Question 1

Other things equal,if $100 billion of government purchases (G)is added to private spending (C + Ig + Xn),GDP will:

Accepted Answer

A)  increase by $100 billion. 
B)  increase by less than $100 billion. 
C)  increase by more than $100 billion. 
D)  fall by $100 billion. 
A)  increase by $100 billion. 
B)  increase by less than $100 billion. 
C)  increase by more than $100 billion. 
D)  fall by $100 billion.

Question 2

Unintended changes in inventories:

Accepted Answer

A)  cause the economy to move away from the equilibrium GDP. 
B)  are treated as components of consumption. 
C)  bring actual investment and saving into equality only at the equilibrium level of GDP. 
D)  bring actual investment and saving into equality at all levels of GDP. 
A)  cause the economy to move away from the equilibrium GDP. 
B)  are treated as components of consumption. 
C)  bring actual investment and saving into equality only at the equilibrium level of GDP. 
D)  bring actual investment and saving into equality at all levels of GDP.

Question 3

If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Accepted Answer

A)  a rightward shift in the investment demand schedule. 
B)  an $8 billion downshift in the consumption schedule. 
C)  a $4 billion upshift in the consumption schedule. 
D)  a $12 billion downshift in the consumption schedule. 
A)  a rightward shift in the investment demand schedule. 
B)  an $8 billion downshift in the consumption schedule. 
C)  a $4 billion upshift in the consumption schedule. 
D)  a $12 billion downshift in the consumption schedule.

Question 4

Equal increases in government purchases and taxes will:

Accepted Answer

A)  increase the equilibrium GDP and the size of that increase varies directly with the size of the MPC. 
B)  increase the equilibrium GDP and the size of that increase is independent of the size of the MPC. 
C)  increase the equilibrium GDP and the size of that increase varies inversely with the size of the MPC. 
D)  decrease the equilibrium GDP and the size of that decrease is independent of the size of the MPC. 
A)  increase the equilibrium GDP and the size of that increase varies directly with the size of the MPC. 
B)  increase the equilibrium GDP and the size of that increase is independent of the size of the MPC. 
C)  increase the equilibrium GDP and the size of that increase varies inversely with the size of the MPC. 
D)  decrease the equilibrium GDP and the size of that decrease is independent of the size of the MPC.

Question 5

An inflationary expenditure gap is the amount by which:

Accepted Answer

A)  equilibrium GDP falls short of the full-employment GDP. 
B)  aggregate expenditures exceed any given level of GDP. 
C)  saving exceeds investment at the full-employment GDP. 
D)  aggregate expenditures exceed the full-employment level of GDP. 
A)  equilibrium GDP falls short of the full-employment GDP. 
B)  aggregate expenditures exceed any given level of GDP. 
C)  saving exceeds investment at the full-employment GDP. 
D)  aggregate expenditures exceed the full-employment level of GDP.

Question 6

Answer the question on the basis of the following table:   The MPC and MPS in the economy:

Accepted Answer

A)  are .4 and .6 respectively. 
B)  are .6 and .4 respectively. 
C)  are .8 and .2 respectively. 
D)  cannot be determined from the information given. 
A)  are .4 and .6 respectively. 
B)  are .6 and .4 respectively. 
C)  are .8 and .2 respectively. 
D)  cannot be determined from the information given.

Question 7

If the MPC is .8 in a private closed economy,a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Accepted Answer

A) True 
 B)False

Question 8

Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.

Accepted Answer

A) True 
 B)False

Question 9

When C + Ig = GDP in a private closed economy,S = Ig and there are no unplanned changes in inventories.

Accepted Answer

A) True 
 B)False

Question 10

Assume in a private closed economy that the equilibrium level of income is $380 and the MPS is .25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

Accepted Answer

A)  the equilibrium level of real income and the price level will both remain unchanged. 
B)  the equilibrium level of income will remain unchanged. 
C)  the equilibrium level of income will rise to $420. 
D)  the equilibrium level of income will rise to $430. 
A)  the equilibrium level of real income and the price level will both remain unchanged. 
B)  the equilibrium level of income will remain unchanged. 
C)  the equilibrium level of income will rise to $420. 
D)  the equilibrium level of income will rise to $430.

