Question 1

A decrease in the value of the simple multiplier can be caused by

Accepted Answer

A) a decrease in the net tax rate. 
B) a decrease in the marginal propensity to import. 
C) an increase in the marginal propensity to consume. 
D) an increase in the marginal propensity to save. 
E) an increase in the marginal propensity to spend. 
A) a decrease in the net tax rate. 
B) a decrease in the marginal propensity to import. 
C) an increase in the marginal propensity to consume. 
D) an increase in the marginal propensity to save. 
E) an increase in the marginal propensity to spend.

Question 2

A movement along the net export (NX)function can be caused by a change in

Accepted Answer

A) domestic national income. 
B) foreign national income. 
C) domestic prices. 
D) the exchange rate. 
E) foreign prices. 
A) domestic national income. 
B) foreign national income. 
C) domestic prices. 
D) the exchange rate. 
E) foreign prices.

Question 3

Consider the following news headline: "Canadians develop a greater taste for foreign vacations." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

Accepted Answer

A) The AE function will shift down parallel to itself and equilibrium national income will fall. 
B) The AE function will rotate upward (become steeper)and equilibrium national income will rise. 
C) The AE function will rotate downward (become flatter)and national income will fall. 
D) The AE function will shift up parallel to itself and equilibrium national income will rise. 
E) There will be no change in the AE function or in equilibrium national income. 
A) The AE function will shift down parallel to itself and equilibrium national income will fall. 
B) The AE function will rotate upward (become steeper)and equilibrium national income will rise. 
C) The AE function will rotate downward (become flatter)and national income will fall. 
D) The AE function will shift up parallel to itself and equilibrium national income will rise. 
E) There will be no change in the AE function or in equilibrium national income.

Question 4

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Total autonomous spending in this model is

Accepted Answer

A) 120.0. 
B) 1120.0. 
C) 420.0. 
D) 600.0. 
E) 828.8. 
A) 120.0. 
B) 1120.0. 
C) 420.0. 
D) 600.0. 
E) 828.8.

Question 5

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.The marginal propensity to spend on national income,z,is

Accepted Answer

A) 0.655. 
B) 0.760. 
C) 0.773. 
D) 0.840. 
E) 0.920. 
A) 0.655. 
B) 0.760. 
C) 0.773. 
D) 0.840. 
E) 0.920.

Question 6

The AE function for an open economy with government can be written as

Accepted Answer

A) AE = C + I - G + (X - IM). 
B) AE = C + I + G - (X - IM). 
C) AE = C + I - G - (X + IM). 
D) AE = C + I + S + (X + IM). 
E) AE = C + I + G + (X - IM). 
A) AE = C + I - G + (X - IM). 
B) AE = C + I + G - (X - IM). 
C) AE = C + I - G - (X + IM). 
D) AE = C + I + S + (X + IM). 
E) AE = C + I + G + (X - IM).

Question 7

A parallel upward shift in the net export (NX)function can be caused by

Accepted Answer

A) an increase in domestic national income. 
B) an increase in foreign national income. 
C) an increase in domestic prices relative to foreign prices. 
D) a decrease in the Canadian-dollar price of foreign currency. 
E) a decrease in foreign prices relative to domestic prices. 
A) an increase in domestic national income. 
B) an increase in foreign national income. 
C) an increase in domestic prices relative to foreign prices. 
D) a decrease in the Canadian-dollar price of foreign currency. 
E) a decrease in foreign prices relative to domestic prices.

Question 8

In a simple macro model,it is generally assumed that a country's exports

Accepted Answer

A) and imports are autonomous. 
B) and imports are induced. 
C) are autonomous whereas imports are induced. 
D) are induced whereas imports are autonomous. 
E) are always equal to investment. 
A) and imports are autonomous. 
B) and imports are induced. 
C) are autonomous whereas imports are induced. 
D) are induced whereas imports are autonomous. 
E) are always equal to investment.

Question 9

The G and T components in the national-income accounts measure purchases and net taxes collected by

Accepted Answer

A) all levels of government. 
B) only provincial governments and the federal government. 
C) only the federal government. 
D) only provincial governments. 
E) only local governments. 
A) all levels of government. 
B) only provincial governments and the federal government. 
C) only the federal government. 
D) only provincial governments. 
E) only local governments.

Question 10

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Desired consumption expenditure at equilibrium national income is

Accepted Answer

A) 3113.5. 
B) 3307.7. 
C) 3824.6. 
D) 4250. 
E) Not enough information to determine 
A) 3113.5. 
B) 3307.7. 
C) 3824.6. 
D) 4250. 
E) Not enough information to determine

Question 11

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.The trade balance at equilibrium national income is

Accepted Answer

A) a deficit of 36.67. 
B) a deficit of 21.43. 
C) zero. 
D) a surplus of 21.43. 
E) a surplus of 36.67. 
A) a deficit of 36.67. 
B) a deficit of 21.43. 
C) zero. 
D) a surplus of 21.43. 
E) a surplus of 36.67.

Question 12

FIGURE 22-4
-Refer to Figure 22-4.The rotation from AE0 to AE1 implies that the marginal propensity to spend ________ and the value of the simple multiplier ________.

Accepted Answer

A) increases; decreases 
B) increases; increases 
C) remains the same; increases 
D) decreases; increases 
E) decreases,decreases 
A) increases; decreases 
B) increases; increases 
C) remains the same; increases 
D) decreases; increases 
E) decreases,decreases

Exam 22: Adding Government and Trade to the Simple Macro Model

A decrease in the value of the simple multiplier can be caused by

A movement along the net export (NX)function can be caused by a change in

Consider the following news headline: "Canadians develop a greater taste for foreign vacations." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Total autonomous spending in this model is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.The marginal propensity to spend on national income,z,is

The AE function for an open economy with government can be written as

A parallel upward shift in the net export (NX)function can be caused by

In a simple macro model,it is generally assumed that a country's exports

The G and T components in the national-income accounts measure purchases and net taxes collected by

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Desired consumption expenditure at equilibrium national income is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.The trade balance at equilibrium national income is

FIGURE 22-4 -Refer to Figure 22-4.The rotation from AE0 to AE1 implies that the marginal propensity to spend ________ and the value of the simple multiplier ________.

Economic Issues and Concepts

Economic Theories,Data,and Graphs

Demand, Supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: The Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, Interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Trade Policy

Exchange Rates and the Balance of Payments

Filters

FIGURE 22-4 -Refer to Figure 22-4.The rotation from AE₀ to AE₁ implies that the marginal propensity to spend and the value of the simple multiplier .