Question 1

If inflation in Canada is lower than inflation in other countries, what will be the effect on net exports for Canada?

Accepted Answer

A) Net exports will rise as Canadian exports increase. 
B) Net exports will rise as Canadian imports increase. 
C) Net exports will decrease as Canadian exports decrease. 
D) Net exports will decrease as Canadian imports decrease. 
E) Net exports will remain unchanged. 
A) Net exports will rise as Canadian exports increase. 
B) Net exports will rise as Canadian imports increase. 
C) Net exports will decrease as Canadian exports decrease. 
D) Net exports will decrease as Canadian imports decrease. 
E) Net exports will remain unchanged.

Question 2

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is -$2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP?

Accepted Answer

A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million 
E) $29 million 
A) $15 million 
B) $23 million 
C) $25 million 
D) $27 million 
E) $29 million

Question 3

C = 2,550 + (MPC)Y
I = 800
G = 1,100
NX = 50
If the equilibrium level of GDP is $11,250, using the equations for C, I, G, and NX shown above, find the value of the marginal propensity to consume.

Accepted Answer

Y = C + I + G + NX
11,250 = 2,

Question 4

If the consumption function is defined as C = 7,250 + 0.8Y, what is the value of the multiplier?

Accepted Answer

A) 0.2 
B) 0.8 
C) 1.25 
D) 5 
E) 10 
A) 0.2 
B) 0.8 
C) 1.25 
D) 5 
E) 10

Question 5

A/an ________ in taxes will decrease consumption spending, and a/an________ in transfer payments will increase consumption spending.

Accepted Answer

A) increase; increase 
B) decrease; increase 
C) increase; decrease 
D) decrease; decrease 
A) increase; increase 
B) decrease; increase 
C) increase; decrease 
D) decrease; decrease

Question 6

When Jack's income increases by $1,000, he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

Accepted Answer

A) True 
 B)False

Question 7

Actual investment spending includes spending by consumers on

Accepted Answer

A) durable goods. 
B) nondurable goods. 
C) new houses. 
D) services. 
E) stocks and bonds. 
A) durable goods. 
B) nondurable goods. 
C) new houses. 
D) services. 
E) stocks and bonds.

Question 8

The ratio of the increase in ________ to the increase in ________ is called the multiplier.

Accepted Answer

A) equilibrium nominal GDP; autonomous expenditure 
B) equilibrium real GDP; autonomous expenditure 
C) autonomous expenditure; equilibrium real GDP 
D) induced expenditure; equilibrium real GDP 
E) planned investment; consumer spending 
A) equilibrium nominal GDP; autonomous expenditure 
B) equilibrium real GDP; autonomous expenditure 
C) autonomous expenditure; equilibrium real GDP 
D) induced expenditure; equilibrium real GDP 
E) planned investment; consumer spending

Question 9

What impact does an increase in the price level in Canada have on net exports and why?

Accepted Answer

A) An increase in the price level decreases net exports because higher prices decrease the value of the dollar. 
B) An increase in the price level decreases net exports by increasing the relative cost of Canadian goods. 
C) An increase in the price level increases net exports because higher prices lower the value of the dollar. 
D) An increase in the price level increases net exports because higher prices decrease Canadian spending on imports. 
E) An increase in the price level decreases net exports by reducing Canadian's nominal income. 
A) An increase in the price level decreases net exports because higher prices decrease the value of the dollar. 
B) An increase in the price level decreases net exports by increasing the relative cost of Canadian goods. 
C) An increase in the price level increases net exports because higher prices lower the value of the dollar. 
D) An increase in the price level increases net exports because higher prices decrease Canadian spending on imports. 
E) An increase in the price level decreases net exports by reducing Canadian's nominal income.

Question 10

Figure 8.7   Alt text for Figure 8.7: In figure 8.7, a graph comparing real GDP and real aggregate expenditure.
Long description for Figure 8.7: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars).The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars).Line AE1, begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Line AE2, is to the right of AE1 and is on a similar path as line AE1, sloping up to the top right corner.Line Y = AE, originates at the vertex and slopes up to the top right corner.Line Y = AE meets line AE2 at point K, half way along both the lines, and meets line AE1 at point N, plotted close to the right end of line AE1.Point J is plotted a little less than half way along line AE2, to the left of point K.Point L is marked close to the right end of line AE2, to the right of point K.
-Refer to Figure 8.7.Suppose that government spending increases, shifting up the aggregate expenditure line.GDP increases from GDP1 to GDP2, and this amount is $200 billion.If the MPC is 0.8, then what is the distance between N and L, or by how much did government spending change?

Accepted Answer

A) $16 billion 
B) $40 billion 
C) $160 billion 
D) $200 billion 
E) $1,000 billion 
A) $16 billion 
B) $40 billion 
C) $160 billion 
D) $200 billion 
E) $1,000 billion

Question 11

A decrease in the price level in Canada will shift the aggregate expenditure line downward.

Accepted Answer

A) True 
 B)False

Question 12

If the marginal propensity to consume is 0.75, the marginal propensity to save is

Accepted Answer

A) 0.25. 
B) 0.5. 
C) 0.75. 
D) 1. 
E) 3. 
A) 0.25. 
B) 0.5. 
C) 0.75. 
D) 1. 
E) 3.

Question 13

Investment spending will decrease when

Accepted Answer

A) the interest rate falls. 
B) the corporate income tax decreases. 
C) business cash flow decreases. 
D) firms become more optimistic about earning future profits. 
E) governments reduce compliance costs. 
A) the interest rate falls. 
B) the corporate income tax decreases. 
C) business cash flow decreases. 
D) firms become more optimistic about earning future profits. 
E) governments reduce compliance costs.