Question 11

If the dollar appreciates relative to foreign currencies,we would expect:

Accepted Answer

A)  the multiplier to decrease. 
B)  a country's exports and imports to both fall. 
C)  a country's net exports to rise. 
D)  a country's net exports to fall. 
A)  the multiplier to decrease. 
B)  a country's exports and imports to both fall. 
C)  a country's net exports to rise. 
D)  a country's net exports to fall.

Question 12

Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero.If at the equilibrium income the public sector's budget shows a surplus:

Accepted Answer

A)  Ca + Ig + Xn + G must exceed GDP. 
B)  planned investment must exceed saving. 
C)  a recessionary expenditure gap must exist. 
D)  saving must exceed planned investment. 
A)  Ca + Ig + Xn + G must exceed GDP. 
B)  planned investment must exceed saving. 
C)  a recessionary expenditure gap must exist. 
D)  saving must exceed planned investment.

Question 13

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (Ca + Ig + Xn + G)fall short of real GDP at the full-employment level of real GDP.

Accepted Answer

A) True 
 B)False

Question 14

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion,both at the $280 billion level of domestic output.Thus:

Accepted Answer

A)  saving is $10 billion. 
B)  unplanned decreases in inventories of $10 billion will occur. 
C)  the MPC is .80. 
D)  unplanned increases in inventories of $10 billion will occur. 
A)  saving is $10 billion. 
B)  unplanned decreases in inventories of $10 billion will occur. 
C)  the MPC is .80. 
D)  unplanned increases in inventories of $10 billion will occur.

Question 15

If C + Ig exceeds GDP in a private closed economy,GDP will decline.

Accepted Answer

A) True 
 B)False

Question 16

(Advanced analysis)Answer the question on the basis of the following information for a mixed open economy.The letters Y,Ca,Ig,Xn,G,and T stand for GDP,consumption,gross investment,net exports,government purchases,and net taxes respectively.Figures are in billions of dollars. $\begin{aligned}
C _ { a } & = 25 + 0.75 ( Y - T ) \
I _ { g } & = I _ { g 0 } = 50 \
X _ { n } & = X _ { n 0 } = 10 \
G & = G _ { 0 } = 70 \
T & = T _ { 0 } = 30
\end{aligned}$ Refer to the information.If government desired to raise the equilibrium GDP to $650,it could:

Accepted Answer

A)  raise G by $45 and reduce T by $10. 
B)  raise G by $40 and reduce T by $30. 
C)  raise G by $30 or reduce T by $40. 
D)  raise both G and T by $40. 
A)  raise G by $45 and reduce T by $10. 
B)  raise G by $40 and reduce T by $30. 
C)  raise G by $30 or reduce T by $40. 
D)  raise both G and T by $40.

Question 17

If government decreases its purchases by $20 billion and the MPC is .8,equilibrium GDP will decrease by $100 billion.

Accepted Answer

A) True 
 B)False

Question 18

In the aggregate expenditures model,technological progress will shift the investment schedule:

Accepted Answer

A)  downward and increase aggregate expenditures. 
B)  downward and decrease aggregate expenditures. 
C)  upward and increase aggregate expenditures. 
D)  upward and decrease aggregate expenditures. 
A)  downward and increase aggregate expenditures. 
B)  downward and decrease aggregate expenditures. 
C)  upward and increase aggregate expenditures. 
D)  upward and decrease aggregate expenditures.

Question 19

Viewed through the aggregate expenditures model,the U.S.recession of 2007-2009 resulted mainly from:

Accepted Answer

A)  a fall in the average propensity to save. 
B)  insufficient aggregate expenditures. 
C)  reduced government spending. 
D)  increased taxes. 
A)  a fall in the average propensity to save. 
B)  insufficient aggregate expenditures. 
C)  reduced government spending. 
D)  increased taxes.

