) MPC/MPM

Question 9

Exhibit 10-8
  
-In Exhibit 10-8, the marginal propensity to consume is

Accepted Answer

A) 0.3 
B) 0.1 
C) 0.7 
D) 0.4 
E) 0.2 
A) 0.3 
B) 0.1 
C) 0.7 
D) 0.4 
E) 0.2

Question 10

If variable net exports increase by the same amount at every level of income, then there is an upward and parallel shift of the net export line.

Accepted Answer

A) True 
 B)False

Question 11

If the MPC equals 0.7 and the MPM equals 0.10, then the spending multiplier equals

Accepted Answer

A) 10 
B) 9 
C) 5 
D) 3.3 
E) 1.1 
A) 10 
B) 9 
C) 5 
D) 3.3 
E) 1.1

Question 12

If net exports increase by $400 billion at every level of income, the aggregate expenditure line will

Accepted Answer

A) shift upward by $400 billion 
B) shift downward by $400 billion 
C) shift upward by more than $400 billion because of the multiplier effect 
D) shift upward by less than $400 billion 
E) shift downward by more than $400 billion because of the multiplier effect 
A) shift upward by $400 billion 
B) shift downward by $400 billion 
C) shift upward by more than $400 billion because of the multiplier effect 
D) shift upward by less than $400 billion 
E) shift downward by more than $400 billion because of the multiplier effect

Question 13

The marginal propensity to import

Accepted Answer

A) is negative 
B) is positive 
C) is likely to be larger than the MPC 
D) depends on the value of domestic income 
E) depends on the value of exports 
A) is negative 
B) is positive 
C) is likely to be larger than the MPC 
D) depends on the value of domestic income 
E) depends on the value of exports

Question 14

Exhibit 10-8
  
-In Exhibit 10-8, the spending multiplier equals

Accepted Answer

A) 1.43 
B) 2.50 
C) 3.33 
D) 5 
E) 10 
A) 1.43 
B) 2.50 
C) 3.33 
D) 5 
E) 10

Question 15

What is the impact of net exports on the aggregate expenditure line?

Accepted Answer

A) They cause the line to shift upward in a parallel fashion. 
B) They cause the line to shift downward in a parallel fashion. 
C) They make the line steeper. 
D) They make the line flatter. 
E) They make the slope of the line equal 1. 
A) They cause the line to shift upward in a parallel fashion. 
B) They cause the line to shift downward in a parallel fashion. 
C) They make the line steeper. 
D) They make the line flatter. 
E) They make the slope of the line equal 1.

Question 16

The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).

Accepted Answer

A) True 
 B)False

Question 17

When variable net exports are included in aggregate expenditures, the two leakages from the circular flow are

Accepted Answer

A) exports and saving 
B) exports and consumption 
C) exports and investment 
D) imports and saving 
E) imports and investment 
A) exports and saving 
B) exports and consumption 
C) exports and investment 
D) imports and saving 
E) imports and investment

Question 18

The formula for the spending multiplier when variable net exports are included in aggregate expenditures is

Accepted Answer

A) 1/(MPS + MPM) 
B) 1/MPS 
C) MPS * MPM 
D) 1/(MPC * MPM) 
E) 1/(1 - MPC - MPM) 
A) 1/(MPS + MPM) 
B) 1/MPS 
C) MPS * MPM 
D) 1/(MPC * MPM) 
E) 1/(1 - MPC - MPM)

Question 19

Which of the following is true concerning the impact of net exports in the model with AE = C + I + NX + G?

Accepted Answer

A) Net exports are a leakage from the economy if imports exceed exports. 
B) Net exports are always positive. 
C) Net exports are negative because exports are assumed to be autonomous. 
D) Net exports must be negative if planned investment is positive. 
E) Net exports are an injection into the economy if imports equal exports. 
A) Net exports are a leakage from the economy if imports exceed exports. 
B) Net exports are always positive. 
C) Net exports are negative because exports are assumed to be autonomous. 
D) Net exports must be negative if planned investment is positive. 
E) Net exports are an injection into the economy if imports equal exports.

Question 20

If the marginal propensity to consume (MPC) equals 0.75 (3/4) and the multiplier equals 2.0, the marginal propensity to import (MPM) must equal

Accepted Answer

A) 0.25 
B) 0.50 
C) 0.75 
D) 1.00 
E) 1.25 
A) 0.25 
B) 0.50 
C) 0.75 
D) 1.00 
E) 1.25

Exam 24: Variable Net Exports Revisited

Net exports are a leakage from the circular flow.

If net exports increase by $350 billion at every level of income, the net export line will

If net exports increase by $450 billion at every level of income, equilibrium real GDP demanded will

The concept of variable net exports is that as domestic income (Y) increases,

When variable net exports are added to the aggregate expenditure line, the resulting planned aggregate expenditure line becomes

In a model which includes variable net exports, the spending multiplier equals 1/(MPS + MPM).

The larger the marginal propensity to import, the __________ during each round of spending and __________ the resulting spending multiplier.

The spending multiplier with variable net exports is

Exhibit 10-8 -In Exhibit 10-8, the marginal propensity to consume is

If variable net exports increase by the same amount at every level of income, then there is an upward and parallel shift of the net export line.

If the MPC equals 0.7 and the MPM equals 0.10, then the spending multiplier equals

If net exports increase by $400 billion at every level of income, the aggregate expenditure line will

The marginal propensity to import

Exhibit 10-8 -In Exhibit 10-8, the spending multiplier equals

What is the impact of net exports on the aggregate expenditure line?

The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).

When variable net exports are included in aggregate expenditures, the two leakages from the circular flow are

The formula for the spending multiplier when variable net exports are included in aggregate expenditures is

Which of the following is true concerning the impact of net exports in the model with AE = C + I + NX + G?

If the marginal propensity to consume (MPC) equals 0.75 (3/4) and the multiplier equals 2.0, the marginal propensity to import (MPM) must equal

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The larger the marginal propensity to import, the during each round of spending and the resulting spending multiplier.