Question 14

An increase in the price level in Canada will reduce imports and increase exports.

Accepted Answer

A) True 
 B)False

Question 15

Autonomous expenditure times the multiplier equals

Accepted Answer

A) autonomous saving. 
B) autonomous consumption. 
C) equilibrium GDP. 
D) planned autonomous investment. 
E) government budget deficit. 
A) autonomous saving. 
B) autonomous consumption. 
C) equilibrium GDP. 
D) planned autonomous investment. 
E) government budget deficit.

Question 16

In the aftermath of the 2008-2009 recession, snowmobile purchases

Accepted Answer

A) rose by 3 percent. 
B) remained stable. 
C) fell by 3 percent. 
D) fell by 12 percent. 
E) fell by 17.4 percent. 
A) rose by 3 percent. 
B) remained stable. 
C) fell by 3 percent. 
D) fell by 12 percent. 
E) fell by 17.4 percent.

Question 17

If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal propensity to save?

Accepted Answer

A) 0.2 
B) 0.25 
C) 0.8 
D) 5.8 
E) 9.1 
A) 0.2 
B) 0.25 
C) 0.8 
D) 5.8 
E) 9.1

Question 18

Firms in a small economy anticipated that inventories would grow over the past year by $500,000.Over that year, inventories actually grew by only $400,000.This implies that

Accepted Answer

A) aggregate expenditure that year was greater than GDP that year. 
B) there was an unplanned increase in inventories that year. 
C) there was a planned increase in inventories that year. 
D) aggregate expenditure that year was equal to GDP that year. 
E) there was a rise in the unemployment rate. 
A) aggregate expenditure that year was greater than GDP that year. 
B) there was an unplanned increase in inventories that year. 
C) there was a planned increase in inventories that year. 
D) aggregate expenditure that year was equal to GDP that year. 
E) there was a rise in the unemployment rate.

Question 19

If disposable income increases by $500 million, and consumption increases by $400 million, then the marginal propensity to consume is

Accepted Answer

A) 1.25. 
B) 0.8. 
C) 0.6. 
D) 0.4. 
E) 0.2. 
A) 1.25. 
B) 0.8. 
C) 0.6. 
D) 0.4. 
E) 0.2.

Question 20

Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what is the marginal propensity to consume? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500

Accepted Answer

A) 0.6 
B) 0.67 
C) 0.75 
D) 0.8 
E) 0.9 
A) 0.6 
B) 0.67 
C) 0.75 
D) 0.8 
E) 0.9

If inflation in Canada is lower than inflation in other countries, what will be the effect on net exports for Canada?

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is -$2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP?

C = 2,550 + (MPC)Y I = 800 G = 1,100 NX = 50 If the equilibrium level of GDP is $11,250, using the equations for C, I, G, and NX shown above, find the value of the marginal propensity to consume.

If the consumption function is defined as C = 7,250 + 0.8Y, what is the value of the multiplier?

A/an in taxes will decrease consumption spending, and a/an in transfer payments will increase consumption spending.

When Jack's income increases by $1,000, he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

Actual investment spending includes spending by consumers on

The ratio of the increase in to the increase in is called the multiplier.

What impact does an increase in the price level in Canada have on net exports and why?

A decrease in the price level in Canada will shift the aggregate expenditure line downward.

If the marginal propensity to consume is 0.75, the marginal propensity to save is

Investment spending will decrease when

An increase in the price level in Canada will reduce imports and increase exports.

Autonomous expenditure times the multiplier equals

In the aftermath of the 2008-2009 recession, snowmobile purchases

If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal propensity to save?

Firms in a small economy anticipated that inventories would grow over the past year by $500,000.Over that year, inventories actually grew by only $400,000.This implies that

If disposable income increases by $500 million, and consumption increases by $400 million, then the marginal propensity to consume is

Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what is the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 8: Aggregate Expenditure and Output in the Short Run

If inflation in Canada is lower than inflation in other countries, what will be the effect on net exports for Canada?

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is -$2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP?

C = 2,550 + (MPC)Y I = 800 G = 1,100 NX = 50 If the equilibrium level of GDP is $11,250, using the equations for C, I, G, and NX shown above, find the value of the marginal propensity to consume.

If the consumption function is defined as C = 7,250 + 0.8Y, what is the value of the multiplier?

A/an ________ in taxes will decrease consumption spending, and a/an________ in transfer payments will increase consumption spending.

When Jack's income increases by $1,000, he spends an additional $850 dollars.This implies that his marginal propensity to save is 0.85.

Actual investment spending includes spending by consumers on

The ratio of the increase in ________ to the increase in ________ is called the multiplier.

What impact does an increase in the price level in Canada have on net exports and why?

A decrease in the price level in Canada will shift the aggregate expenditure line downward.

If the marginal propensity to consume is 0.75, the marginal propensity to save is

Investment spending will decrease when

An increase in the price level in Canada will reduce imports and increase exports.

Autonomous expenditure times the multiplier equals

In the aftermath of the 2008-2009 recession, snowmobile purchases

If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal propensity to save?

Firms in a small economy anticipated that inventories would grow over the past year by $500,000.Over that year, inventories actually grew by only $400,000.This implies that

If disposable income increases by $500 million, and consumption increases by $400 million, then the marginal propensity to consume is

Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what is the marginal propensity to consume? C = 5,000 + (MPC)Y I = 1,500 G = 2,000 NX = -500

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

A/an in taxes will decrease consumption spending, and a/an in transfer payments will increase consumption spending.

The ratio of the increase in to the increase in is called the multiplier.