Question 20

The following schedule contains data for a private closed economy.All figures are in billions.Use these data in answering the question. $\begin{array}{l}
\underline{\text { GDP }}& \underline{C} \
\$140&\$150\
180 & 180 \
220 & 210 \
260 & 240\
300 &270 \
\end{array}$ Refer to the data.If gross investment is $10 at all levels of GDP,the equilibrium GDP will be:

Accepted Answer

A)  $300. 
B)  $260. 
C)  $220. 
D)  $180. 
A)  $300. 
B)  $260. 
C)  $220. 
D)  $180.

Other things equal,if $100 billion of government purchases (G)is added to private spending (C + I_g + X_n),GDP will:

Unintended changes in inventories:

If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Equal increases in government purchases and taxes will:

An inflationary expenditure gap is the amount by which:

Answer the question on the basis of the following table: The MPC and MPS in the economy:

If the MPC is .8 in a private closed economy,a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.

When C + I_g = GDP in a private closed economy,S = I_g and there are no unplanned changes in inventories.

Assume in a private closed economy that the equilibrium level of income is $380 and the MPS is .25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

If the dollar appreciates relative to foreign currencies,we would expect:

Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero.If at the equilibrium income the public sector's budget shows a surplus:

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (C_a + I_g + X_n + G)fall short of real GDP at the full-employment level of real GDP.

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion,both at the $280 billion level of domestic output.Thus:

If C + I_g exceeds GDP in a private closed economy,GDP will decline.

If government decreases its purchases by $20 billion and the MPC is .8,equilibrium GDP will decrease by $100 billion.

In the aggregate expenditures model,technological progress will shift the investment schedule:

Viewed through the aggregate expenditures model,the U.S.recession of 2007-2009 resulted mainly from:

The following schedule contains data for a private closed economy.All figures are in billions.Use these data in answering the question. \1 40 \1 50 180 180 220 210 260 240 300 270 Refer to the data.If gross investment is $10 at all levels of GDP,the equilibrium GDP will be:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters

Exam 30: The Aggregate Expenditures Model

Other things equal,if $100 billion of government purchases (G)is added to private spending (C + Ig + Xn),GDP will:

Unintended changes in inventories:

If the MPC is 2/3,the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

Equal increases in government purchases and taxes will:

An inflationary expenditure gap is the amount by which:

Answer the question on the basis of the following table: The MPC and MPS in the economy:

If the MPC is .8 in a private closed economy,a $30 billion increase in planned investment will increase equilibrium real GDP by $120 billion.

Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.

When C + Ig = GDP in a private closed economy,S = Ig and there are no unplanned changes in inventories.

Assume in a private closed economy that the equilibrium level of income is $380 and the MPS is .25.Now suppose government collects taxes of $50 and spends the entire amount.As a result:

If the dollar appreciates relative to foreign currencies,we would expect:

Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero.If at the equilibrium income the public sector's budget shows a surplus:

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (Ca + Ig + Xn + G)fall short of real GDP at the full-employment level of real GDP.

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion,both at the $280 billion level of domestic output.Thus:

If C + Ig exceeds GDP in a private closed economy,GDP will decline.

If government decreases its purchases by $20 billion and the MPC is .8,equilibrium GDP will decrease by $100 billion.

In the aggregate expenditures model,technological progress will shift the investment schedule:

Viewed through the aggregate expenditures model,the U.S.recession of 2007-2009 resulted mainly from:

The following schedule contains data for a private closed economy.All figures are in billions.Use these data in answering the question. \1 40 \1 50 180 180 220 210 260 240 300 270 Refer to the data.If gross investment is $10 at all levels of GDP,the equilibrium GDP will be:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters

Other things equal,if $100 billion of government purchases (G)is added to private spending (C + I_g + X_n),GDP will:

When C + I_g = GDP in a private closed economy,S = I_g and there are no unplanned changes in inventories.

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures (C_a + I_g + X_n + G)fall short of real GDP at the full-employment level of real GDP.

If C + I_g exceeds GDP in a private closed economy,GDP will decline.